Wednesday, September 15, 2010

Obama's Tax Policy Worst Possible From Growth Perspectiv

Interesting analysis from Alan Viard that points out that Obama's proposed tax policy, to extend the Bush middle class tax cuts while allowing the upper income tax cuts to expire is actually the worst possible from a growth perspective.

The reason for this is that the upper income tax cuts affects incentives for a group particularly sensitive to such changes, while the middle class tax cuts have little or no effect on incentives (Indeed, it should be added, they can actually have negative effects on incentives for many because they are phased out as income rises).

He also points out that while it is true that this will mean that tax rates return to the Clinton era levels in 2011, taxes will rise further in 2013 as a result of provisions in the health care bill passed previously this year.