Sunday, May 25, 2008

Frank on Tax Policy

Cornell's Robert Frank confirms his membership in the Pigou Club.

Update: A friend points out another article by Frank and says
the surprising thing in Robert Frank's book review in today's NY Times is that he endorsed the 2003 tax cut....he wants a progressive income tax and to exempt saving from taxation. So he's even to the right of the administration -- he would have a zero tax rate on dividends and capital gains.
Here is the relevant paragraph from Frank (with emphasis added):
Skeptics invariably counter that the taxes needed to pay for an expanded social safety net would cripple the economy by weakening people’s incentives to work hard and take risks. Yet there are many ways to raise additional tax revenue that would actually cause G.D.P. to grow rather than shrink. A tax on carbon and other environmental pollutants, for example, would raise substantial revenue and yield a cleaner, more sustainable environment. Congestion taxes would save millions of hours currently wasted in traffic jams. A progressive income tax that exempts savings would divert billions of dollars from wasteful mine-is-bigger spending contests.
Note that my friend is distinguishing the 2001 tax bill from the 2003 tax bill. The 2001 tax bill was mainly about lower income tax rates and an increased child credit. The 2003 tax bill, in addition to accelerating the phase-in of the 2001 changes, was mainly about reducing the tax burden on capital.