It’s as if we’ve just survived a near-death experience. (Image above from NPR.) Like we followed the light and even saw the pearly gates and then miraculously were sucked back down into our bed overnight! We technically “went over” the fiscal cliff at midnight yesterday, and yet here we are today celebrating more extended tax cuts as the best way our policy leaders know how to compromise.
The debate over the fiscal cliff and all the scariness about it was far more about how we would manage to avoidour own prior commitments to reducing the deficit rather than what was intended to be a push for greater fiscal responsibility and at least a longer-term and thoughtful (rather than immediate and brute-force) strategy for deficit reduction.
So what has come out of this fiscal adventure? The Washington Post’s Ezra Klein (in his “Wonkblog”) stayed up for the finale to post a nice summary of what was agreed to, “everything you need to know about the fiscal cliff deal.” Most of the press accounts characterize the deal as the Republicans eventually caving on raising taxes on the rich. But the Brookings Institution’s Bill Gale points out that taxes are actually going way down, not up, relative to our one-day, near-death experience of the current law baseline–and thank goodness for the Republicans, because technically the minority of them who voted in favor of the deal did not violate the No New Taxes pledge. ( Continue… )
All over an unwillingness to convince his colleagues to let tax rates come back up (as scheduled) on (even) the very richest, any “deal” between Boehner and Obama is off – at least until after Christmas:
House Speaker John A. Boehner threw efforts to avoid the year-end “fiscal cliff” into chaos late Thursday, as he abruptly shuttered the House for the holidays after failing to win support from his fellow Republicans for a plan to let tax rates rise for millionaires.
The proposal — Boehner’s alternative to negotiating a broader package with President Obama — would have protected the vast majority of Americans from significant tax increases set to take effect next year. But because it also would have permitted tax rates to rise for about 400,000 extremely wealthy families, conservatives balked, leaving Boehner (Ohio) humiliated and his negotiating power immeasurably weakened.
The Post article goes on to quote from Boehner’s issued statement: ( Continue… )
I’ve long thought of AARP as an “old people’s” organization, which might be enough reason to resist joining despite the attractive discounts and other benefits. (Who wants to admit they’re now a card-carrying “old person,” after all?) But for most of my adult life I have also thought of AARP as an “angry” old people’s organization, because I’ve found quite unappealing the “age-ist” attitude that they seem to promote–a sort of “us against them” (”them” being all the non-old people) demeanor that comes through in their emphasis on how special old people and old people’s benefits are.
I first received an invitation to join AARP in the summer of 2011 when I was still 49. (I think the official floor is still 50.) Coincidentally, I got my invitational membership card at the same time that AARP’s then-policy director, John Rother, had seemingly brought AARP to its senses on Social Security reform. That led me to post this pat on AARP’s back and a more serious contemplation of my personal relationship with AARP–that I might actually join. But I thought about it long enough that within a few months John Rother was leaving AARP and (probably not coincidentally) the association had reversed course and launched an angry ad campaign to oppose Social Security and Medicare reform, which I was not too pleased about. Inching closer to age 50, I continued to avoid committing to membership.
Yes, the visual was ridiculous, and the comedians are going to have a field day with this (beyond the field days ordinary bloggers and tweeters have already had). But the whole exchange bugged me more than amused me. I was bothered by the suggestion that this is how women get hired to high positions: employers have it pointed out to them (even via talking to themselves) that the first-round “qualified” applicants are all men. So they are told to go look for more women–to collect the resumes in “binders”–because they don’t already know these women to be qualified the first time around; they only think those women “could be qualified” in their lookingagain. And they have to become “anxious” enough to hire so many more people such that the women can finally rise over the bar. Well, yukk to all that. I don’t find it so funny, and I hope I am never hired by someone who found me only in a “binder.”
Still, I look forward to the SNL version.
Today’s Washington Post has a front-page story about Wisconsin, a “state up for grabs” as the print edition says, and “the land of persuadable voters” as the online version puts it. I happen to have spent two days in Wisconsin last week, speaking to a variety of groups ranging from students to financial planners to newspaper editors. Here’s a 6-minute (easy-watch) TV interview I did for Wisconsin ABC affiliate WISN’s Sunday morning talk show, “Up Front with Mike Gousha,” on the tough fiscal policy choices ahead–the election, the fiscal cliff, and beyond. (The segment aired this past Sunday.) If you want the background behind that quick summary, here’s a video of the one-hour conversation I had with Mike and a large, engaged audience at Marquette University Law School, before we taped the TV segment. And here’s a video of a University of Wisconsin event I did (recorded by Wisconsin Eye) with some faculty from their public policy school, focused also on the fiscal cliff and beyond, with heavy emphasis on what tax reform’s role in deficit reduction should be. The tax policy emphasis was natural given the expertise of the participants, but that shouldn’t discount the main point that tax reform is the only kind of fundamental reform that has any chance of significantly affecting the fiscal outlook in the next few years. ( Continue… )
Last week the Tax Policy Center (TPC) released an analysis and held an event (which I participated in) on the tax changes that comprise the so-called “fiscal cliff”–the combination of policies scheduled under current law that according to the Congressional Budget Office (CBO) in their latest budget outlook would reduce the federal budget deficit by around half a trillion dollars between fiscal years 2012 and 2013. (CBO had also done this earlier analysis in May (based on their previous baseline forecasts) focused specifically on the economic effects of avoiding or reducing the 2013 fiscal cliff.)
I’ve made the point before that the scary part of the “cliff” that everyone is talking about and wants to avoid is just the first year of the current-law baseline; the drop from deficits in fiscal year 2012 to the baseline deficits in fiscal year 2013. CBO themselves referred to this one-year fiscal contraction as enough to send us back into recession:
Such fiscal tightening will lead to economic conditions in 2013 that will probably be considered a recession, with real GDP declining by 0.5 percent between the fourth quarter of 2012 and the fourth quarter of 2013 and the unemployment rate rising to about 9 percent in the second half of calendar year 2013.
While it is thus understandable that everyone says we can’t “go over” (or “run into”) the cliff, that doesn’t tell us what we should do on the other side of the one-year cliff. Are we going to reject the entire current-law baseline in favor of “business as usual” that continues to extend and deficit finance the type of spending and tax cuts we’ve enjoyed over the past dozen or so years? Or are we going to try to get back on the current-law baseline path eventually, given that CBO says that not doing so–continuing to avoid the cliffs and kick the cans along the way–would be harmful to the economy later on? (emphasis added):
Under the alternative fiscal scenario, deficits over the 2014–2022 period would be much higher than those projected in CBO’s baseline, averaging about 5 percent of GDP rather than 1 percent. Revenues would remain below 19 percent of GDP throughout that period, and outlays would rise to more than 24 percent. Debt held by the public would climb to 90 percent of GDP by 2022—higher than at any time since shortly after World War II.
Real GDP would be higher in the first few years of the projection period than in CBO’s baseline economic forecast, and the unemployment rate would be lower. However, the persistence of large budget deficits and rapidly escalating federal debt would hinder national saving and investment, thus reducing GDP and income relative to the levels that would occur with smaller deficits. In the later part of the projection period, the economy would grow more slowly than in CBO’s baseline, and interest rates would be higher. Ultimately, the policies assumed in the alternative fiscal scenario would lead to a level of federal debt that would be unsustainable from both a budgetary and an economic perspective.
Note that most of the difference between “take the cliff” or current law and “avoid the cliff” or “alternative fiscal scenario” is tax policy; CBO’s figures for the one-year decline in the deficit under current law show that higher revenues alone account for $478 billion, or 98 percent, of the $487 billion “cliff.” Alternatively, if defined as the difference between current-law and policy-extended (business as usual, alternative fiscal) deficits in fiscal year 2013, higher revenues account for 83 percent of the difference ($330 billion of $396 billion).
Thus, it’s pretty important that we take a closer look at the tax policies that comprise the “fiscal cliff,” in order to address it in the best way not just over the next year (when we want to avoid it because of the recession factor) but in the future (when we want to come closer to embracing it for long-term economic growth reasons). The Tax Policy Center’s analysis is very helpful in this regard, effectively pulling apart the pile of fiscal cans that have all been kicked to this particular point in time (the end of 2012) and studying the tax-policy labels on each one of the tax-policy cans (that are most of the cans). See, I believe the approach we need to take is not to simply avoid the fiscal cliff and kick the whole pile of current-law policy cans away (either into the trash or yet again “down the road”), but to commit to honoring the mix of spending cuts and (mostly) revenue increases imbedded in those fiscal cans and the current-law baseline, without feeling stuck with the particular timing and shape of the revenue- and spending-side policies. What I mean is that we should strive to achieve (and committo achieving) the same amount of deficit reduction over the 10-year budget window as is implied by the current-law baseline, and even the same amount achieved via the spending side vs. the revenue side of the budget–except with economically smarter, better-timed spending cuts and revenue increases. I think of this as “recycling the cans” instead of continuing to kick them. If we can’t use them usefully now, in their current spending-cut or revenue-increase form, let’s carry them along with us as we go along and figure out how to use them better later. But the rule is that we have to use them; we aren’t allowed to trash them.
The Tax Policy Center analysis takes apart the pile of fiscal cans and sorts the current-law tax increase cans according to their “likelihood of occurring”–basing this admittedly very subjective ranking on “public discussion, proposals advanced by the two presidential candidates and members of Congress, and past congressional actions.” This ranking is because TPC is trying to show the effects of what is most likely to happen–basically, what to expect when expecting our dysfunctional political and policymaking processes to continue. Here’s that list, from the tax increases they judge as most likely to occur (tax cuts most likely to expire) to those they judge as least likely to occur (tax cuts most likely to be extended)–see the TPC report for description of the policies in each category:
- Payroll Tax
- Health Care Law Provisions
- High-Income Capital Gains and Dividends
- High-Income Rates, Pease, and PEP
- Stimulus Legislation EITC, CTC, and AOTC
- Estate Tax
- 2001/2003 Tax Provisions Primarily Affecting Low- and Middle-Income Households
- Alternative Minimum Tax Patch
The TPC analysis demonstrates that we’re facing significant tax increases over the next year under current law, and that even if policymakers opt to avoid significant portions of the impending fiscal cliff, any parts of the cliff that do occur are likely to involve higher tax burdens on almost all of us (at least 90 percent of us), because the most likely tax increases to occur are some tax increases on mostly lower-and-middle-income households (such as items 1 and 5) and only some on just higher-income households (such as items 2, 3, and 4).
But TPC’s ranking of the “likelihood” of the tax increases above shouldn’t be taken as their endorsement of that policy ranking. What if TPC had chosen to rank the policies according to economic intelligence instead–or how they would do it if their economists (or other smart economists) had their say? That is, what if TPC had adopted my “recycle the cans” approach and tried to put out a ranking to guide policymakers on how to bestdeal with the tax-increase cans–from an economic perspective? This kind of ranking would have to change over time, based on economic conditions at the time. Right now, the entire fiscal cliff is a scary proposition because in an economy still in recovery, still facing a shortage of demand, any form of fiscal contraction can worsen conditions (as the CBO warning of “recession” underscores). But ranking the tax increases from least harmful to most harmful, we economists would prioritize and use the tax-increase cans this year differently. We would either avoid using any cans this year, or we would use the tax-increase cans that increase burdens on just the richest of households first–so we would probably rank tax increases 2, 3, 4, and 7 in the TPC list as the least harmful to the economy and the hence the most acceptable to exercise first. We would push tax increases 1, 5, and 8 (the more regressive or proportional tax increases) further down this year’s list, because those are tax increases more likely to adversely reduce demand and suppress job creation. Or we would simply replace this year’s scheduled regressive tax increases with other more progressive, less harmful to demand, tax increases–”recycling” the tax-increase cans (by changing their timing or shape) while keeping their essential revenue-raising element.
But on the other hand, an economist-determined ranking of these tax policies would change once the economy got back to full employment, a couple years out (hopefully). In a full-employment economy, economic growth becomes once again constrained by the limits of our productive capacity, or the “supply side” of our economy–how large our human and physical capital stock is, and how intensely and efficiently we are choosing to use it. Under those full-employment conditions the adverse influence of higher marginal tax rates on labor supply and saving, and uneven effective tax rates across different sources and uses of income, will matter relatively more than they do now in our currently-still-demand-constrained economy. So in a couple years when we reexamine the tax-increase cans we have yet to use or re-purpose, we economists may rank tax increases that are skewed heavily to the rich and in the form of higher marginal tax rates much lower than we might this year. At that time we economists will also likely press harder for “base broadening” revenue increases that would raise effective burdens on all taxpayers, not just on the rich, because in a full-employment economy we will be more concerned with minimizing tax policy’s distortions on economic decisions than on steering more cash to the most cash-constrained households or businesses (who won’t be as cash-constrained at that time).
So my idea is to stop “kicking the can(s)” and instead follow a “recycle the cans” approach. Stop rejecting the current-law baseline levels of revenues and instead more strongly embrace them, because: (i) those revenues lead to economically-sustainable deficits over the next 10-20 years and represent a “grand bargain,” “go big” level of deficit reduction; (ii) those are policies our policymakers actually agreed to (to let tax cuts expire); and (iii) contrary to the spending-side portions of the current-law baseline, which we haven’t really experienced before, we have lived through the revenue-side portions (as in Clinton-era tax policy). Whatever parts of current-law revenues we can’t tolerate at the moment, save them for future, more thoughtful revenue increases–don’t just abandon them. And get the budget committees and the budget process to enforce this commitment. “Recycle As You GO” (or “RAYGO”) can be the new budget mantra. It sounds easier and more resourceful than “PAYGO,” doesn’t it?
From Wednesday's debate (emphasis added to NPR transcript):
MR. ROMNEY: Well, sure. I’d like to clear up the record and go through it piece by piece. First of all, I don’t have a $5 trillion tax cut. I don’t have a tax cut of a scale that you’re talking about. My view is that we ought to provide tax relief to people in the middle class. But I’m not going to reduce the share of taxes paid by high- income people...
…look, I’m not looking to cut massive taxes and to reduce the — the revenues going to the government. My — my number one principle is there’ll be no tax cut that adds to the deficit.
I want to underline that — no tax cut that adds to the deficit. But I do want to reduce the burden being paid by middle-income Americans. And I — and to do that that also means that I cannot reduce the burden paid by high-income Americans. So any — any language to the contrary is simply not accurate.
First, Romney says he will have “no tax cut that adds to the deficit.” How to reconcile this with not raisingburdens on “middle-income” Americans and not reducing burdens on “high-income” Americans–given the Tax Policy Center’s analysis of the kind of base broadening needed to support a 20% across the board reduction in marginal income tax rates (in addition to the proposed extension of the full complement of Bush tax cuts) andno increase in effective tax rates on capital income?
A few possibilities I see: (i) Romney is willing to back off the 20% figure for the marginal tax rate cuts; (ii) Romney is implicitly fiddling around with his definition of “middle income” vs. “high income” (consistent withMartin Feldstein’s point that you might be able to avoid raising burdens on middle-income households as long as “middle-income” ends at $100,000); and/or (iii) Romney is using “dynamic scoring” assumptions that assume growth effects offset any “static” revenue loss. Some combination of those three tradeoffs is being exploited here.
Second, Romney says he is “not going to reduce the share of taxes paid by high- income people.” How to reconcile this with reducing marginal tax rates and keeping capital income tax expenditures out of the tax base? Well, two cautions here, noting what Romney is literally saying:
- If the Romney plan is actually revenue losing, then maintaining the high-income households’ share of a smaller overall tax burden would still imply a reduction in the progressivity of the income tax system–”progressivity” referring to the existing pattern of rising average tax burdens (taxes paid/income) at higher income levels. A constant share of a shrinking progressive policy means the rich person’s burden, relative to his or her income, goes down more than it does for someone with lower income. The reference to “shares of taxes paid” was a favorite way of talking about the (claimed “increased”) progressivity of the Bush tax cuts by the Bush Administration. Given that a lot of the Romney advisers are the same people who created, promoted, and managed the Bush tax cuts (way back in 2001), the use of this statistic to advertise the “fairness” of the Romney plan is not at all surprising.
- Exactly who are the “high-income people” in this category? (Go back to point (ii) above, regarding the deficit-neutrality claim.) As the Tax Policy Center pointed out in their response to the Feldstein critique, if we change the definition of “high income” to above $100,000 instead of above $200,000 or $250,000, it’s much easier to keep the burdens of this much broader category of households constant (or higher), by paying for net tax cuts on those above $200,000, with net tax increases on those between $100,000 and $200,000. You can technically call that “not a reduction” in the tax burdens of (all) “high-income people” (meaning the aggregate category of people with income above $100,000), but most of us wouldn’t find that a sensible way to increase the “fairness” of the tax system.
So Romney was very effective in Wednesday night’s debate at making his tax plan sound, contrary to the President’s claims, both fiscally responsible and fair, but that’s because he was just able to declare it without explaining the details. And the President coming back with the details of the TPC analysis didn’t work as well as it did when he first touted the analysis two months ago in his campaign speeches and TV ads. (CNN’s real-time sentiment meter of their sample of Colorado undecided voters recorded that point in Obama’s remarks as his lowest point in last night’s debate, in fact.) And the debate moderator certainly didn’t follow up with the questions I would have.
Last week as part of the “Strengthening of America-Our Children’s Future” project that the Concord Coalition is a co-sponsor of, a forum was held in New York on the topic of “pro-growth tax reform.” Harvard economics professor and Romney adviser, Martin Feldstein, joined former Treasury secretary and Obama adviser, Lawrence Summers, to discuss what they consider “pro-growth” tax policy. A preview of their discussion was provided by former Senator Sam Nunn’s co-anchoring of the CNBC “Squawk Box” show earlier that morning; inthis segment Feldstein and Nunn discuss the potential for bipartisanship in tax reform, but Feldstein is also asked to react to comments that Summers had made on the show just before. (This latter issue will be most appreciated by those who have been following the Tax Policy Center’s analysis of the Romney plan and Feldstein’s subsequent critique of the TPC analysis and defense of the Romney tax reform plan.)
At the event, Feldstein and Summers made it clear that when it comes to the notion of what is “pro-growth tax reform,” there is a lot of common ground between economists who favor the Rs and economists who favor the Ds. Here are what I heard as some of the main points of agreement between Feldstein and Summers (what Summers referred to as the “structure that Marty and I have converged on”):
- “Pro-growth tax reform” means structuring the tax system to encourage longer-term expansion in the productive capacity (or “supply side”) of the economy.
- This suggests that a broader, more even tax base, which supports relatively low marginal tax rates, is the best way to raise necessary revenue with the least distortion to those supply-side economic decisions (how much to work, how much to save, how much to invest in human or physical capital).
- A first priority to follow the “broadening the tax base” strategy is to reduce existing “tax expenditures” that are considered inefficient and/or unfair. Tax expenditures are economically equivalent to government spending programs and make government bigger than indicated by the levels of direct spending. (Cutting revenues by increasing tax expenditures grows, rather than shrinks, the size of government.)
- Tax expenditures could be reduced in a variety of ways that don’t have to target particular sectors of the economy (could be done in across-the-board, broad-brush ways–e.g., Feldstein likes the idea of capping the total amount to a percentage of gross income) and can be done in a progressive manner, where tax burdens are increased relatively more on higher-income households (e.g., the Obama budget proposal to limit itemized deductions and even other tax expenditures to the 28% rate).
- Tax reform does need to raise revenue (relative to the policy-extended, “business as usual” baseline, and even before any “dynamic scoring” type effects are accounted for) in order to contribute to deficit reduction and (therefore) be “pro-growth.”
- But “pro-growth tax policy” is a longer-term goal focused on mainly the supply side of the economy; we cannot immediately raise tax burdens in ways that would threaten putting our economy back in recession (by reducing demand for goods and services too severely).
But I also heard some remaining sources of disagreement between Feldstein and Summers, which are probably indicative of where “stumbling blocks” to bipartisan tax reform remain:
- Beyond decreasing tax expenditures/broadening the income tax base, what are some other features essential to “pro-growth” tax policy? (i) Feldstein seems to favor continued low or even lower effective tax rates on capital income (more consistent with a consumption base), while Summers seems to favor reducing or eliminating the current preferential rates on capital gains and dividends (consistent with reducing tax expenditures under an income base); (ii) Feldstein would favor keeping marginal tax rates low across the income spectrum, including at the very top, while Summers would favor a return to higher rates at the top as necessary to restore fairness (greater progressivity) to the system; (iii) Summers explicitly said that effective (average) corporate income tax rates are too low, not too high, while Feldstein argues for corporate tax reform that is revenue-neutral at best with lower marginal tax rates on profits earned abroad; (iv) Feldstein would probably argue for a lower upper bound on overall revenues/GDP than Summers would, as consistent with the “pro-growth” goal.
- Beyond deficit reduction, what is needed to grow the economy’s “supply side?” Feldstein would probably argue for working toward smaller government in scale and scope, while Summers clearly stated that pro-growth tax reform is (necessary but) “not sufficient” to address our nation’s growth needs, because we have “under-invested” in many things. Beyond raising national saving by reducing the deficit, Summers believes government should more directly help the economy invest more in education, infrastructure, the environment, health care, etc.–the components of the productive capacity of the economy. He stated that such public investments are a necessary complement to fiscal sustainability in a “pro-growth” fiscal agenda. (And immediately, Summers emphasized that continued stimulus-type policies, to keep demand for goods and services up, are still necessary–although Feldstein did not disagree with this.)
The conversation between Feldstein and Summers is a good indicator of the potential for achieving bipartisan tax reform consistent with not just “growth” goals but fairness and fiscal responsibility goals as well. The broad contours of the common ground are indeed well “grounded,” but some of the remaining points of disagreement might be significant-enough stumbling blocks to make meeting halfway still challenging.
Earlier this week, Martin Feldstein, a Romney campaign economic adviser and Harvard professor, published this op-ed in the Wall Street Journal, critiquing the Tax Policy Center’s viral (thanks to President Obama) analysis of the implied distributional effects of Mitt Romney’s self-proclaimed-revenue-neutral tax reform plan. If you recall, the Tax Policy Center’s analysis showed that it was mathematically impossible to cut marginal tax rates as much as Romney proposes, not increase capital income taxes, and broaden the tax base in a revenue neutral way, without the reform resulting in a shift of tax burdens away from the richest households and towards other households (the “non-rich” you might say)–in other words, a “regressive” distributional effect.
Feldstein decided to do the calculation for himself, looking into which tax expenditures he himself could find to reduce/broaden the tax base that would reverse the conclusion that the Romney plan would cut taxes for the rich and raise them on everyone else (…remember, this is relative to Obama’s tax proposals, not relative to current law). He reports his discovery, which he characterizes as not just a critique of the TPC analysis, but an outright refutation (emphasis added):
The key question raised by the Romney plan’s critics is whether this revenue loss can be offset by broadening the tax base of high-income individuals. It is impossible to calculate the exact effects of the future reforms since Gov. Romney hasn’t specified what he would do. But refuting the Tax Policy Center’s assertions doesn’t require that. It only requires knowing if enough revenue could be raised from high-income taxpayers to cover the $186 billion cost.
The IRS data show that taxpayers with adjusted gross incomes over $100,000 (the top 21% of all taxpayers) made itemized deductions totaling $636 billion in 2009. Those high-income taxpayers paid marginal tax rates of 25% to 35%, with most $200,000-plus earners paying marginal rates of 33% or 35%.
And what do we get when we apply a 30% marginal tax rate to the $636 billion in itemized deductions? Extra revenue of $191 billion—more than enough to offset the revenue losses from the individual income tax cuts proposed by Gov. Romney.
In other words, Feldstein refutes that the Romney plan would raise taxes on the non-rich by redefining the non-rich. Obama, the TPC, and I’ll bet Romney himself, don’t consider households in the $100,000 to $200,000 range the “rich.” We know President Obama has always made the dividing line between the “rich” and the “middle class” somewhere in the $200K to $250K range. Households in the $100K to $200K range are squarely within Obama’s definition of the middle class households who would never be subjected to any increase in tax burdens under Obama tax policy. (By the way, those households also happen to be the households that tax policymakers often talk about as unfairly bearing the bulk of the burden of the alternative minimum tax, in contrast to the truly “rich”–say, millionaires–who are typically not on the AMT because their marginal tax rate puts their ordinary income tax burden above their broader-based AMT burden.)
So as the Tax Policy Center counter-responded today:
Writing in Wednesday’s Wall Street Journal, Romney economic adviser Martin Feldstein attempts to contradict our finding. Instead, his analysis actually confirms our central result. Under the stated assumptions in Feldstein’s article, taxpayers with income between $100,000 and $200,000 would pay an average of at least $2,000 more. (Feldstein uses a different income measure than we do – see technical note at end.)
Taxes would rise on families earning between $100,000 and $200,000 in Feldstein’s analysis because he considers a tax reform that would completely eliminate itemized deductions for taxpayers with income above $100,000. In 2009, taxpayers earning between $100,000 and $200,000 claimed more than half of these itemized deductions. Eliminating itemized deductions would raise more in taxes from people in this group than they would save from the rate reductions and other specified features of Governor Romney’s plan.
Gee, let’s repeat that Feldstein version/reinterpretation of the Romney plan (emphasis added):
a tax reform that would completely eliminate itemized deductions for taxpayers with income above $100,000. In 2009, taxpayers earning between $100,000 and $200,000 claimed more than half of these itemized deductions. Eliminating itemized deductions would raise more in taxes from people in this group than they would save from the rate reductions and other specified features of Governor Romney’s plan.
One has to wonder: did the Romney campaign really want Feldstein to “refute” the TPC analysis of the Romney tax plan this way–in effect spelling out that it’s “just” the $100K to $200K households that might get socked with the burden of paying for the net tax cuts for the above $200K households?
I don’t get it. But that’s probably why I’m not cut out to ever advise a political campaign. (I think I would have said “keep this quiet.”)
There are other, less-fundamental problems about Feldstein’s analysis including his use of 2009 tax year data (an unusually low-revenue year) which you can read more about in the same TPC blog post.
No, not a discussion of how to become an EconomistMom like me, but rather, the Economist magazine’s take on the “Mommy Track” and the “real reason why more women don’t rise to the top of companies.” I agree with this reasoning (especially where I have added emphasis):
Several factors hold women back at work. Too few study science, engineering, computing or maths. Too few push hard for promotion. Some old-fashioned sexism persists, even in hip, liberal industries. But the biggest obstacle (at least in most rich countries) is children. However organised you are, it is hard to combine family responsibilities with the ultra-long working hours and the “anytime, anywhere” culture of senior corporate jobs. A McKinsey study in 2010 found that both women and men agreed: it is tough for women to climb the corporate ladder with teeth clamped around their ankles. Another McKinsey study in 2007 revealed that 54% of the senior women executives surveyed were childless compared with 29% of the men (and a third were single, nearly double the proportion of partnerless men).
Many talented, highly educated women respond by moving into less demanding fields where the hours are more flexible, such as human resources or public relations. Some go part-time or drop out of the workforce entirely. Relatively few stay in the most hard-driving jobs, such as strategy, finance, sales and operations, that provide the best path to the top.
Consider this example. Schumpeter sat down with a mergers-and-acquisitions lawyer who says that, before starting a family, she was prepared to “give blood” to meet deadlines. After the anklebiters appeared, she took a job in corporate strategy at an engineering firm in Paris. She found it infuriating. Her male colleagues wasted time during the day—taking long lunches, gossiping over café au lait—but stayed late every evening. She packed her work into fewer hours, but because she did not put in enough “face time” the firm felt she lacked commitment. She soon quit. Companies that furrow their brows wondering how to stop talented women leaving should pay heed.
But I don’t like how the Economist insinuates it’s up to the new Yahoo CEO to prove that working moms really can rise to the top, this way:
Ms Mayer of Yahoo! is an inspiration to many, but a hard act to follow. She boasts of putting in 90-hour weeks at Google. She believes that “burn-out” is for wimps. She says that she will take two weeks’ maternity leave and work throughout it. If she can turn around the internet’s biggest basket case while dandling a newborn on her knee it will be the greatest triumph for working women since winning the right to wear trousers to the office (which did not happen until 1994 in California). To adapt Malia Obama’s warning to her father on his inauguration, the first pregnant boss of a big, well-known American company had better be good.
I think it’s all too easy to claim before the baby comes that you will be just as committed to your professional job, time-wise as well as attention-wise, once the baby arrives. And in my own experience, going back to work full time soon after the baby is born is far easier than staying at work full time after the baby has turned into a teenager with needs that can’t really be properly met by anyone other than their actual parent. Mothers have an obvious comparative (biological) advantage to fathers in caring for our newborn kids, but I think mothers keep the comparative advantage in terms of the “tug” we feel toward home over office (i.e., where we feel we make the biggest difference) throughout our kids’ childhoods.