Monday, March 22, 2010

US healthcare: dispatch from anti-tax la-la land

Following President Obama's victory on healthcare, Citizens for Tax Justice in Washington, D.C. (an important player who did a lot to dispel some of the nonsense that was being spouted during the process of pushing forward the bill) has published another useful analysis:

"The Institute for Research on the Economics of Taxation (IRET) is at it again. If you've ever wondered where the Wall Street Journal's editorial board gets its most half-baked ideas about taxes and economics, the IRET is your answer. Last year, they released a remarkable report concluding that repealing the estate tax would actually increase federal revenue. (See CTJ's response.)

Now the IRET claims that the Medicare tax reform included in the health care compromise before Congress would decrease GDP by 1.3 percent and actually reduce federal revenue by $5 billion a year.
. . .
Sadly for IRET, no one believes it. Even George W. Bush's Treasury concluded that the gross increase in revenue resulting from the economic impact of tax cuts is tiny and comes nowhere near the level needed to actually offset the cost of tax cuts (much less result in a net revenue gain). Economic advisers to conservative Republican presidents agree. For example, Martin Feldstein, Chairmen of Council of Economic Advisers under President Reagan, and Glenn Hubbard and Greg Mankiw, both CEA chairmen during the George W. Bush administration, all have been quoted as saying that tax cuts do not raise revenue. One would assume that they believe the reverse, that tax increases do not reduce revenue.

More from this in our 2007 article Laffer in la-la land. And the CTJ article has plenty more.


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