NPR’s List of Policies Economists Love

Josh Wright —  17 August 2012

The NPR put together a panel of economists with various political and ideological views to see what economists agree on.  (HT: Mankiw) Here is the list:

One: Eliminate the mortgage tax deduction, which lets homeowners deduct the interest they pay on their mortgages. Gone. After all, big houses get bigger tax breaks, driving up prices for everyone. Why distort the housing market and subsidize people buying expensive houses?

Two: End the tax deduction companies get for providing health-care to employees. Neither employees nor employers pay taxes on workplace health insurance benefits. That encourages fancier insurance coverage, driving up usage and, therefore, health costs overall. Eliminating the deduction will drive up costs for people with workplace healthcare, but makes the health-care market fairer.

Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that’s good. Don’t tax companies in an effort to tax rich people.

Four: Eliminate all income and payroll taxes. All of them. For everyone. Taxes discourage whatever you’re taxing, but we like income, so why tax it? Payroll taxes discourage creating jobs. Not such a good idea. Instead, impose a consumption tax, designed to be progressive to protect lower-income households.

Five: Tax carbon emissions. Yes, that means higher gasoline prices. It’s a kind of consumption tax, and can be structured to make sure it doesn’t disproportionately harm lower-income Americans. More, it’s taxing something that’s bad, which gives people an incentive to stop polluting.

Six: Legalize marijuana. Stop spending so much trying to put pot users and dealers in jail — it costs a lot of money to catch them, prosecute them, and then put them up in jail. Criminalizing drugs also drives drug prices up, making gang leaders rich.

See also Greg Mankiw’s list from his NY Times piece back in 2008.  Agree?  Disagree?   Additions to the list?

9 responses to NPR’s List of Policies Economists Love

  1. 

    I’m glad to see economists aren’t much different from politicians or regular citizens: they want to eliminate taxes (on net) and fail to propose either which expenses should be cut, or what other sources of revenue might replace these. Or to undermine employer-sponsored health care plans (no reason for an employer to bear the administrative burden if there’s no tax advantage), without proposing what delivery system might replace it. Though if we eliminate all corporate and personal income taxes, I suppose the mortgage and health care tax subsidies are moot anyway.

    This is disheartening to hear from economists, whom I believe all have the idea “opportunity cost” branded in some secret place when they are initiated into the tribe. The value of something (tax cut in this case) is equal to what you give up to get it. I learned that from Yoram Bauman’s summary of Mankiw’s principles. What do we give up and/or gain in the bargain? Better or worse taxes? Better or worse government programs? Better or worse deficit financing? A dysfunctional or highly functional health-care delivery and payment system?

    To put that in familiar terms: if the proposal were to end the tax subsidy on employer-sponsored health care and replace it with a British NHS-style system, I suspect a lot of conservatives would prefer the status quo, while if the replacement were some flavor of individual insurance market, conservatives would like it more. If revenue lost from eliminating all income taxes is replaced by a broad-based national consumption/VAT, it would be more or less attractive to different economists than if it were replaced by pushing all expenses to state-level income, sales and property taxes, or required introducing capitation taxes, or what have you.

    So I look at these and don’t see serious policies. I see bland, mom & apple-pie economist notions that are absolutely meaningless out of context. We may as well have policy prescriptions that everyone acts rationally based on full information to maximize their utility function.

    I don’t disagree that any of these might be useful to contemplate, but outside of the broader policy context, agreement or disagreement is along the lines of agreeing with a 6-year old who wants a pony.

    • 

      In personal terms, these policy proposals are akin to:

      - quit your job
      - divorce your spouse
      - train for an ultramarathon
      - bicycle to work

      Without knowing what your new job (or plan for getting a new job) is, who’s going to take care of your kids and how this is going to work, what you’re going to give up to train for your ultramarathon, and whether it’s even safe to bike to work, how can you say that you _should_ do any of these things?

    • 

      Huh? Only 1 of the 6 would reduce revenue. 3 of 6 would increase tax revenue. And 2 are ambiguous.

      1. Mortgage interest deduction–if eliminated tax revenue would increase
      2. Health care exemption–if eliminated, tax revenue would increase
      3. Corporate income tax–tax revenue would decrease (putting aside increases in revenue from dividends and capital gains)
      4. Consumption tax instead of income tax–could be designed to be revenue neutral
      5. Carbon emissions tax would increase revenues
      6. Legalizing marijuana – likely reduces spending, and if fully legalized could provide an additional source of revenue through taxation.

  2. 

    Points 1 through 4 look like the FairTax. Not so much point 5, but if “carbon emissions” are taxed no more and no less than every other good sold at retail, then it’s FairTax compatible too.
    Point 6, well, good luck with that.

    • 

      One could probably say “good luck with all of them”, although they seem to be ordered roughly along political likelihood.

  3. 

    What if Carbon dioxide emisions are good? Global cooling is far worse and historically much more likely.

  4. 
    Donald Alexander 18 August 2012 at 8:15 am

    I would add the following. First, eliminate all tariffs and quotas, and make free trade the policy default. Second, abolish the minimum wage law.

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