Monday, April 24, 2017

Best selling textbook author describes principles for tax reform

In a NY Times article, Greg Mankiw demonstrates the ability that has made him a best-selling-econ-textbook author by simplifying a confusing debate down to four principles:

  • WORLDWIDE VS. TERRITORIAL: Most nations aim to impose taxes on economic activity that takes place within their borders 
  •  INCOME VS. CONSUMPTION: Many economists have argued that taxes should be levied based on consumption rather than income. 
  •  ORIGIN-BASED VS. DESTINATION-BASED TAXATION: The corporate tax system is now origin-based. 
  •  DEBT VS. EQUITY: Now, firms can deduct interest payments to bondholders, but they cannot deduct dividend payments to equity holders.
Mankiw thinks that Congress is moving in the right direction in all four dimensions.  

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