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Academic Taxtivists

Write-Off: The Tax Blog

President Biden released a budget on Monday that called for such things as increasing the corporate tax rate and taxing the accruals on capital gains of folks with more than $100 million in assets (the taxiverse has yet to converge on a catchy name for this tax). I am seeing many academic tax folks of all stripes, economists, lawyers, etc., weighing in, expressing their love, or hate, of these plans. At this point, mostly love. This is all well and good—in my view, society is better off if people who have very informed opinions weigh in with their opinion (as opposed to uninformed people weighing in, which also frequently happens). However, one point, which is almost always unstated, is that these are opinions that comingle science with, well, opinion. The optimal tax in society requires an objective function. Science can theoretically tell us for a given objective function how to make the best tax possible. It cannot, however, tell us what the objective function is.

So, with these particular reforms, should the corporate rate be 21% or 28%? It matters how you see the trade-off between equity and efficiency (and science can tell us something about the parameters behind that trade-off). Should the wealthy pay taxes on their changes in wealth? Among other things, it matters how progressive you think the tax code should be. And, of course, any change in the tax code depends on what you think the proper role of government in a society is, and whether you think we need more revenue, and if so, how much. So, as I see comments on these proposed changes, I just keep in mind something I wrote a bit about back in 2019—opinions on tax code changes, and whether they are desirable for society, are informed by science, but, also embed the opiner’s values with them.

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