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Tax policy is a fundamental part of governance and encompasses difficult economic and political judgments and trade-offs across efficiency, equity, efficacy, and administration.
Sensible Taxes and Practical Politics draws on economics and political science to argue that a desirable income tax has a narrow base and high tax rates, as currently exists in the United States and other high-income countries.
List of contents
- Ch 1 Tax Policy and Tax Politics
- Ch 2 Comprehending Comprehensive Taxation
- Ch 3 To 1986 and Back
- Ch 4 Efficient Taxes
- Ch 5 Tax Equity
- Ch 6 Efficient and Equitable Personal Taxation
- Ch 7 Better Business Taxes
- Ch 8 Influencing Tax, and Taxing Influence
- Ch 9 Reformulating Tax Reform
- Ch 10 High Tax Heresy
- Addendum: Chapter Notes
About the author
James R. Hines is L. Hart Wright Collegiate Professor of Law, Richard A. Musgrave Collegiate Professor of Economics, and research director of the business school's Office of Tax Policy Research at the University of Michigan. In 2017 he received the National Tax Association's Daniel M. Holland Medal for lifetime achievement in the study of public finance. He is a research associate of the National Bureau of Economic Research, research director of the International Tax Policy Forum, former co-editor of the American Economic Association's Journal of Economic Perspectives, and former economist in the U.S. Department of Commerce.
Summary
Taxes are like the weather in one way: everyone complains about them. But how the government raises revenues is something that people can influence, as long as they have a good understanding of the stakes and options.
Sensible Taxes and Practical Politics argues that American tax rates are too low and are indiscriminate. James Hines, a leading authority on tax policy, controversially posits that the base tax rate should be higher but there should also be more ability for individuals to reduce their taxes. This is the only way to create an equitable and efficient tax system makes distinctions among people and that treats them as individuals rather than classes. And as tax policy reflects societal values and goals, it is perfectly legitimate for it to create incentives by facilitating significant deductions for dependents, child care expenses, exceptional medical expenses, casualty losses, charitable contributions, education expenditures, and other expenses associated with employment and income production. While the headline tax rate may be high, the real rate, after deductions, is much lower.
By contrast, the pursuit of lower baseline tax rates has, Hines shows, produced revenue shortfalls, inefficient incentives, and tax inequities. The current tax system creates distortions and is unfair because of the reduced provision for personal circumstances. It is also dishonest because it claims to be progressive but is not.
The art of tax design entails tailoring tax burdens to collect revenue from activities that are least likely to be distorted by taxation. As for individuals, so too for business, Tax policy should treat preferentially firms and activities that might diminish or disappear if taxed heavily. Tax policy is a fundamental part of governance and encompasses difficult economic and political judgments. Hines provides an honest assessment of the interaction of politics, values, and taxes.
