How to target untaxed wealth: Lawrence Summers
- Mali hostage crisis ends as security forces gun down militants; 27 killed
- Sheena Bora case: Peter charged with murder, criminal conspiracy
- Nitish Kumar sworn in as Bihar Chief Minister; Lalu's sons in Cabinet
- UP keeps its distance from Bihar: Why Mulayam, Akhilesh didn't attend Nitish swearing-in
- Madras HC stays cancellation of Greenpeace India registration
Sooner or later the American tax code will be reformed - probably sooner. Raising revenue will be the main motivation, but at a time of sharply increasing economic polarization, issues of fairness will be prominent too.
There are also legitimate concerns about the complexity of current tax rules and their adverse effects on the economy.
So far, the debate has focused on scaling back provisions of the tax code that have favored activities traditionally deemed to be valuable.
For example, there is talk of reducing deductions for charitable contributions, taxes paid to state and local governments, home mortgages, employer-provided health insurance and many less important provisions.
There are reasonable arguments to be made in each case.
But taking only the "limit tax incentives" approach to tax reform has several major defects.
First, if reform is designed to avoid perverse outcomes - such as the crushing of charitable contributions or more pressure on state budgets - then it will raise limited amounts of revenue.
Second, this approach will address very little of the complexity in the code and is not likely to do much for recovery, since it will do little to increase demand.
Third, it will do little to address concerns about fairness: the richest taxpayers actually make relatively little use of deductions and credits.
What is needed is an additional element, one that has largely been absent to date: the numerous exclusions from the definition of adjusted gross income that enable the accumulation of great wealth with the payment of few or no taxes.
The issue of the special capital gains treatment of carried interest - performance fee income for investment managers - is only the tip of a very large iceberg.
There are far too many provisions that favor a small minority of very fortunate taxpayers.
- Modi can leverage foreign policy to repair his domestic image
- Muslims biggest losers from our reservation policy, one that Bhagwat rightly wants reviewed
- If Pak state really cared for its people, it would put national economy above all else
- Despite little coverage in India, the Argentinian presidential election is significant
- Uday lacks a strong, accessible monitoring mechanism critical for its success
- What Mr Mani Shankar Aiyar won’t say