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George H.W. Bush Economic Advisor - "Romney’s Tax Plan and Economic Growth" Or Lack Thereof!
The interesting thing is that no one with an iota of credibility is supporting Romney-Ryan's proposed tax plan. Indeed, given their reluctance to discuss the deductions or loopholes that would be eliminated, it is more likely that Romney-Ryan would push for the rate cut first, then go through the motions of trying to cut deductions, thus allow the debt to explode. Then, with debt exploding further, Romney-Ryan will demand that Medicare and Social Security be ended in the interest of fiscal responsibility. Of course, the media would portray just a move as bold and brave.
http://economix.blogs.nytimes.com/2012/10/16/romneys-tax-plan-and-economic-growth/
Mitt Romney and his running mate, Paul Ryan, are quite insistent that their tax plan is just the elixir that the economy needs to jumpstart growth. As Mr. Ryan said at last week’s debate, “Our entire premise of these tax reform plans is to grow the economy and create jobs.” He pointed to the similarity between Mr. Romney’s tax plan and the one that became law under Ronald Reagan in 1986.
* * *
But the idea that tax reform will jump-start an economy suffering from the after-effects of a cyclical downturn is nonsense. This can be illustrated by looking at the impact of the 1986 tax reform.
* * *
By the mid-1990s, it was the consensus view of economists that the Tax Reform Act of 1986 had little, if any, impact on growth. In an article in the May 1995 issue of the American Economic Review, the Harvard economist Martin Feldstein, a strong supporter of tax reform who had served as chairman of Reagan’s Council of Economic Advisers, found large changes in the composition of income, but the only growth effect was a small increase in the labor supply of married women.
* * *
Mr. Romney’s plan is not likely to be enacted in anywhere near the form he has proposed, if only because Congress is far more polarized today than it was in 1986, and the major political parties are much farther apart on the goals of tax reform. Consequently, there is little reason to think we will see tax reform any time soon, and even if Mr. Romney’s plan is enacted as proposed the growth effect will be small to nonexistent.
* * *
But the idea that tax reform will jump-start an economy suffering from the after-effects of a cyclical downturn is nonsense. This can be illustrated by looking at the impact of the 1986 tax reform.
* * *
By the mid-1990s, it was the consensus view of economists that the Tax Reform Act of 1986 had little, if any, impact on growth. In an article in the May 1995 issue of the American Economic Review, the Harvard economist Martin Feldstein, a strong supporter of tax reform who had served as chairman of Reagan’s Council of Economic Advisers, found large changes in the composition of income, but the only growth effect was a small increase in the labor supply of married women.
* * *
Mr. Romney’s plan is not likely to be enacted in anywhere near the form he has proposed, if only because Congress is far more polarized today than it was in 1986, and the major political parties are much farther apart on the goals of tax reform. Consequently, there is little reason to think we will see tax reform any time soon, and even if Mr. Romney’s plan is enacted as proposed the growth effect will be small to nonexistent.
