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Owen Zidar
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External authors
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Blog Post
What’s at stake: Greg Mankiw recently highlighted a John Diamond study, which finds that a base-broadening, rate-reducing, Romney type tax plan would increase GDP relative to baseline by 5.4 percentage points over the next decade. While the specifics of this study are prone to discussion, similar simulations support similar findings – recognizing that the income tax systems of most countries are a complex, inefficient, and costly way of raising revenues to finance government expenditures. Looking beyond the headline numbers, however, reveals that these large efficiency gains often rely on the political feasibility of (1) making a majority of the population worse off, (2) raising burdens on older people, and/or (3) taxing imputed rents from housing.
