Don't Cut Taxes—Reform Them

I am an admirer of Larry Summers. And of Kevin Hassett. Which is why I mourn Larry’s descent from civility into dismissive name-calling, and Kevin’s ill-considered attack on the Tax Policy Center, an organization with which I often disagree but is staffed by what Larry calls “highly respected former civil servants”—which I take to be intended as praise.

The debate over tax policy is going to be unpleasant enough without two very good economists descending to the level of, shall we say, Chuck Schumer and Donald Trump.

Let’s start by listing areas of relative agreement (emphasis on “relative”): A reduction in corporate taxes will stimulate growth. Hassett believes there will be a considerable increase from the lackluster rate of recent years, while Summers says such growth will be “attenuated” by the current full-employment situation in which the economy happily finds itself.

Hassett believes a corporate tax cut will mostly end in the pockets of workers; Summers believes that only a small portion will trickle down to working families.

Hassett believes that the current corporate tax rates are making our businesses uncompetitive. Summers knows that the 40 percent rate is merely nominal, and the effective rate is closer to 23 percent, not all that far from the industrialized country average of 24 percent.