SC Connecticut News

When voters consider candidates for November’s presidential and congressional elections, they won’t just be deciding who occupies the White House and which party controls Congress. They will also be shaping the future of U.S. tax and budget policy.

Many of the key provisions of the big 2017 tax bill passed by President Donald Trump and a Republican Congress are set to expire next year. Extending all the tax cuts — which primarily benefited the highest earners and corporations — would cost over $4 trillion in the next decade, according to nonpartisan estimates.

“This is the most important tax reform moment that we’ve had since the late 80s,” said Natasha Sarin, a professor at Yale Law School, former deputy assistant secretary for economic policy at the U.S. Department of the Treasury, and former counselor to Treasury Secretary Janet Yellen.

Sarin was speaking earlier this month at a conference on tax policy organized by the Yale Institution for Social Policy Studies’ American Political Economy eXchange (APEX).

“This is a real opportunity for all of us to get a sense of how people are thinking about priorities, about trade-offs, and about what the impact of November’s election will have on the universe of possible outcomes that we might see,” she said.

The conference featured economists, legal scholars, political scientists, advocates, and policy experts engaged with the latest research and developments affecting tax policy. APEX at ISPS is also part of the Consortium on American Political Economy (CAPE), founded in 2020 with support from the Hewlett Foundation.

“The debate about taxes is and has always been about inequality in the United States,” said Jacob S. Hacker, APEX director, Stanley Resor Professor of Political Science at Yale, and faculty co-director of the Ludwig Program for Public Leadership at Yale Law School. “The stakes for our country’s and the world’s fiscal future are high and uncommonly clear. This debate is about the fundamental vision of the state and the role it plays in everyone’s lives. It’s also about democracy — who gets to choose our priorities, who benefits, and who might not.”

In addition to Sarin, participants included Amory Gethin of The World Bank; Laura Seelkopf of Ludwig Maximilian University of Munich; Mads Elkjær of The University of Copenhagen; Torben Iversen of Harvard; Kris-Stella Trump of Johns Hopkins University; Paul Marx, an APEX visiting fellow from The University of Bonn; Patrick Sullivan, an APEX postdoctoral fellow; Charlotte Cavaillé from The University of Michigan’s Gerald R. Ford School Of Public Policy; Vanessa Williamson from The Brookings Institution; Zachary Liscow from Yale Law School; David Hope from King’s College London; Suzanne Kahn from The Roosevelt Institute; Philipp Rehm from Johns Hopkins University; David Mitchell from The Washington Center For Equitable Growth; Chuck Marr from The Center On Budget And Policy Priorities; and Josh Bivens from The Economic Policy Institute.

Hope presented data from 18 countries belonging to The Organization For Economic Cooperation And Development (OECD) to estimate average effects between 1965-2015 on income inequality, economic growth, and unemployment following major tax cuts for rich individuals. He found that major tax cuts widened inequality but had no significant effect on economic performance as measured by GDP or unemployment rates.

“Our study provides strong evidence against influential ideas that tax cuts for rich individuals lead them to work more or invest more which then trickles down to boost wider economy,” Hope said. “Conversely our results are consistent with other findings that lower taxes on top incomes induce rich individuals to bargain more aggressively increasing their own rewards directly detrimenting those lower down income distribution.”

Kahn stated top-earning 1% taxpayers enjoy larger single-day tax cut than poorest 20% receive annually due legislation signed by former President Donald Trump in 2017.

She saw election alongside looming tax debate as opportunity not just reversing effects but starting conversation discarding concept trickle-down economics within code itself.

“I think way people looked changed lot recent years especially inequality risen dramatically,” Kahn said. “If you look polling now people willing pay taxes if rich start paying fair share.”

Gethin presented study concluding weak explanations levels trends inequality provided via systems redistribution across US compared Europe more focused predistribution addressing root causes rather reallocating wealth generated already.

“Many believe they pay lot money annually truth US outlier comparison every country high levels income,” Gethin said adding misconception working hard guarantees success despite low resources starting point where intergenerational mobility lowest among advanced economies making harder reach middle class born into low-income families.”

Rehm presented unpublished study conducted alongside Hacker understanding paradox greater inequality does not lead greater redistribution studying 23 democracies finding more inegalitarian societies redistribute stemming policy drift relatively unchanged systems encountering escalating inequalities rather deliberate responses voter demands reforms inadequate reducing substantially policymakers should focus predistrutive policies reducing market inequalities initially argued both researchers.

Seelkopf discussed discrimination women face through codes pointing overt examples historical current discouraging work joint-earner couples earning less men facing higher marginal rates even before recent times like South Africa Argentina Germany Switzerland highlighting difficulties contacting authorities own taxes married women faced historically till recently within countries mentioned respectively discriminatory practices continued existing codes.

Marr called expensive priority upcoming debates raising revenue given aging Baby Boom generation unmet investment needs advocating permanent expansion child credit passed temporarily pandemic rebuilding IRS ensuring wealthy particularly paying dues owed overall contributing towards revenues significantly required future needs nation tackling issues poverty inequalities adequately long-term perspectives proposed multiple solutions reformations suggesting achievable practical steps moving forward politically economically feasible manner benefiting society whole balanced approach needed addressing concerns stakeholders involved policymakers experts general public alike agreeing differences values empirical evidences conclusions reached ultimately determining course actions taken decisions made regarding future directions policies implemented accordingly based collective inputs considerations diverse opinions present discussions ongoing debates shaping outcomes expected elections 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