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Donald Marron

Donald Marron

I am an economist and nature lover. By day, I serve as director of economic policy initiatives & institute fellow at the Urban Institute. By night, I muse about economics, finance, nature, and life here at dmarron.com and occasionally write for other outlets such as the Christian Science Monitor. I also advise several start-up companies.

Articles by Donald Marron

The Worst Jobs Day Ever

May 8, 2020

Driven by the COVID-19 shutdown, April marked the greatest job loss in American history. The unemployment rate skyrocketed to 14.7 percent, and employers cut 20.5 million jobs.
Those figures are heart-wrenching. But as awful as they are, they do not fully capture workers’ hardships. To be counted as unemployed, people must be available for work and actively seeking it. With schools closed, job opportunities withering, and social distancing the new norm, many displaced workers don’t satisfy those requirements. Instead, they officially show up as having left the labor force.

From February to April, the labor force shrank by 8 million people. Add that to the more than 17 million increase in unemployment, and 25 million Americans are no longer employed. More than 61 percent of Americans

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If We Give Everybody Cash, Let’s Tax It

March 18, 2020

Giving people cash is a great way to soften COVID-19’s economic blow. But it’s sparked a classic debate. Should the federal government give money to everyone? Or target it to people with low incomes?
Targeting has the potential to deliver the biggest benefit per dollar spent. But eligibility requirements add complexity and will inevitably screen out some people who need help. Universality is simpler and recognizes that we are all in this together.
Happily, we can combine the best features of both approaches: Let’s give cash to everyone, and then tax it later. By distributing money today, we get the speed and inclusiveness of universality. By taxing it later, we can recapture some of the benefits from those who needed them least.
One approach is simply to tax the assistance just

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Economic Policy in the Time of COVID-19

March 17, 2020

COVID-19 poses a severe threat not only to public health but also to the overall US economy. The nation’s policy response should focus on four basic strategies.
First, we should embrace those economic losses that protect health. The steps needed to combat the coronavirus will inevitably reduce economic activity. We want risky activities to stop. Social distancing is in. Gatherings are out. Reducing economic activity will reduce the overall size of the economy. But we all know Gross Domestic Product is not a measure of social wellbeing. That’s especially true today.
Second, we should help people get through this sudden financial shock. Millions of workers will see their incomes fall from reduced work hours, furloughs, and layoffs. Restaurants, bars, and many other small businesses will

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Brainteasers From My Dad

December 15, 2019

When my sister and I were little, our Dad would challenge us with riddles and word games. I mentioned three in my eulogy for Dad:
1. Imagine a two-volume dictionary sitting on a shelf. Each volume has 500 pages. A bookworm is on the first page of letter A. It wants to eat its way to the end of letter Z as fast as possible. How many pages does it need to eat?
2. Should you walk to work or bring your lunch?
3. Is it warmer in the summer or in England?
Dad used the first to show the perils of leaping to conclusions. The second introduced basic economics. As far as I can tell, the third is just amusing; if you see a deeper meaning, please let me know.

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Brainteasers From My Dad

December 15, 2019

When my sister and I were little, our Dad would challenge us with riddles and word games. I mentioned three in my eulogy for Dad:
1. Imagine a two-volume dictionary sitting on a shelf. Each volume has 500 pages. A bookworm is on the first page of letter A. It wants to eat its way to the end of letter Z as fast as possible. How many pages does it need to eat?
2. Should you walk to work or bring your lunch?
3. Is it warmer in the summer or in England?
Dad used the first to show the perils of leaping to conclusions. The second introduced basic economics. As far as I can tell, the third is just amusing; if you see a deeper meaning, please let me know.

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Remembering My Dad, Donald Marron, 1934 – 2019

December 9, 2019

My dad died unexpectedly last Friday. He lived a remarkable, generous life. Obituaries in Bloomberg, NYT, and WSJ give a taste of his success in business, charity, and the arts. He was truly a self-made man.
Some of my favorite memories, however, are of my dad’s rare failures. His unsuccessful effort to hurdle my sister’s cello during a game of chase. That time we got ejected from Yankee Stadium for throwing paper airplanes. The one and only set of tennis I ever won from him.
It’s difficult to believe he’s gone. Dad brought such vigor and energy to life. Indeed, it was only a few months ago that we rocked to Billy Joel at Madison Square Garden. You should have heard him sing “Movin’ Out”. If I make it to my 80s, I’d be thrilled to have half his energy and sharpness.
Health issues

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Remembering My Dad, Donald Marron, 1934 – 2019

December 9, 2019

My dad died unexpectedly last Friday. He lived a remarkable, generous life. Obituaries in Bloomberg, NYT, and WSJ give a taste of his success in business, charity, and the arts. He was truly a self-made man.
Some of my favorite memories, however, are of my dad’s rare failures. His unsuccessful effort to hurdle my sister’s cello during a game of chase. That time we got ejected from Yankee Stadium for throwing paper airplanes. The one and only set of tennis I ever won from him.
It’s difficult to believe he’s gone. Dad brought such vigor and energy to life. Indeed, it was only a few months ago that we rocked to Billy Joel at Madison Square Garden. You should have heard him sing “Movin’ Out”. If I make it to my 80s, I’d be thrilled to have half his energy and sharpness.
Health issues

Read More »

Should Congress Use The Income Tax To Discourage Consumer Drug Ads?

January 28, 2019

Senator Jeanne Shaheen (D-NH) and a score of Democratic cosponsors want to use the tax code to discourage direct-to-consumer advertising by drug companies. Their bill, the End Taxpayer Subsidies for Drug Ads Act, would prohibit firms from taking tax deductions for any consumer advertising of prescription drugs.
Limiting tax deductions is a blunt and arbitrary way of approaching a legitimate concern. Consumer drug ads play an important role in debates about the costs of prescription drugs, the risks of misuse and overuse of some medications, the balance of authority between doctors and patients, the limits of commercial speech, and a host of other issues. For overviews, see here, here, and here.
But the bill is not well crafted to address those issues. The problem starts with the

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Should Congress Use The Income Tax To Discourage Consumer Drug Ads?

January 28, 2019

Senator Jeanne Shaheen (D-NH) and a score of Democratic cosponsors want to use the tax code to discourage direct-to-consumer advertising by drug companies. Their bill, the End Taxpayer Subsidies for Drug Ads Act, would prohibit firms from taking tax deductions for any consumer advertising of prescription drugs.
Limiting tax deductions is a blunt and arbitrary way of approaching a legitimate concern. Consumer drug ads play an important role in debates about the costs of prescription drugs, the risks of misuse and overuse of some medications, the balance of authority between doctors and patients, the limits of commercial speech, and a host of other issues. For overviews, see here, here, and here.
But the bill is not well crafted to address those issues. The problem starts with the

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Designing Carbon Dividends

December 12, 2018

Carbon dividends are the hottest idea in climate policy. A diverse mix of progressive and conservative voices are backing the idea of returning carbon tax revenues to households in the form of regular “dividend” payments. So are a range of businesses and environmental groups. Two weeks ago, six House members—three Democrats and three Republicans—introduced carbon dividend legislation.
Here is the idea: A robust carbon tax would cut emissions of carbon dioxide and other gases that are threatening our climate. It also would indirectly increase taxes on consumers and raise significant revenue. Carbon dividends would distribute that revenue back to households through regular payments, thus softening the financial blow of the tax while still reducing emissions. (Of course, the revenue

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Designing Carbon Dividends

December 12, 2018

Carbon dividends are the hottest idea in climate policy. A diverse mix of progressive and conservative voices are backing the idea of returning carbon tax revenues to households in the form of regular “dividend” payments. So are a range of businesses and environmental groups. Two weeks ago, six House members—three Democrats and three Republicans—introduced carbon dividend legislation.
Here is the idea: A robust carbon tax would cut emissions of carbon dioxide and other gases that are threatening our climate. It also would indirectly increase taxes on consumers and raise significant revenue. Carbon dividends would distribute that revenue back to households through regular payments, thus softening the financial blow of the tax while still reducing emissions. (Of course, the revenue

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Three Things You Should Know about the Buyback Furor

April 12, 2018

Record stock buybacks—driven in part by the corporate tax changes in the Tax Cuts and Jobs Act (TCJA)—have sparked a media and political furor. Unfortunately, they’ve also created a great deal of confusion. To help elevate the debate, here are three things you should know.
1. Repatriated overseas profits are the main way TCJA is boosting buybacks
By slashing corporate taxes, TCJA will boost after-tax profits and cash flow. Companies will use some of that cash to buy back shares. But that is not the main way TCJA is fueling today’s record buybacks.
The big reason is the “liberation” of around $3 trillion in overseas profits. Our old system taxed the earnings of foreign affiliates only when the domestic parent company made use of them. To avoid that tax, many companies left those

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Three Things You Should Know about the Buyback Furor

April 12, 2018

Record stock buybacks—driven in part by the corporate tax changes in the Tax Cuts and Jobs Act (TCJA)—have sparked a media and political furor. Unfortunately, they’ve also created a great deal of confusion. To help elevate the debate, here are three things you should know.
1. Repatriated overseas profits are the main way TCJA is boosting buybacks
By slashing corporate taxes, TCJA will boost after-tax profits and cash flow. Companies will use some of that cash to buy back shares. But that is not the main way TCJA is fueling today’s record buybacks.
The big reason is the “liberation” of around $3 trillion in overseas profits. Our old system taxed the earnings of foreign affiliates only when the domestic parent company made use of them. To avoid that tax, many companies left those

Read More »

Talking Money, Inflation, Fiat, & Bitcoin

March 23, 2018

For your weekend listening pleasure (?): I visit the ReConsider podcast to chat money, inflation, fiat currencies, gold, Bitcoin, & Uncle Sam’s balance sheet. Starts at 4:59.
https://app.stitcher.com/splayer/f/123218/53701811

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Talking Money, Inflation, Fiat, & Bitcoin

March 23, 2018

For your weekend listening pleasure (?): I visit the ReConsider podcast to chat money, inflation, fiat currencies, gold, Bitcoin, & Uncle Sam’s balance sheet. Starts at 4:59.
https://app.stitcher.com/splayer/f/123218/53701811

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How Should Tax Reform Treat Employee Stock and Options?

October 19, 2017

The tax treatment of employee stock and options raises a classic Goldilocks problem. We want to tax this compensation neither too much or too little. In a recent policy brief, I consider three questions about how to strike that balance.
Do companies get excessive tax deductions for employee stock and options?
This concern rocketed to prominence in 2012 when Facebook went public. Its employees earned billions from their stock options and restricted stock units. The company, in turn, got billions in tax deductions, reducing its income taxes for years.
Those deductions outraged some observers who asked how Facebook could get billions in tax write-offs when its financial statements showed much lower compensation costs. Lawmakers on both sides of the aisle denounced the “stock

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How Should Tax Reform Treat Employee Stock and Options?

October 19, 2017

The tax treatment of employee stock and options raises a classic Goldilocks problem. We want to tax this compensation neither too much or too little. In a recent policy brief, I consider three questions about how to strike that balance.
Do companies get excessive tax deductions for employee stock and options?
This concern rocketed to prominence in 2012 when Facebook went public. Its employees earned billions from their stock options and restricted stock units. The company, in turn, got billions in tax deductions, reducing its income taxes for years.
Those deductions outraged some observers who asked how Facebook could get billions in tax write-offs when its financial statements showed much lower compensation costs. Lawmakers on both sides of the aisle denounced the “stock

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Eight Thoughts on Business Tax Reform

September 22, 2017

On Tuesday, I had the chance to testify before the Senate Finance Committee on business tax reform. Here are my opening remarks. They are a bit on the glum side, emphasizing challenges and constraints lawmakers face.  Moving from optimistic rhetoric about tax reform to legislative reality is hard. You can find my full testimony here.
America’s business tax system is needlessly complex and economically harmful. Thoughtful reform can make our tax code simpler. It can boost American competitiveness. It can create better jobs. And it can promote shared prosperity.
But tax reform is hard. Meaningful reforms create winners and losers. And you likely hear more complaints from the latter than praise from the former. I feel your pain. At the risk of adding to it, my testimony makes eight

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Eight Thoughts on Business Tax Reform

September 22, 2017

On Tuesday, I had the chance to testify before the Senate Finance Committee on business tax reform. Here are my opening remarks. They are a bit on the glum side, emphasizing challenges and constraints lawmakers face.  Moving from optimistic rhetoric about tax reform to legislative reality is hard. You can find my full testimony here.
America’s business tax system is needlessly complex and economically harmful. Thoughtful reform can make our tax code simpler. It can boost American competitiveness. It can create better jobs. And it can promote shared prosperity.
But tax reform is hard. Meaningful reforms create winners and losers. And you likely hear more complaints from the latter than praise from the former. I feel your pain. At the risk of adding to it, my testimony makes eight

Read More »

The 3-2-1 on Economic Growth: Hope for 3, Plan for 2, Pray it isn’t 1

August 10, 2017

How fast will the US economy grow? When mainstream forecasters consult their crystal balls, they typically see real economic growth around 2 percent annually over the next decade. The Congressional Budget Office (CBO) and midpoint estimates of Federal Reserve officials and private forecasters cluster in that neighborhood.
When President Trump looks in his glowing orb, he sees a happier answer: 3 percent.
That percentage point difference is a big deal. Office of Management and Budget director Mick Mulvaney recently estimated the extra growth could add $16 trillion in economic activity over the next decade and almost $3 trillion in federal revenues.
But could our economy really grow that fast? Maybe, but we’d need to be both lucky and good. We’ve grown that fast before. But it’s harder

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The 3-2-1 on Economic Growth: Hope for 3, Plan for 2, Pray it isn’t 1

August 10, 2017

How fast will the US economy grow? When mainstream forecasters consult their crystal balls, they typically see real economic growth around 2 percent annually over the next decade. The Congressional Budget Office (CBO) and midpoint estimates of Federal Reserve officials and private forecasters cluster in that neighborhood.
When President Trump looks in his glowing orb, he sees a happier answer: 3 percent.
That percentage point difference is a big deal. Office of Management and Budget director Mick Mulvaney recently estimated the extra growth could add $16 trillion in economic activity over the next decade and almost $3 trillion in federal revenues.
But could our economy really grow that fast? Maybe, but we’d need to be both lucky and good. We’ve grown that fast before. But it’s harder

Read More »

Outside Research Organizations Can’t Replace CBO’s Budget Team

July 25, 2017

The House Freedom Caucus wants to eliminate the Budget Analysis Division at the Congressional Budget Office and rely on outside research organizations, including the Urban Institute, instead. As a former acting director of CBO and an Institute fellow at Urban, I think this is a terrible idea. It would harm fiscal policymaking and weaken the Congress.
Here’s the proposal offered by Representatives Scott Perry (R-PA), Jim Jordan (R-OH), and Mark Meadows (R-NC):
The Budget Analysis Division of the Congressional Budget Office, comprising 89 employees with annual salaries aggregating $15,000,000, is hereby abolished. The duties imposed by law and regulation upon the employees of that Division are hereby transferred to the Office of the Director of the Congressional Budget Office, who

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Outside Research Organizations Can’t Replace CBO’s Budget Team

July 25, 2017

The House Freedom Caucus wants to eliminate the Budget Analysis Division at the Congressional Budget Office and rely on outside research organizations, including the Urban Institute, instead. As a former acting director of CBO and an Institute fellow at Urban, I think this is a terrible idea. It would harm fiscal policymaking and weaken the Congress.
Here’s the proposal offered by Representatives Scott Perry (R-PA), Jim Jordan (R-OH), and Mark Meadows (R-NC):
The Budget Analysis Division of the Congressional Budget Office, comprising 89 employees with annual salaries aggregating $15,000,000, is hereby abolished. The duties imposed by law and regulation upon the employees of that Division are hereby transferred to the Office of the Director of the Congressional Budget Office, who

Read More »

Can Trump Make Mexico Pay for the Wall?

January 31, 2017

Mexico won’t willingly write the check for Donald Trump’s wall. So the president is hunting for a way to make Mexico pay.
That search isn’t going well.
Last week, press secretary Sean Spicer floated one idea: the destination-based cash flow tax. The DBCFT taxes imports and exempts exports. We import about $50 billion more from Mexico each year than we export. So the DBCFT could raise substantial revenue from trade with Mexico. Maybe Trump could earmark that money to pay for the wall?
Such earmarking sounds superficially plausible. But it has fundamental budget and logic flaws.
The budget problem is that Congress has other plans for that money. The DBCFT is the centerpiece of the House proposal for tax reform. House leaders insist reform will be revenue neutral. Any new money from the

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Can Trump Make Mexico Pay for the Wall?

January 31, 2017

Mexico won’t willingly write the check for Donald Trump’s wall. So the president is hunting for a way to make Mexico pay.
That search isn’t going well.
Last week, press secretary Sean Spicer floated one idea: the destination-based cash flow tax. The DBCFT taxes imports and exempts exports. We import about $50 billion more from Mexico each year than we export. So the DBCFT could raise substantial revenue from trade with Mexico. Maybe Trump could earmark that money to pay for the wall?
Such earmarking sounds superficially plausible. But it has fundamental budget and logic flaws.
The budget problem is that Congress has other plans for that money. The DBCFT is the centerpiece of the House proposal for tax reform. House leaders insist reform will be revenue neutral. Any new money from the

Read More »

Taxing carried interest just right

October 6, 2016

Hillary Clinton and Donald Trump agree on one thing: Managers of private equity funds should pay ordinary tax rates on their carried interest, not the lower rates that apply to long-term capital gains and dividends. They differ, of course, on what those rates should be. But if we made that change today, managers would pay taxes at effective federal rates of up to 44 percent, rather than the up-to-25 percent rates that apply currently.
I agree. Fund managers should pay ordinary rates on their carried interest. In a new paper, I argue that this is the right approach for a reason distinct from, and in addition to, the conventional concern about wealthy fund managers paying low tax rates. Taxing carried interest as capital gains creates a costly loophole when benefits to managers are

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Taxing carried interest just right

October 6, 2016

Hillary Clinton and Donald Trump agree on one thing: Managers of private equity funds should pay ordinary tax rates on their carried interest, not the lower rates that apply to long-term capital gains and dividends. They differ, of course, on what those rates should be. But if we made that change today, managers would pay taxes at effective federal rates of up to 44 percent, rather than the up-to-25 percent rates that apply currently.
I agree. Fund managers should pay ordinary rates on their carried interest. In a new paper, I argue that this is the right approach for a reason distinct from, and in addition to, the conventional concern about wealthy fund managers paying low tax rates. Taxing carried interest as capital gains creates a costly loophole when benefits to managers are

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Britain Builds a Better Soda Tax

March 22, 2016

Britain will soon tax sugary drinks. Whether you love that idea or hate it, you’ve got to give the Brits credit: They’ve designed a better version of the tax than any other government.
Beginning in 2018, the United Kingdom will charge the equivalent of 0.75 cents per ounce for drinks that contain more than 3 teaspoons of sugar in an 8-ounce serving and a full cent per ounce for drinks with more than 5 teaspoons per serving. These tax levels are similar to the penny per ounce that Berkeley, California levies on sugary drinks.
Britain’s innovation is in the tiering. Rather than hit all sugary drinks with the same tax, as Berkeley does, Britain has three levels. Drinks with little sugar aren’t taxed at all, drinks with moderate sugar face one tax rate, and drinks with lots of sugar face

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Budgeting for Federal Lending Programs Is Still a Mess

March 2, 2016

On Monday, the Government Accountability Office (GAO) defended the current method for budgeting for federal lending programs, known as “credit reform.” By endorsing the status quo, GAO puts itself at odds with the Congressional Budget Office (CBO), which has championed a “fair value” alternative. The details are wonky but the stakes are big. Over a decade, federal lending support for mortgages, student loans, and the Export-Import Bank could appear $300 billion more costly under fair-value budgeting than under credit reform.
CBO is right to question the way we budget for these programs. But GAO is right that CBO’s version of fair value is the wrong solution. Instead, we need a new approach that captures the strengths of both ideas, while avoiding their flaws. I laid out that

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How Should We Use the Revenue from Taxing Carbon?

February 23, 2016

Adele Morris co-authored this post.
A US carbon tax could raise $1 trillion or more in new revenue over the next decade. There is no shortage of ways to use it.
Tax reformers want to cut business and personal taxes. Budget hawks want to reduce future deficits. Environmental advocates want to invest in clean energy. Progressives want to expand the social safety net. And so on.
How should we make sense of these competing ideas? In a new policy brief, we suggest a framework for thinking through these options. We identify four basic uses of carbon tax revenues:
Offset the new burdens that a carbon tax places on consumers, producers, communities, and the broader economy;
Support further efforts to reduce greenhouse gas emissions;
Ameliorate the harms of climate disruption; or
Fund public

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