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Brad DeLong's Grasping Reality 2019-10-07 15:20:36

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Sylvia Nasar (December 12, 1992): Tapping the Rich May Prove Tricky https://www.nytimes.com/1992/12/12/business/tapping-the-rich-may-prove-tricky.html?searchResultPosition=257: "Getting the really rich—the people who reaped an outsize share of the economic gains of the 1980's—to pay more was a major plank of the Democratic campaign.... The problem is that while higher tax rates on high incomes are likely to provide a good deal of new money, they are not likely, barring an unexpectedly buoyant economy, to generate the 92 billion over four years that the Clinton camp has claimed.... 'If there's a significant change in rates, say from 31 percent to 41 percent, people will change their behavior to take advantage of ways to defer income', Professor Poterba said. 'It would set into motion a

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Sylvia Nasar (December 12, 1992): Tapping the Rich May Prove Tricky https://www.nytimes.com/1992/12/12/business/tapping-the-rich-may-prove-tricky.html?searchResultPosition=257: "Getting the really rich—the people who reaped an outsize share of the economic gains of the 1980's—to pay more was a major plank of the Democratic campaign.... The problem is that while higher tax rates on high incomes are likely to provide a good deal of new money, they are not likely, barring an unexpectedly buoyant economy, to generate the 92 billion over four years that the Clinton camp has claimed.... 'If there's a significant change in rates, say from 31 percent to 41 percent, people will change their behavior to take advantage of ways to defer income', Professor Poterba said. 'It would set into motion a return to pre-1986 tax shelters'.... Mr. Clinton's strategists must find roughly 100 billion a year through permanent tax increases or spending cuts to fulfill his deficit-shrinking pledge...

...Where does that leave the middle-class tax cut? Robert Reich and other spokesmen for the President-elect keep insisting that the middle class—which accounts for three-fourths of total taxpayer income—deserves tax relief. But the consensus view among economists is that the Clinton Administration will have to prune the proposal radically or even drop it altogether merely to avoid inflating the deficit further. 'Even without the middle-class tax cut, the plan is mildly deficit-increasing', said Paul R. Krugman, an M.I.T. economist. 'It would be nice to get a sense from Little Rock that there are some hard choices being made'.... Clinton made two proposals during the campaign. One was to grant 60 billion of relief to middle-class taxpayers... The second proposal... is to raise the reward of working by expanding the popular earned-income tax credit for poor workers with children.... Taken together, the two changes, if carried out on this scale, would swallow up the revenue raised from the rich and then some...


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Bradford DeLong
J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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