I need to write a proper response to Stephen J. Entin’s critique of family-friendly tax policy. For now, I suggest you read it and see what you think.
Ending many deductions and fringe benefits would greatly expand taxable income, which would bump millions into higher tax brackets. Unless marginal tax rates came down a lot, marginal disincentives to work and save could rise for millions of households.
If the tax change is revenue neutral, and much of the revenue is devoted to large tax credits for families with children, then other taxpayers must pay a higher tax bill – and tax rates at the margin on saving, investment and work must increase for most taxpayers.
This is almost certainly true. But is it still worth it? Ramesh anticipated many of these objections, and my sense is that he offered pretty convincing rebuttals. Then there is the question of political psychology, which Ramesh tackles in the context of what sociologists call the life-course perspective. More to come.