Would GOP Tax Reform Proposals Help Everyone? That's 'Pure Fantasy,' Says Northwestern Economist

Article ID: 685034

Released: 10-Nov-2017 5:05 PM EST

Source Newsroom: Northwestern University

Expert Pitch
  • Credit: Northwestern University

    Jorg Spenkuch

Newswise — EVANSTON, Ill. --- Jorg Spenkuch is an associate professor of managerial economics and decision sciences in the Kellogg School of Management at Northwestern University. His research focuses on political economy, political mass communication, strategic behavior and “money in politics.” He can be reached at 312-448-1319 or j-spenkuch@kellogg.northwestern.edu

Quote from Professor Spenkuch:

“My view is that, for political reasons, the GOP needs to pass a signature policy. Failing to pass tax reform, either this year or in early 2018, would, from the GOP’s view, be an unmitigated disaster for the 2018 midterm elections.

“The Senate and House tax plans differ in significant ways, and given that Republicans cannot afford to lose two or more votes in the Senate, the bill will, in the end, probably look more like the Senate than the House version – if a bill is passed at all.”

Spenkuch says the reconciliation process -- which would allow tax reform to pass in the Senate without any Democratic votes -- imposes significant restrictions on the content of the bill, essentially requiring the reform to be deficit neutral after 10 years.

“This means that tax cuts need to be offset by eliminating certain exemptions. In principle, most economists agree that a tax code with low rates and a broad definition of income (i.e., few exemptions) is preferable to a code with high rates and special treatment for different source of income or expenses -- though there are exemptions that make a lot of sense, say, for money put into retirement accounts.

“Much of the haggling and public outcry that we observe is about which exemptions are on the chopping block. In the end, there will be winners and losers. The top 1 percent will almost surely win. Whether (and, if so, by how much) middle-class Americans will benefit is still up in the air. The idea that the current tax proposals would make everyone better off is pure fantasy.”


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