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Begin New Search Topic Development Author Peter R. Orszag

1. Reforming Tax Incentives into Uniform Refundable Tax Credits

Author:
Lily L. Batchelder, Jr. Fred T. Goldberg, and Peter R. Orszag
Publication Date:
08-2006
Content Type:
Policy Brief
Institution:
The Brookings Institution
Abstract:
The federal tax code provides about $500 billion each year in incentives intended to encourage socially-valued activities, including homeownership, charitable contributions, health insurance, and education. The vast majority of these incentives operate through deductions or other approaches that link the size of the tax break to a household's marginal tax bracket, which means that higher-income taxpayers receive larger incentives than lower-income taxpayers. Such an approach is often appropriate for provisions, such as deductions for business expenses, designed to measure income or ability to pay. But such an approach for incentives intended to promote socially-valued activities excludes more than a third of America, and misses an important opportunity to increase efficiency and economic growth.
Topic:
Civil Society, Development, and Economics
Political Geography:
United States

2. Deficits, Interest Rates, and the User Cost of Capital: A Reconsideration of the Effects of Tax Policy on Investment

Author:
William G. Gale and Peter R. Orszag
Publication Date:
07-2005
Content Type:
Working Paper
Institution:
The Brookings Institution
Abstract:
Under traditional formulations, lower capital income tax rates reduce the user cost of capital and stimulate investment. The traditional approach, however, implictly or explicitly considers a revenue-neutral reduction in capital income taxation. We extend the traditional approach by considering a reduction in taxes that generates an increase in the budget deficit; the expanded budget deficit raises interest rates and the opportunity cost of investment. This provides a mechanism through which tax cuts can raise the cost of capital. Representative calculations show that, even with relatively modest interest rate effects, the net effect of making the Administration's recent tax cuts permanent or a 10-percent reduction in individual income tax rates would be to raise the user cost of capital. Thus, sustained tax cuts can raise the cost of capital and reduce investment.
Topic:
Development, Economics, and Government
Political Geography:
United States