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82 IRET Policy Bulletin 1 (2000)

handle is hein.taxfoundation/iretpbul0041 and id is 1 raw text is: September 20, 2000 THE GORE TAX PLAN: REDISTRIBUTION, NOT REFORM Introduction Vice President Al Gore proposes tax cuts that he claims will be worth $500 billion over the next 10 years. The Vice President describes his tax program as targeted, meaning it would not reduce taxes across the board but would cut taxes for activities or groups he believes the government should assist. The majority of his tax-reduction proposals involve tax credits, including several refundable credits. (People can claim refundable tax credits whether or not they owe tax.) The highly targeted nature of the G ore tax cuts and their structuring as refundable credits has raised several serious questions. Are these proposals really tax cuts or are they disguised spending increases? How much of the population would qualify? Would the proposals increase economic activity and income, or would they merely redistribute, or worse, reduce income and employment? The highly targeted nature of the Gore tax cuts and their structuring as refundable credits has raised several serious questions. Are these proposals really tax cuts or are they disguised spending increases? How much of the population would qualify? Would the proposals increase economic activity and income, or would they merely redistribute, or worse, reduce income and employment? The economic consequences of tax changes are best predicted by looking at the degree to which the tax changes increase or reduce incentives at the margin to produce additional income. That is, will a tax change reduce marginal tax rates or instances of double taxation, or correct mismeasurement of taxable income, in a manner that would increase the after-tax reward to additional production? If so, the proposal will increase work, saving or investment, and raise economic output and employment; if not, not. The Gore tax plan contains virtually no net marginal incentives to increase work, saving or investment, and would do nothing to promote growth. It contains many tax increases on saving and investment that would retard those activities. Where money would flow from the Treasury to taxpayers, it would generally do so in a manner that more resembles a spending program than a tax Institute for IRET is a non-profit, tax exempt 501(c)3 economic policy research and educational Research organization devoted to informing the public about policies that will promote on the economic growth and efficient operation of the market economy. Economics of 1730 K Street, N.W., Suite 910 . Washington, D.C. 20006 Taxation (202) 463-1400 . Fax (202) 463-6199 . Internet www.iret.org