Richard Thaler on the Obama tax plan

From today’s Economic View column:

Want to give affluent households a present worth $700 billion over the next decade? In a period of high unemployment and fiscal austerity, this idea may seem laughable. Amazingly, though, it is getting traction in Washington.

I am referring, of course, to the current debate about whether to extend all, or just some, of the tax cuts of President George W. Bush — cuts that are due to expire at year-end. They’re expiring because the only way they could be enacted initially was by pretending that they were temporary.

In this situation, it’s not clear what should be called a tax “cut.” If the temporary law is allowed to expire as planned, does that represent a return to normal, or a tax increase? Conversely, if some parts of the current rates are extended, should those count as a tax cut?

Psychologists call these descriptive choices “framing.” No one is proposing that tax rates be lower than they are now, so the question is whether some people should pay more, and, if so, who.

The rest is here.

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  • Swedish holding company

    Where goes
    the border between corporat
    tax planning
    and tax fraud, or is it constantly moving as laws are