Giving Compass' Take:

· Writing for the Washington Center for Equitable Growth, Corey Husak takes a look at the impact feeral tax changes have on the US economy.

· Why is it important to acknowledge the impact of these changes? 

· Read more about the federal tax system and how Americans feel about it.

The primary purpose of taxation is to fund public spending in a fair manner. When analyzing proposed tax changes, tax economists must make complex assumptions about how people would respond to those changes and what that means for the incidence of the tax changes, meaning who would ultimately receive a tax cut or pay for a tax increase. Luckily, the economic effects of a federal tax change are summarized succinctly and intuitively by rigorous, nonpartisan groups such as the Joint Committee on Taxation and the Tax Policy Center in the form of a revenue analysis and a distribution table.

As Greg Leiserson, Equitable Growth’s director of Tax Policy and chief economist, notes, “If U.S. tax reform delivers equitable growth, a distribution table will show it.” Numerous complex calculations and assumptions underlie the production of revenue and distribution tables, but when done well, they provide the key information that policymakers need to know about how tax changes will impact the populations they care about. This may seem like a simple point, but all too often, arguments about tax policy ignore these fundamental sources of information, instead focusing on narrow, misleading claims about economic growth and job creation.

On December 6 and December 13, Equitable Growth hosted our “Economics of Taxation” courses in the U.S. Capitol building to help congressional staffers understand these tools of tax analysis and the trade-offs in designing tax policy. Our first day, “Tax Basics,” was an introduction to the federal tax system. The second day, “Taxes and Consequences,” covered most of the topics presented below in this column and how to understand and evaluate taxes in an intellectually rigorous and coherent manner.

Read the full article about the impact of federal tax changes by Corey Husak at Washington Center for Equitable Growth.