Sunday, March 21, 2010

Interesting variable taxation idea from Thoma

From Economist's View:
Political battles make it very difficult to use discretionary fiscal policy to fight a recession, so more automatic stabilizers are needed. Along those lines, if something like this were to be implemented to stabilize the economy over the business cycle, I'd prefer to do this more generally, i.e. allow income taxes, payroll taxes, etc. to vary procyclically. That is, these taxes would be lower in bad times and higher when things improve, and implemented through an automatic moving average type of rule that produces the same revenue as some target constant tax rate (e.g. existing rates).

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