Emory Report
November 24, 2008
Volume 61, Number 13



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November 24
, 2008
Tax plan: Will it help economy?

By Myra Thomas

As America’s economic situation continues to worsen, there is much debate over the best way that taxes should (or should not be) used to jumpstart the economy. Emory Law professor Dorothy A. Brown recently discussed with Goizueta Business School’s Knowledge@Emory what President-Elect Obama’s tax plan might mean for the country. Brown specializes in federal tax law, corporate tax matters, tax policy and critical race theory.

Q: President-Elect Obama, choosing to focus his tax credit strategy on America’s middle class, notes the financial health of is critical to economic recovery. How true is that statement?
The theory is with more money to spend, the middle class could provide some of the fuel needed to re-start the economy.

Q: President-Elect Obama’s plan calls for a tax cut and credits for 95 percent of workers and their families. Do these credits directly benefit the economy (as a whole), or are they simply a necessary quick fix?
The studies that I’ve seen suggest that low and middle-income taxpayers are more likely to spend than higher income taxpayers. Therefore, they are more likely to spend the rebate money received.

Q: His plan also includes a proposed repeal of a portion of the Bush tax cuts for families earning over $250,000.
I have seen no studies which suggest if taxes are raised that those making more than $250,000 will work less, which would result in a net loss of tax revenue. So to the extent the extra tax revenue helps bring down the deficit, the economy will be better off.

Q: The issue of tax breaks for large corporations has certainly come under fire. Just how useful are these breaks for job creation and the economy? And, is it critical to first deal with the matter of corporate tax loopholes?
It’s theoretically possible, but I don’t know whether it’s politically possible. President-Elect Obama has set forth an ambitious agenda for tax reform, which includes closing corporate tax loopholes. Corporations aren’t the most sympathetic taxpayers these days, so if he can garner public support for his tax proposals, we may see some more history in the making.

Q: President-Elect Obama has proposed removing foreign tax credit benefits to companies and manufacturing deductions, to address concern over companies shipping jobs overseas. Can tax policy remedy offshoring?
Yes, but this is a more complicated question than just tax policy. Each country has different regulations. While American tax laws may not always work in a corporation’s favor, other regulatory schemes may.

Q: Most political leaders would agree that the income tax filing system is a convoluted and cumbersome process. Why hasn’t something been done about the process?
Right now, special interest groups lobby for more tax provisions, which add to the complexity of the tax law. What is needed is a systemic overhaul of our tax laws. If the public demanded a change, we would more likely see one. We saw the impact of public outrage during the recent bailout bill. Yes, we still have a bill, but it is a very different bill than was originally suggested by President [George W.] Bush.

To read more on Obama’s tax policy, please see the full transcript with Dorothy A. Brown at knowledge.emory.edu.