Thursday, April 19, 2012

Hey, Simon Johnson agrees with me!

A little, sort of.

I shared this shower musing about a year ago:
why not index tax rates to GDP growth?  The government has no trouble indexing the yield on TIPS to inflation. Why not set a baseline tax rate that's operative at, say, 3% GDP growth, adjustable down in a set ratio all the way to, say, a 3% contraction, and adjustable up all the way to, say 6% annual growth? Economic velocity will determine our GAIT (Growth Adjusted Income Tax).
Yesterday, contemplating the possible gridlock-induced expiration of all the Bush tax cuts (no way...), Johnson proposed:

That’s a big fiscal adjustment, to be sure. But it could well be buffered by a temporary payroll tax cut, linked to employment relative to population. As employment recovers, the payroll tax cut would fade away.
Of course, he's talking about timing the exit from a temporary stimulative (or counter-contractionary) tax cut, not permanently adjustable income tax rates. But still.

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