WE ARE BETTER THAN THIS EDWARD D KLEINBARD WE ARE BETTER THAN THIS HOW GOVERNMENT SHOULD SPEND OUR MONEY Oxford University Press is a department of the University of Oxford It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide Oxford New York Auckland Cape Town Dar es Salaam Hong Kong Karachi Kuala Lumpur Madrid Melbourne Mexico City Nairobi New Delhi Shanghai Taipei Toronto With offices in Argentina Austria Brazil Chile Czech Republic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore South Korea Switzerland Thailand Turkey Ukraine Vietnam Oxford is a registered trademark of Oxford University Press in the UK and certain other countries Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016 © Edward D Kleinbard, 2015 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by license, or under terms agreed with the appropriate reproduction rights organization Inquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Library of Congress Cataloging-in-Publication Data Kleinbard, Edward D We are better than this : how government should spend our money / Edward D Kleinbard pages cm Includes bibliographical references and index ISBN 978–0–19–933224–3 (hardback) Fiscal policy—United States Finance, Public—United States Government spending policy—United States United States—Appropriations and expenditures I Title HJ257.2.K595 2015 336.3′90973—dc23 2014024466 eISBN: 978–0–19–933226–7 To the memory of my father, who delayed my entry into academia by 30 years —just long enough for me to have something useful to say CONTENTS List of Figures List of Tables Acknowledgments Introduction A Nation of Jerks? Taxing and Spending, or Spending and Taxing? What’s Moral Philosophy Got to Do with This? A Dutch Uncle to All The Book’s Ambitions The Book’s Data Sources A Closing Apology PART I OUR FISCAL SOUL IN PERIL CHAPTER The Happiness of Society Fiscal Policy and Our Happiness The Instruments of Fiscal Policy Other Tools of Government National Welfare Is Not National Income What Does GDP Actually Measure? Alternative Welfare Measures Equality of Opportunity CHAPTER Our Descent from Moral Philosophy to Narcissism The Villains in This Drama Adam Smith, Moralist and Mensch Neoliberalism Marketplace Freedoms, Political Liberties Neoliberal Thinking in Action Did Soup Kitchens Cause the Great Recession? Market Triumphalism CHAPTER Our Dismal Report Card Grading Our Performance Who Grades Us? Sagging Median Incomes, Collapsing Wealth Hours Worked International Comparisons Long-Term Employment Trends Poverty Income and Wealth Inequality Economic Mobility What Have We Bought for All This? Welfare Is the Ultimate Metric CHAPTER Inequality Defenders, Deniers, and Dissemblers Inequality Defenders Inequality Deniers Inequality Dissemblers CHAPTER The Growth Fairy The Redistribution Ogre The Growth Fairy Narrative A Background of Low Tax Rates Empirical Studies: Individual Labor and Savings Empirical Studies: Business Income Top-Down Economic Models Growth Effects of Government Investment Income Growth or Welfare Growth? PART II STARVING OUR FISCAL SOUL CHAPTER A Field Guide to False Fiscal Crises Our Procrustean Framing of Fiscal Policy The Federal Budget, Debt, and Deficits Budget Brinksmanship The Great Recession Where Are We Heading? A Tale of Two Budgets Spending: Squeezing Blood from the Stone CHAPTER An Overweight Government? A Two-Fisted Spender? Military Spending Healthcare Fifty Shades of Grey Americans: Social Security Fifty Shades of Grey Americans: Medicare Means-Tested Income Support Programs CHAPTER Are High Taxes Killing Us? The United States Is a Low-Tax Paradise Composition of Taxes Everyone Pays Taxes Economic Incidence of Taxation Shares of Total Tax Burden Effective and Marginal Tax Rates A Progressive Tax System? CHAPTER The Hidden Hand of Government Spending Our Subsurface Spending Programs Government-Subsidized Private Healthcare Economic Implications of Tax Expenditures Budget Process and Presentation Concerns Evaluating Tax Expenditures on the Merits How Much Is at Stake? Who Benefits? The Sacred Tax Cows of Personal Itemized Deductions—It’s Them or Us Low Taxes Yet High Pain PART III RECLAIMING OUR FISCAL SOUL CHAPTER 10 Government Investment The Many Faces of Investment Infrastructure Education CHAPTER 11 Government as Insurer What Is Insurance? Social Insurance The Social Value of Insurance Healthcare Insurance Other Social Insurance Programs Social Insurance and “Redistribution” Aristotelian Fallacies and Jason the Surfer CHAPTER 12 From a Progressive Tax to a Progressive Fiscal System Progressive Taxation versus a Progressive Fiscal System What’s So Good about Progressive Taxation? Tax Progressivity in Contemporary Application Two Levers of Progressivity Progressive Fiscal Systems and Happiness Progressive Fiscal Systems and Efficiency CHAPTER 13 The Better Base Case Focus of the Better Base Case Right-Sizing Spending Right-Sizing Revenues Additional Revenues Fundamental Tax Reform—Nice but Unnecessary Really Fundamental Income Tax Reform The Dual Business Enterprise Income Tax CHAPTER 14 We Are Better Than This Moving Forward The Pursuit of Happiness Notes Bibliography Index GDP per capita, 80, 81f income inequality, 364, 364f, 365, 365f, 366f life expectancy, 315, 315f poverty rate, 81, 82f total tax revenue and GDP growth, 145, 146f total tax revenues vs tax system progressivity, 365–366, 367f luxury, 123 Machiavelli, Niccolò, 61 macroeconomic effects of, 435n24 Madison, James, 42 Madisonian interpretation, 42 Madoff, Bernie, 208 Making the Modern American Fiscal State (Mehrotra), 337 malnutrition, 22, 24 Mankiw, N Gregory, 104, 106–109 March Current Population Survey (CPS), 111 Marchman, Virginia A., 295 marginal analysis, 52–53 marginal assets, 394 marginal costs, 49 marginal investments, 142–143 marginal tax rates, 52–54, 137, 142–144, 148, 228–232, 231t, 234, 351, 431n17, 453n21 marine insurance, 300, 321 market-based healthcare, 313–314 market income, 83, 113, 122, 235 definition of, 115–116, 118 growth in, 121–123 inequality of, 84, 85f shares of, 88, 89f marketplace freedoms, 41–43, 108 market triumphalism, 30, 37, 55–62, 122–123, 127–129, 131, 145–146, 335–336, 406, 408 Mashaw, Jerry, 303 maximum tax rate, 351 maxi-tax, 351, 431n24 McCaffery, Edward, 457n39 McCray v United States, 421n37 mean income, 68–69, 68f means-tested income support programs, 206–211, 206f median disposable income growth, 120 median household market income growth, 123 median income, 67–72, 68f median income growth, annualized, 119, 119t Medicaid, 26, 113, 206, 209–211, 307 Medicaid spending, 162, 207–208, 320 medical care See healthcare Medicare, 113, 123, 192, 202–205, 307 administrative costs, 319 distributional implications, 329 lifetime costs and benefits, 204, 205t Part A, 204 Part B (Supplementary Medical Insurance), 204 Part D (Supplementary Medical Insurance), 204 as social insurance, 302–303 Medicare spending, 162, 193, 203, 320, 357 Medicare taxes, 223 medications, prescription, 319–320 Meeks, James, 281 Mehrotra, Ajay K., 337 men labor earnings, 122 wages, 122–123, 424n5, 424n9 mercantilism, 420n25 merit goods, 444n25 Metropolitan Policy Program, 272–273 Mexico debt crisis, 10 healthcare insurance coverage, 312, 313f income support programs, 189 life expectancy, 315, 315f poverty rate, 81, 82f total tax revenue and GDP growth, 145, 146f Michigan, 272 middle class, 124–125, 425n14 middle class consumption, 70 military spending, 190–191 minimum wage, 8–9 Mishel, Lawrence, 427n8 Missouri, 210 mobility, economic, 91–98, 98t monetary policy, 145 moral hazards, 302 moralists, 31–37, 126 moral philosophy, xxiii–xxiv, 27–62, 411 mortality, 315, 316f Mulligan, Casey, 45–48, 51–55, 57 Musgrave, Richard, 415n1 narcissism, xxiv, 4, 27–62 NASA, 181, 273–274 National Academy of Sciences, 315 national budget See budget National Bureau of Economic Research, 422n46 national debt, 159–169, 434n8 National Federation of Independent Business v Sebelius, 210–211 national income, 10–12, 114 National Income and Product Accounts (NIPAs), 13, 416n9 National Journal, 329 National Oceanographic and Atmospheric Administration (NOAA), 274 national parks, 11, 417n20 National Review, 329 National Space Symposium, 181 national welfare, 10–12 A Nation of Takers: America’s Entitlement Epidemic (Eberstadt), 57 natural philosophy, 27 NDP See net domestic product negative income tax, 51, 422n43 neoliberalism, 30, 37–41, 43–44 net domestic product (NDP), 15 Netherlands GDP per capita, 80, 81f healthcare spending, 193, 194f income inequality, 364, 364f, 365, 365f, 366f life expectancy, 315, 315f mortality from communicable diseases, 315, 316f poverty rate, 81, 82f total tax revenue and GDP growth, 145, 146f total tax revenues vs tax system progressivity, 365–366, 367f unmet healthcare needs due to costs, 314, 314f New Deal, 42 New Hampshire, 305 new Sparta, New York Times, 155, 308, 317–319, 330 New Zealand income inequality, 95, 96f, 364, 364f, 365, 365f, 366f life expectancy, 315, 315f total tax revenue and GDP growth, 145, 146f total tax revenues vs tax system progressivity, 365–366, 367f unmet healthcare needs due to costs, 314, 314f Nexium (esomeprazole), 319–320 90/10 ratio, 89 NIPAs See National Income and Product Accounts non-excludable goods, 356 nonmarket services, 15–16 non-rivalrous goods, 356 normal taxes, 442n16 Norway, 64–65, 437n16 all-in tax rates, 214, 216f average teacher salaries, 291, 292f average wealth per adult, 91 consumption taxes, 216, 217f GDP per capita, 80, 81f government spending, 189–190, 190f healthcare insurance coverage, 312, 313f healthcare spending, 193–194, 194f, 195f hourly manufacturing compensation costs, 73, 74f hourly manufacturing wages + direct benefits, 73, 74f income inequality, 95, 96f, 364, 364f, 365, 365f, 366f intergenerational mobility, 98, 98t long-term unemployment, 79, 79f mortality from communicable diseases, 315, 316f P90/P50 ratio, 85, 87f poverty rate, 81, 82f projected increases in public health spending, 196, 196f projected tax revenues, 212–213, 213f protections against individual dismissal, 73, 75f public education spending, 291, 292f S90/S10 ratio, 85, 86f spending for old age and survivors’ benefits, 198, 199f tax revenues, 216–218, 217t tax wedges, 214, 215f top tax rates, 231–232, 231t total inland transport infrastructure investment, 274, 275f total public social spending, 207, 208f, 324–325, 325f total public spending on family benefits, 206–207, 207f total tax revenue and GDP growth, 145, 146f total tax revenues vs tax system progressivity, 365–366, 367f unmet healthcare needs due to costs, 314, 314f Nozick, Robert, 108, 330 Obama, Barack, xxiv, 59–60, 167–168 Obama administration, 195–196, 415n2 Obamacare See Patient Protection and Affordable Care Act OECD See Organization for Economic Co-operation and Development Office of Tax Analysis (Treasury Department), 66 Office of Tax Policy (Treasury Department), 66 oil production tax subsidies, 256 old age spending, 198, 199f Oliphant, Herman, 340 Oliphant, James, 329 omeprazole (Prilosec), 320 opportunity, 91, 95 optimal tax rates, 352, 452n13 optimal tax theory, 352, 431n17 O’Reilly, Bill, 137 Organization for Economic Co-operation and Development (OECD), 72–75, 80, 159, 186, 189, 359–360 action plans to address BEPS problems, 387 budget, 66 data collection efforts, 66–67 education report cards, 289–291, 294, 298 measure of poverty, 80 membership, 66 “Programme for International Student Assessment,” 289–290 revenue statistics, 439n4 Organization for Economic Co-operation and Development (OECD) countries See also individual countries average teacher salaries, 291, 292f consumption taxes, 216, 217f GDP per capita, 80, 81f government spending, 189–190, 190f healthcare spending, 193, 194f hourly manufacturing compensation costs, 73, 74f hourly manufacturing wages + direct benefits, 73, 74f projected tax revenues, 212–213, 213f spending for old age and survivors’ benefits, 198, 199f tax revenues, 216–218, 217t tax wedges, 214, 215f total public spending on family benefits, 206–207, 207f Osborn, Robin, 449n16 Our Fiscal Security, 376 ownership, 280 P90/P50 ratio, 85–86, 87f panel data, 92 Panem, xxiii Pareto improvement, 58 partnerships, 142 Pasadena, California, 276 “pass-through” entities, 142 Patient Protection and Affordable Care Act economic implications, xxiv, 42–43, 158, 170, 184, 247, 329 healthcare insurance, 26, 191–197, 203–205, 210, 307, 317, 323–324 individual mandate, 305 patrimonial capitalism, xxvi Paul, Rand, 320 “pay-as-you-go” or “PAYGO” budget rules, 248 PAYGO, 201 PAYGO budget rules, 248 payroll taxes, 216–218, 217t, 222–224, 231, 234 Pediatrics, 124 Pell Grants, 327 Pennsylvania Station (New York City, NY), 271 Perry, Mark, 124–125 personal economic liberty, personal income taxes, 135, 220, 224, 231–232, 231t, 337 personal itemized tax deductions, 257–261, 381 personal savings, 139 Peterson-Pew Commission on Budget Reform, 159 philosophy moral, xxiii–xxiv, 27–62, 411 natural, 27 physical capital spendings, 139 Pigovian taxes, 407 Piketty, Thomas, xxvi, 103, 103f PISA 2009, 293 Poland, 146f, 290, 315f The Political Economy of Human Happiness: How Voters’ Choices Determine the Quality of Life (Radcliff), 368 political liberty, 30, 41–43 poll taxes, 219 population, 192 Portugal, 146f, 316f, 366f positional goods, 368 postal service, 281–282 post-graduate success, 427n49 post-secondary education, 296, 298 Potts, Louis W., 459n13 poverty, 24, 80–83, 82f, 123–124 Power, Tyrone, 300, 302 PPOs See preferred provider organizations preferred provider organizations (PPOs), 311 prescription medications, 319 The Price of Inequality (Stiglitz), 105–106 Prilosec (omeprazole), 320 private goods, 280 private healthcare, government-subsidized, 245–247 private healthcare insurance, 307–310, 312, 323 private healthcare spending, 196–198 private insurance, private nonresidential fixed investment, 432n38 private school tuitions, 294 private spending, educational, 96, 291 privatization, 280–283, 296–298 Procrustean framing, 157–159 production boundary, 15–16 productivity, 77, 77f, 284 “Programme for International Student Assessment” (OECD), 289–290 progressive fiscal systems, 335–337, 364–371 Progressive movement, xxiv, 335–336 progressive spending, 341 Progressive Taxation in Theory and Practice (Seligman), 339 progressive taxes, 49, 232–243, 335–354, 451n3 vs tax revenues, 365–366, 367f The Uneasy Case for Progressive Taxation (Blum and Kalve), 342 progressivism, xxiii–xxiv, xxiv progressivity levers of, 354–366 Reynolds-Smolensky index of, 237–238, 356 property rights, 278–280 property taxes, 216–218, 217t proportional taxes, 233 protections against individual dismissal, 73, 75f Providence, 36–37 public debt See national debt public education, 294, 412, 427n49 public education spending, 291–294, 292f, 412 public goods, 276, 278–280, 356, 360 public healthcare, 313–314 public healthcare insurance, 312, 313f, 320–324 public infrastructure See infrastructure public investment See government investment public-private partnerships, 7–8, 287 public spending See government spending quality of healthcare, 315 quality of life gross happiness product (GHP), 12 happiness, 20, 367–370 mortality from communicable diseases, 315, 316f The Political Economy of Human Happiness: How Voters’ Choices Determine the Quality of Life (Radcliff), 368 Radcliff, Benjamin, 368–370 radio frequency transponders, 287 rail systems, 270–272 Ravitch, Diane, 297–298 Rawls, John, 60, 330–332, 345 Reagan, Ronald, 39 real after-tax income growth, 86–88, 88f real annual GDP growth, 145, 146f realization doctrine, 391 Reardon, Sean, 95 A Reconsideration of Tax Expenditure Analysis (JCT), 252–254 redistribution, xxiv, 110, 127–130, 327–333, 336, 416n4 The Redistribution Recession (Mulligan), 45–48, 51–55 registered warrants, 168–169 regressive taxes, 364–366 Regulation, 46 regulation, government, Reign of Terror (Ravitch), 297–298 rent seeking, 105 rent subsidies, 181 Report on Manufactures (Hamilton), 42 republicanism, 410 Republican Party, 166–167 research empirical studies of business income, 139–145 empirical studies of individual labor and savings, 135–139 retirement age, 198 revenue-neutral reform, 145 Reynolds-Smolensky index, 237–238, 356 Rigsby, Dustin, 23 risk pooling, 301 risk shifting, 301 risk-taking, 305–308 rival goods, 276–277 Rivlin-Domenici commission, 159 roads and services, 216–218, 217t, 272 The Road to Serfdom (Hayek), 39 Romer, Christina, 147 Romer, David, 147 Romney, Mitt, 219, 222–223, 226 Roosevelt, Franklin Delano, 41, 370 Root, Elihu, 451n3 Rothstein, Richard, 293 Royal Mail, 280–282 Russia, 151 Ryan, Paul, 25, 320 S90/S10 ratio, 85, 86f Sachs, Jeffrey, 367 sacred cows, 258–261 Saez, Emmanuel, 70, 88–89, 103, 103f, 352 safety net programs, 50–51, 172 safety net spending, 170–171 sales taxes, 216 San Francisco International Airport, 444n13 satellites, 274 Save the Children Fund, 22, 24 savings, 71–72, 139 Say, Jean-Baptiste, 14 Say’s Law, 14 Schlesinger, Arthur, 411 science, big, 273–274 “S” corporations, 142 scrip, 168–169 secondary wage earners, 70 A “Second Opinion” on the Economic Health of the American Middle Class (Burkhauser, Larrimore, and Simon), 110 Securities and Exchange Commission (SEC), 8, 181 self-centeredness, 34 self-interest-seeking, 28 Seligman, Edwin, 337–339 sequestration, 25, 157–158, 165, 175, 179–182 services See goods and services Sessions, Samuel, 448n8 sewage treatment plants, 273 Shanghai, 290 Shaviro, Daniel, 250 Short, William, 411 Simon, Kosali, 110 Skipwith, Robert, 409 Slovak Republic, 315f, 364f, 365f Slovenia, 293–294, 315f Smith, Adam, xxiii, 3, 27–63, 127, 155, 187, 212, 403 Adam Smith problem, 31 on economic incidence of taxation, 223–224 on equality, 102, 107, 109, 123–124, 126 on government spending, 241–242, 267, 279, 372 on happiness, 411, 419n10 on insurance, 299 “invisible hand” metaphor, 36, 420n26 on mercantilism, 420n25 on pursuit of happiness, 408 on taxes, 335 The Theory of Moral Sentiments, 31–37, 409–410 on trickle-down economics, 284–285 The Wealth of Nations, 31–36, 409 SNAP See Supplemental Nutrition Assistance Program social insurance, xxiv, 5–6, 128–129, 302–305, 324–333 tax revenues, 220 transfer payments, 407–408 social investment, 128–129 socialism, unbridled, 64 Social Security, 93, 113, 160–161, 198–202, 325–326 distributional implications, 329 lifetime costs and benefits, 204, 205t as social insurance, 302–304 spending on, 162, 184, 188, 192, 357 tax revenues, 216–218, 217t Social Security Trust Fund, 434n8 social spending, 189, 253 public, 207, 208f, 324–325, 325f social wages, 368 social welfare function, 128–129, 328, 352 society happiness, 3–26 sole proprietorships, 142 soup kitchens, 44–55, 421n41 South Dakota v Dole, 421n37 Southerland, Steve, 331, 333 Southerland Amendment, 57 Spain, 315–316 GDP per capita, 80, 81f income inequality, 365, 366f life expectancy, 315, 315f mortality from communicable diseases, 315, 316f poverty rate, 81, 82f total tax revenue and GDP growth, 145, 146f Sparta, new, “special sworn researchers,” 111 spending See also government spending; transfer payments business, 139, 253 discretionary, 158, 161–162, 162f, 172, 180–183, 188, 189f on education, 96, 291–294, 292f, 412 on healthcare, 184, 191–198, 194f, 202–203, 309, 449n30, 450n38 historical vs projected, 184–185, 185f mandatory, 160–162, 162f, 183–184 military, 190–191 old age, 198, 199f on other goods and services, 360 on physical capital, 139 progressive, 341 public (See government spending) public education spending, 291, 292f safety net, 170–171 social, 189, 207, 208f, 253, 324–325, 325f on Social Security, 184, 198–202 synthetic, 253 spending (term), 250 spending initiatives, 170 Spreading the Wealth Around: Reflections Inspired by Joe the Plumber (Mankiw), 108 Squires, David, 449n16 Stantcheva, Stefanie, 106–107 start-ups, 432n29 stateless income, 387–388 state taxes, 221, 222t Steuerle, C Eugene, 204 Stigler, George, 28, 31, 420n31 Stiglitz, Joseph, 105–106 stock, capital, 15 student loans, 296 student performance, 289–291, 294, 446n57 subsidies government-subsidized private healthcare, 245–247 rent subsidies, 181 tax subsidies, 251–253, 256–259, 443n24 substitution effects, 133, 136, 455n11 Superconducting Super Collider (SSC), 273 Superstorm Sandy, 274 Supplemental Nutrition Assistance Program (SNAP), 23, 45–46, 111, 169, 188–189, 206, 209–210, 302–303, 327, 331–334, 422n46 Supplemental Nutrition Program for Women, Infants and Children (WIC), 25 Supplemental Poverty Measure, 83, 426n29 Supplemental Security Income (SSI), 188–189 Supplementary Medical Insurance (Medicare Part B), 204 surfers, 333–334 Survey of Consumer Finances (Federal Reserve), 66–69, 71–72 survivors’ benefits, 198, 199f Sweden, 64–65 all-in tax rates, 214, 216f average teacher salaries, 291, 292f consumption taxes, 216, 217f GDP per capita, 80, 81f, 99 government spending, 189–190, 190f healthcare insurance coverage, 312, 313f healthcare spending, 193–194, 194f, 195f hourly manufacturing compensation costs, 73, 74f hourly manufacturing wages + direct benefits, 73, 74f income inequality, 84, 85f, 95, 96f, 364, 364f, 365, 365f, 366f intergenerational mobility, 98, 98t life expectancy, 315, 315f long-term unemployment, 79, 79f mortality from communicable diseases, 315, 316f P90/P50 ratio, 85, 87f projected increases in public health spending, 196, 196f projected tax revenues, 212–213, 213f protections against individual dismissal, 73, 75f public education spending, 291, 292f S90/S10 ratio, 85, 86f spending for old age and survivors’ benefits, 198, 199f tax revenues, 216–218, 217t tax wedges, 214, 215f top tax rates, 231–232, 231t total inland transport infrastructure investment, 274, 275f total public social spending, 207, 208f, 324–325, 325f total public spending on family benefits, 206–207, 207f total tax revenue and GDP growth, 145, 146f total tax revenues vs tax system progressivity, 365–366, 367f unemployment rate, 76, 76f unmet healthcare needs due to costs, 314, 314f Switzerland, 64–65 all-in tax rates, 214, 216f average wealth per adult, 91 consumption taxes, 216, 217f GDP per capita, 80, 81f government spending, 189–190, 190f healthcare insurance coverage, 312, 313f healthcare spending, 193–194, 194f, 195f, 449n30 healthcare system, 313–314 hourly manufacturing compensation costs, 73, 74f hourly manufacturing wages + direct benefits, 73, 74f income inequality, 84, 85f, 365, 366f mortality from communicable diseases, 315, 316f P90/P50 ratio, 85, 87f projected increases in public health spending, 196, 196f projected tax revenues, 212–213, 213f protections against individual dismissal, 73, 75f public education spending, 291, 292f S90/S10 ratio, 85, 86f spending for old age and survivors’ benefits, 198, 199f tax revenues, 216–218, 217t tax wedges, 214, 215f top tax rates, 231–232, 231t total inland transport infrastructure investment, 274, 275f total public social spending, 207, 208f, 324–325, 325f total public spending on family benefits, 206–207, 207f total tax revenue and GDP growth, 145, 146f unmet healthcare needs due to costs, 314, 314f A System of Moral Philosophy (Hutcheson), 409 Taiwan, 91 TANF See Temporary Assistance to Needy Families targeted tax relief, 242 TARP See Troubled Asset Relief Program taxable income, 138, 233 tax burden, 135 corporate, 141–142 effective, 144 excess, 132 vs tax revenues, 348–349 total, 226–228 tax collections, 261–262 See also tax revenues tax credits, 188–189, 243, 251 child tax credit, 188–189, 379 earned income tax credit (EITC), 8–9, 51–54, 188–189, 251–252, 326 federal spending on, 206–211, 206f proposed revisions, 379 tax-deferred retirement accounts, 136–137 taxes, xx–xxii, 128, 219–223 See also income taxes ability to pay, 339, 342, 350–351 alternative minimum tax (AMT), 178 baseline distribution of, 220, 221t before-tax income and, 227–228, 229f and budget deficit, 404–405 capital gains taxes, 137, 379 on capital income, 353 composition of, 216–219 consumption taxes, 216–218, 217t, 439n4 deadweight loss of, 133–134 distribution of, 227–228, 229f, 346–347, 347t, 360–362, 361f, 362t, 363, 363f on dividends, 379 economic incidence of, 223–226 effects on behavior, 146 effects on economic growth, 433n47 effects on economy, 146 effects on efficiency and growth, 432n28 effects on growth, 130 estate taxes, 379–380 excise taxes, 216 fiscal cliff deal, 177–179 flat, 338, 342, 351, 451n3 on foreign income, 387–389 “full inclusion,” 388–389 on goods and services, 439n4 income effects of, 132–133, 455n11 international, 387–388 job-killing hikes, 131 local, 221, 222t low, 261–263 maxi-tax, 351, 431n24 on middle class, 425n14 normal, 442n16 optimal tax theory, 431n17, 452n13 payroll taxes, 216–218, 217t, 222–224, 231, 234 as percentage of income, 221, 222t Pigovian, 407 progressive, 232–240, 335–354, 365–366, 367f, 451n3 property taxes, 216–218, 217t proportional, 233 regressive, 364–366 sales taxes, 216 shares of total taxes paid, 228, 230f substitution effects of, 133, 136, 455n11 total income and, 228, 230f value added tax (VAT), 216, 375, 385–386 tax expenditures, 242–244, 261–262, 441n7, 442n19 beneficiaries, 256–258 costs of, 254–256 economic implications of, 247–250 for energy production, 256 estimates of, 255–256 evaluation of, 251–254 household shares of, 257, 257f A Reconsideration of Tax Expenditure Analysis (JCT), 252–254 “upside down” subsidy pattern of, 247 tax extenders, 179 tax-induced structural distortions, 252 taxing (term), 250 tax law, 147–148 “distributionally neutral,” 348–350 proposed revisions, 379 tax policy, xx–xxii, 262–263 Tax Policy Center, 378 tax preparation companies, 263 tax progressivity, 341–346 tax rates, 49–50, 141, 212–240, 221t, 227, 236–237, 395–398 all-in, 214, 216f corporate, 141–142, 144, 386–387 and economic growth, 145, 147 effective, 142–143, 228–233 effects of benefit programs on, 54–55 effects on labor income, 136 flat, 338, 342, 351, 451n3 low, 134–135, 261–263 marginal, 52–54, 137, 142–144, 148, 228–232, 231t, 234, 351, 431n17, 453n21 maximum, 351 optimal, 352 top, 231–232, 231t tax reform, 351, 386–390 corporate, 144–145, 386–390 fundamental, 390–398 revenue-neutral, 145 Tax Reform Act, 106–107, 351 tax refunds, 51–52 tax relief revenue neutral, 249 targeted, 242, 249 tax returns, prepopulated, 262–263 tax revenues, 159, 212–213, 213f, 216–218, 217t, 219–220, 261 additional, 382–386 inframarginal, 262, 380 right-sizing, 377–383 vs tax burdens, 348–349 vs tax system progressivity, 365–366, 367f total, 145, 146f tax subsidies, 251–253, 256–259, 443n24 tax systems See also tax rates design defects, 378 effects on reducing inequality, 364, 364f, 365, 365f, 366f territorial, 388–389 “territorial with teeth,” 388–389 tax transfers, 252–253 tax units, 110, 118–120 tax wedges, 214, 215f, 342–343 teacher pay, 291, 292f, 446n57 Tea Party, 56 technology, 104–105, 287, 318 Temporary Assistance to Needy Families (TANF), 81, 327 Tennessee Valley Authority, 269 territorial tax systems, 388–389 “territorial with teeth” tax systems, 388–389 Texas Seed Bill, 406 Thatcher, Margaret, 39, 56, 280–281 The Theory of Moral Sentiments (Smith), 31–37, 409–410 Thies, Clifford F., 422n43 Thomson, Sarah, 449n16 Thorndike, Joseph, 339–340, 451n3 Thrifty Food Plan, 209 Title IX, Top 400, 93–94 top-coding, 111–112 top-down economic models, 145–149 total tax burden, 226–228 total tax revenue, 145, 146f total tax shares, 228, 230f train stations, 272 transfer payments, 114, 123 cash and near-cash, 360 distribution by household type, 357, 358f distribution by market income group, 357, 357f health care, 360 household shares, 114, 114f social insurance programs, 407–408 spending on other goods and services, 360 transportation inland transport infrastructure investment, 270–271, 274, 275f rail systems, 270–272 trends, 172–173 trickle-down economics, 284–285 trickle up economics, 59 Troubled Asset Relief Program (TARP), 170, 415n2 trust funds, 161 Turkey education, 293–294 healthcare insurance coverage, 312, 313f income support programs, 189 infrastructure, 271 life expectancy, 315, 315f UI See unemployment insurance Ukraine, 426n38 Uncommon Schools, 297–298 underwriting, 302 unearned income, 351, 453n21 unearned income taxes, 231, 351 The Uneasy Case for Progressive Taxation (Blum and Kalve), 342–343 unemployment, 45, 76–79, 76f, 78f, 79f, 173 unemployment compensation, 162 unemployment insurance (UI), 45, 188–189, 302–303, 327 United Kingdom, 64–65, 281 See also Great Britain all-in tax rates, 214, 216f consumption taxes, 216, 217f education report card, 290 GDP per capita, 80, 81f government spending, 189–190, 190f healthcare insurance coverage, 312, 313f healthcare spending, 193–194, 194f, 195f, 197 hourly manufacturing compensation costs, 73, 74f hourly manufacturing wages + direct benefits, 73, 74f income inequality, 84, 85f, 95, 96f, 364, 364f, 365, 365f, 366f income support programs, 189 inequality, 84 infrastructure spending, 271 intergenerational mobility, 98, 98t mortality from communicable diseases, 315, 316f P90/P50 ratio, 85, 87f poverty rate, 81, 82f privatization, 445n33 projected increases in public health spending, 196, 196f projected tax revenues, 212–213, 213f protections against individual dismissal, 73, 75f public education spending, 291, 292f S90/S10 ratio, 85, 86f spending for old age and survivors’ benefits, 198, 199f tax revenues, 216–218, 217t tax wedges, 214, 215f top tax rates, 231–232, 231t total inland transport infrastructure investment, 274, 275f total public social spending, 207, 208f, 324–325, 325f total public spending on family benefits, 206–207, 207f total tax revenue and GDP growth, 145, 146f total tax revenues vs tax system progressivity, 365–366, 367f unemployment rate, 76, 76f unmet healthcare needs due to costs, 314, 314f United States Air Force, 274 United States Census Bureau, 66, 82–83, 89–90, 116, 118–119 Current Population Survey (CPS), 111 data, 103, 103f, 111 Supplemental Poverty Measure, 83 United States Constitution, 42, 337, 406 United States Department of Agriculture (USDA), 22, 209 United States Department of Energy, 256 United States Department of Health and Human Services (HHS), 309 United States Department of Treasury, 92–94, 225 Office of Tax Analysis, 66 Office of Tax Policy, 66 tax expenditure estimates, 255–256 United States dollar, 167 United States Navy, 191, 273–274 United States Postal Service (USPS), 282 United States Supreme Court, 42, 210–211, 407 United States Treasury, 161 University of California, Berkeley, 427n49 U.S Health in International Perspective: Shorter Lives, Poorer Health (National Academy of Sciences), 315 USS Enterprise, 191 USS Gerald R Ford, 191, 273–274 usual hourly earnings, 111 value added, 13–14 value added tax (VAT), 216, 375, 385–386 Vanetik, Yuri, 141 Veterans Administration, 312, 319 virtue, 411–412 voter fraud, 334 wages and benefits benefit programs, 54–55 hourly manufacturing wages + direct benefits, 73, 74f hourly wages, 69 minimum wages, 8–9 primary wage earners, 137 protections against individual dismissal, 73, 75f secondary wage earners, 137 wage rates, 122 Wall Street, 137 Wall Street Journal, 59–60, 126, 180–181, 219, 235 waste, healthcare industry, 318 water systems, 273 wealth average, 90–91 collapsing, 67–72 distribution of, 91 family, 71–72 inequality of, 83–91, 150 median, 91 relative, 123 wealth effects, 51 The Wealth of Nations (Smith), 31–36, 409 wedges entering, 339 tax, 214, 215f, 342–343 Weisleder, Adriana, 295 welfare, 34, 200 alternative measures of, 19–21 definition of, 416n4 general, 42 national, 10–12 as ultimate metric, 100–101 welfare economics, 416n4 welfare growth, 150–151 welfare programs, 10–11, 200 well-being, 369 WIC See Supplemental Nutrition Program for Women, Infants and Children wilderness areas, 11, 417n20 Williamson, James E., 437n27 Wills, Garry, 459n16 women labor earnings, 122 wages, 122, 424n5 workers, 72 working-age population, 192 working rich, 104 workload average annual workload, 72, 75 average hourly workweek, 72, 73f, 75 World Airport Awards, 272, 444n13 World Economic Forum, 274–275 World War II, 308 zero rate brackets, 233–234 Zimbabwe, 91 .. .WE ARE BETTER THAN THIS EDWARD D KLEINBARD WE ARE BETTER THAN THIS HOW GOVERNMENT SHOULD SPEND OUR MONEY Oxford University Press is a department... Library of Congress Cataloging-in-Publication Data Kleinbard, Edward D We are better than this : how government should spend our money / Edward D Kleinbard pages cm Includes bibliographical references... Rethinking what we ask of government requires our active engagement in the political process, armed with accurate information about what we are doing today, how well we are doing it, and how much it