Earlier in the week the Freakonomics blog on NYTimes.com posted an opinion piece on the largest tax mistakes that could be made this year. With the looming expiration of the Bush tax cuts, and changes to capital gains rates on the horizon new tax laws are inevitable. Author Stephen J. Dunber asked a hand full of "smart people" what would be the biggest potential tax policy mistake? You can find a few of the responses below courtesy of the Tax Prof, or click here for the full article.
William G. Gale (co-director, Urban-Brookings Tax Policy Center): "Policy makers have already made the biggest potential tax policy mistake they could have made this year. Ever since the tax cuts were enacted in 2001 and 2003, policy makers have known the law would expire at the end of 2010. That “drop dead” date offered an auspicious way to galvanize a systematic effort to reform a tax system that is badly in need of repair. Instead, policy makers pretty much ignored the issue until just before the 2010 Congressional recess, when politically tinged efforts to extend some or all of the tax cuts finally began — a “debate” that was too little, too narrow, and too late."
Donald Marron (director, Urban Brookings Tax Policy Center): "With little time left on the legislative clock, policymakers will be hard-pressed to top the tax policy blunders they’ve already made this year. Most notable is their failure to decide what this year’s tax law should be. While politicians, analysts and the media endlessly debate how expiring tax cuts might affect taxpayers in 2011, the real disgrace is that we still don’t know what the tax law is in 2010."
Joel Slemrod (professor of economics and public policy, University of Michigan): "The biggest possible mistake would be to lose sight of the long-term issues that surround tax policy. Given the depth of the recent recession as well as the slow pace and apparent fragility of the expansion, it is appropriate that the macroeconomic effect of tax policy changes be taken seriously. A big jump in the tax level could abort the delicate recovery."