Efficient Taxation of Income

Efficient Taxation of Income

The Efficient Taxation of Income is an approach to taxation that would apply different tax rates for property-type income and earned income from work. Earned income would be taxed at a flat rate of 10%, while property-type income would be taxed at 30%. The plan was created by Dale Jorgenson, Samuel W. Morris University Professor at Harvard University, and Kun-Young Yun, Professor of Economics at Yonsei University, Korea. [cite web| title=Efficient Taxation of Income |url=http://www.economics.harvard.edu/faculty/jorgenson/papers/BURDEN_web.pdf |last=Jorgenson |first=Dale | coauthors=Yun, Kun-Young|publisher=Harvard|date=2002-11-15 |accessdate=2007-07-17] Jorgenson states that the plan would provide big gains in economic efficiency that would result from making the tax treatment of income from corporate, non-corporate and household property the same.cite web|url=http://www.ksg.harvard.edu/news/opeds/2002/jorgenson_tax_ft_061802.htm |title=A Smarter Type of Tax |publisher=Financial Times | last=Jorgenson| first=Dale| date=2002-06-18| accessdate=2007-07-17] The plan has been discussed before the United States Congress but a bill has not been introduced. [cite web| url=http://waysandmeans.house.gov/Legacy/srm/107cong/5-9-02/5-9jorg.htm |title=Hearing on the Extraterritorial Income Regime |publisher=House Committee on Ways and Means |last=Jorgenson |first=Dale |date=2002-05-09 |accessdate=2007-07-18]

Under Efficient Taxation of Income, each dollar of new business investment would generate a credit against taxes on business income. The rates for these credits would make tax burdens on all income sources the same. Taxes on new investments by households would be collected by car dealers, real estate developers, and other providers. These would not apply to existing home owners and would protect property values. Jorgenson states that the Efficient Taxation of Income could be implemented without cumbersome transition rules. In the United States, the tax treatment of Social Security and Medicare contributions and benefits would be unaffected, as would the treatment of private pension plans. Jorgenson estimates that the total one-off gain from Efficient Taxation of Income in the U.S. would be $4,900 billion, while adoption of the Flat Tax would yield only $2,060 billion.cite web| title=Efficient Taxation of Income |url=http://www.harvardmagazine.com/on-line/030388.html |last=Jorgenson |first=Dale |publisher=Harvard Magazine|date=2003-04 |accessdate=2007-07-17] The gains underscore the benefits of shifting investment to higher-yielding assets and reflect greater investment and faster economic growth.

ee also

*Income tax in the United States
*Taxation in the United States

Notes

References

*cite book | first=Dale | last=Jorgenson | coauthors=Yun, Kun-Young| year=2002| title=Investment, Vol. 3: Lifting the Burden: Tax Reform, the Cost of Capital, and U.S. Economic Growth| edition=Hardcover|publisher=The MIT Press| id=ISBN 0-262-10091-6

External links

* [http://post.economics.harvard.edu/faculty/jorgenson/bio/bio.html Jorgenson's Harvard biography]


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