Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, February 6, 2019

AI Summary. The number of high-income countries with individual net wealth taxes fell from 12 in 1990 to four—France, Norway, Spain, and Switzerland—and the OECD reported such taxes raised between 0.2% of GDP in Spain and 1.0% in Switzerland, or 0.5% to 3.7% of total tax revenues. Switzerland is an exception because its wealth tax substitutes for property taxes, yielding higher revenue.

Timothy Taylor Conversable Economist
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Wealth taxes have fallen out of favor globally. By 2017, only 4 high-income countries retained wealth taxes, down from 12 in 1990. @TimothyDTaylor

Do wealth taxes raise enough revenue to be worth keeping?

Core argument: By 2017, only four high-income countries—France, Norway, Spain, and Switzerland—still levied wealth taxes, down from 12 in 1990.

By 2017, only four high-income countries—France, Norway, Spain, and Switzerland—retained wealth taxes, down from 12 in 1990. The OECD reported that in 2016, tax revenues from individual net wealth taxes ranged from 0.2% of GDP in Spain to 1.0% in Switzerland, with these taxes contributing just 0.5% to 3.7% of total tax revenues. Switzerland is an exception, using wealth taxes as a substitute for property taxes, resulting in higher revenue. The limited revenue generated by wealth taxes has led many countries to abandon them, questioning their efficacy and administrative burden. This trend suggests that a US wealth tax targeting individuals with over $50m may not yield significant revenue, reflecting broader global skepticism about the financial impact of such taxes.

Takeaways by Macro Roundup® AI

  1. By 2017, only four high-income countries—France, Norway, Spain, and Switzerland—still levied wealth taxes, down from 12 in 1990.
  2. The OECD reported that in 2016 individual net wealth tax revenues ranged from 0.2% of GDP in Spain to 1.0% in Switzerland, contributing 0.5% to 3.7% of total tax revenues.
  3. Switzerland is an exception, using its wealth tax as a substitute for property taxes and collecting higher revenue as a result, while limited revenue elsewhere led many countries to abandon such taxes.

Breaking rule for this factoid from Tim Taylor (might be useful for BBC interview)

".... Back in 1990, 12 high-income countries had wealth taxes. By 2017, that had dropped to four: France, Norway, Spain, and Switzerland (In 2018, France changed its wealth tax so that it applied only to real estate, not to financial assets.).... It's interesting, then, that in these European countries the wealth tax generally accounted for only a small amount of government revenue. The OECD writes: "In 2016, tax revenues from individual net wealth taxes ranged from 0.2% of GDP in Spain to 1.0% of GDP in Switzerland. As a share of total tax revenues, they ranged from 0.5% in France to 3.7% in Switzerland... Switzerland has always stood out as an exception, with tax revenues from individual net wealth taxes which have been consistently higher than in other countries..." However, Switzerland apparently has no property tax, and instead uses the wealth tax as a substitute. The fact that wealth taxes collect relative little is part of the reason that a number of countries decided that they weren't worth the bother. In addition, it suggests that a US wealth tax which doesn't kick in until $50 million in wealth or more will not raise meaningfully large amounts of revenue....."

Timothy Taylor, "Why Have Other Countries Been Dropping Their Wealth Taxes?," Conversable Economist, February 4, 2019, http://conversableeconomist.blogspot.com/2019/02/why-have-other-countries-been-dropping.html

Thursday, February 7, 2019

AI Summary. Despite US tax reform aimed at encouraging repatriation of offshore profits, more than half of the profits American companies report abroad are still booked in a few low-tax jurisdictions such as Ireland, the Netherlands, and Bermuda. Repatriation rose temporarily but fell short of expectations, with much of the money going to stock buybacks.

Brad Setser New York Times
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@Brad_Setser The global distribution of corporations’ offshore profits remains largely unchanged, with over half still booked in low-tax nations. The TCJA has not effectively altered the incentives for booking profits offshore.

Did tax reform stop companies from booking profits in low-tax havens?

Core argument: More than half of the profits American companies report abroad are still booked in a handful of low-tax nations including Ireland, the Netherlands, and Bermuda, leaving the global distribution of offshore profits largely unchanged after the Tax Cuts and Jobs Act.

Despite the Tax Cuts and Jobs Act (TCJA) aiming to incentivize the repatriation of offshore profits, the global distribution of corporations' offshore profits remains largely unchanged. Over half of the profits reported by American companies abroad are still booked in a few low-tax nations, indicating persistent tax avoidance strategies. The repatriation deal led to a temporary surge in profits returning to the U.S., but the total amount fell short of the trillions anticipated, with much of it fueling stock buybacks rather than economic growth. The scale of tax shifting is so significant that addressing it could potentially increase reported GDP by over 1%. This highlights that the TCJA has not effectively altered the incentives for booking profits offshore, as multinational corporations continue to exploit low-tax jurisdictions like Ireland, the Netherlands, and Bermuda to minimize tax liabilities.

Takeaways by Macro Roundup® AI

  1. More than half of the profits American companies report abroad are still booked in a handful of low-tax nations including Ireland, the Netherlands, and Bermuda, leaving the global distribution of offshore profits largely unchanged after the Tax Cuts and Jobs Act.
  2. The Tax Cuts and Jobs Act's repatriation deal produced a temporary surge of profits returning to the U.S. that fell short of the trillions anticipated, with much of the money funding stock buybacks rather than economic growth.
  3. Addressing the scale of profit shifting by U.S. multinationals could raise reported U.S. GDP by more than 1%.

Breaking rule to show you this op-ed from Brad Setser as I suspect it's going to make a big splash

"...But now that a full year has passed since the tax bill became law, we have hard numbers we can evaluate. For starters, the law’s repatriation deal did prompt a brief surge in offshore profits returning to the United States. But the total sum returned so far is well below the trillions many proponents predicted, and a large chunk of the returned funds have been used for record-breaking stock buybacks, which don’t help workers and generate little real economic activity...... The global distribution of corporations’ offshore profits — our best measure of their tax avoidance gymnastics — hasn’t budged from the prevailing trend. Well over half the profits that American companies report earning abroad are still booked in only a few low-tax nations — places that, of course, are not actually home to the customers, workers and taxpayers facilitating most of their business. A multinational corporation can route its global sales through Ireland, pay royalties to its Dutch subsidiary and then funnel income to its Bermudian subsidiary — taking advantage of Bermuda’s corporate tax rate of zero....The scale of the tax shifting has become so immense that some economists believe curbing it could raise reported G.D.P. by well over a percentage point— something Mr. Trump, who’s been absorbed by opportunities to brag about the economy, should notionally welcome...."

Brad Setser, "The Global Con Hidden in Trump’s Tax Reform Law, Revealed,"New York Times, February 6, 2019, https://www.nytimes.com/2019/02/06/opinion/business-economics/trump-tax-reform-state-of-the-union-2019.html

AI Summary. U.S. debt held by the public as a share of GDP has risen above historical averages, driven by increased government spending and slower economic growth. The trend raises concerns about managing future budget deficits and interest payments, with fiscal reforms and faster growth proposed to stabilize the ratio.

CBO Staff Congressional Budget Office
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The debt held by the public as a percentage of GDP has surpassed historical averages, driven by increased government spending and slower economic growth, according to @CBOStaff.

Is rising debt as a share of GDP straining fiscal sustainability?

Core argument: Debt held by the public as a share of GDP has surpassed historical averages, driven by increased government spending and slower economic growth, raising concerns among economists and policymakers about long-term fiscal sustainability.

The debt held by the public as a percentage of GDP is a critical indicator of a nation's fiscal health, reflecting the balance between government borrowing and economic output. Recent data indicates that this ratio has been on an upward trajectory, raising concerns among economists and policymakers about long-term fiscal sustainability. As of the latest reports, the debt-to-GDP ratio has surpassed historical averages, driven by increased government spending and slower economic growth. This trend suggests potential challenges in managing future budget deficits and interest payments, which could impact public investment and economic stability. Policymakers are urged to consider strategies to stabilize this ratio, such as fiscal reforms and measures to boost economic growth, to ensure that the debt remains manageable and does not hinder economic progress.

Takeaways by Macro Roundup® AI

  1. Debt held by the public as a share of GDP has surpassed historical averages, driven by increased government spending and slower economic growth, raising concerns among economists and policymakers about long-term fiscal sustainability.
  2. The rising debt-to-GDP ratio suggests potential challenges in managing future budget deficits and interest payments, which could affect public investment and economic stability.
  3. Policymakers are urged to stabilize the debt-to-GDP ratio through fiscal reforms and measures to boost economic growth so that debt remains manageable.

CBO Staff, “Budget And Economic Outlook,” Congressional Budget Office, June 2017 Update, https://www.cbo.gov/about/products/major-recurring-reports

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CBO Staff, “Budget And Economic Outlook,” Congressional Budget Office, January 2019, https://www.cbo.gov/about/products/major-recurring-reports

AI Summary. The top 1% of U.S. earners paid 39% of all federal income taxes while earning 20% of total adjusted gross income, with the top 0.1% alone paying 19%. The bottom 50% of earners accounted for 3% of federal income taxes.

Michael Durkheimer Forbes
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The top 1% of earners in the U.S. paid 39% of all federal income taxes in 2017, despite earning 20% of total adjusted gross income.

How large a share of federal income taxes do top earners pay?

Core argument: The top 1% of U.S. earners paid 39% of all federal income taxes in 2017 while earning 20% of total adjusted gross income.

In 2017, the top 1% of earners in the U.S. paid 39% of all federal income taxes, despite earning 20% of total adjusted gross income. This disproportionate tax burden highlights the significant role high-income earners play in funding government operations. The top 0.1% alone contributed 19% of federal income taxes, underscoring their substantial fiscal impact. Meanwhile, the bottom 50% of earners accounted for only 3% of federal income taxes, reflecting the progressive nature of the U.S. tax system. These figures illustrate the concentration of tax contributions among the wealthiest, raising questions about equity and efficiency in tax policy. As policymakers debate tax reforms, understanding these dynamics is crucial for crafting policies that balance revenue generation with economic fairness.

Takeaways by Macro Roundup® AI

  1. The top 1% of U.S. earners paid 39% of all federal income taxes in 2017 while earning 20% of total adjusted gross income.
  2. The top 0.1% of U.S. earners alone contributed 19% of federal income taxes in 2017.
  3. The bottom 50% of U.S. earners accounted for 3% of federal income taxes in 2017, reflecting the progressive structure of the U.S. tax system.

Michael Durkheimer, “What You Don’t Know About The Top One Percent,” Forbes, May 1, 2018, https://www.forbes.com/sites/michaeldurkheimer/2018/03/01/0-001-percent-one-percent/

What You Don’t Know About The Top One Percent: Extended Excerpt Image 1

Matthew Gardner, “Who Pays Taxes In American In 2017,” Institute On Taxation and Economic Policy,” April 13, 2017, https://itep.org/who-pays-taxes-in-america-in-2017/

Scott Greenberg, “Summary Of The Latest Federal Income tax Data, 2016 Update,” Tax Foundation, February 1, 2017, https://taxfoundation.org/summary-latest-federal-income-tax-data-2016-update/

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