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The Taxman Cometh

By supporting policies that imply a massive increase in public spending, progressives in the United States and other advanced economies have launched a new debate about how best to increase government revenues at a time of slowing growth. But as recent protests in France, Chile, and elsewhere have shown, designing politically palatable tax policies is no easy feat.

In this Big Picture, Nobel laureate economist Michael Spence considers recent proposals for a wealth tax in the United States, and concludes that, if properly designed, such a policy is justified for an age of rising inequality. Bruegel’s Jean Pisani-Ferry agrees, but points out that the optimal design of such a policy is not nearly as straightforward as its proponents suggest. And Harvard’s Kenneth Rogoff warns that wealth taxes are notoriously difficult to enforce, and argues instead for a consumption tax targeting higher spenders and earners.

Meanwhile, Nobel laureate economist Joseph E. Stiglitz points out that a significant amount of revenue is being lost to corporate-tax arbitrage, and argues that the time has come for an international minimum tax on multinationals’ profits. And, setting his sights on another source of lost revenues, Roger E.A. Farmer of UCLA and Warwick University explains why loopholes for capital gains and other privileged income classifications should be closed.

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