A Big-Picture Look at Taxing the Wealthy

Taxing wealth has become a hot-button issue in today’s political discourse, promising to reshape economic equality. But what are the real-world implications of such policies? In this episode, we dive into the contentious world of taxing wealth, examine how a progressive tax system aims to balance fairness and revenue generation, and explore the potential impacts and broader implications for economic policy and social equity.  

Garrett Watson, Senior Policy Analyst and Modeling Manager at the Tax Foundation, joins Kyle Hulehan to dissect the fundamentals of taxing wealth. They discuss the challenges of implementation, potential long-term consequences for the broader economy, and alternative policy options that could achieve progressivity while maintaining economic growth. 

Links: 

https://taxfoundation.org/blog/taxing-consumption-progressively-tax-the-wealthy/ 

https://taxfoundation.org/blog/federal-tax-code-progressive-rich/ 

https://taxfoundation.org/blog/us-pandemic-response-inequality-progressivity/ 

https://taxfoundation.org/research/all/federal/tax-fairness-funding-government-investments/ 

Transcript

0:00

Taxing wealth has become a hot button issue in today's political discourse promising to reshape economic equality. But what are the real world implications of such policies? In this episode, we dive into the contentious world of taxing wealth and examine how a progressive tax system aims to balance fairness and revenue generation.

Kyle Hulehan: 0:20

Hello and welcome to the deduction, a tax foundation podcast. I'm your host, Kyle Houlihan. And today we are joined by Garrett Watson, senior policy analyst and modeling manager here at TF. Garrett, how are you doing today?

Garrett Watson: 0:32

Doing well. How are you?

Kyle Hulehan: 0:33

I'm good. I'm good. Where are you joining us from today?

Garrett Watson: 0:36

I live just outside of Fayetteville, Arkansas, in the northwest corner of the state. Moved here about three years ago, and it's a booming area with a lot of, a lot of activity nowadays, so it's an exciting

Kyle Hulehan: 0:46

Is it scorching hot there?

Garrett Watson: 0:48

It's about 95 right now, and it's drying out, so we just got past our tornado season, which we're thankful for.

Kyle Hulehan: 0:54

Okay. Cause I was about to say it is going to be 99 here today. I'm in New Jersey. And I would I'm not ready for it, but it's here. So we're just going to have to deal with it anyway. And enough

Garrett Watson: 1:04

Well it'll be fall before you know it.

Kyle Hulehan: 1:05

Yeah, thank God. anyway, enough of the weather, today we're here to actually talk about taxing wealth. Now that's a really complex topic. so we need to, start off at the beginning by understanding, the tax system we have, which is progressive. So let's start off. I'm going to give you the layup of your life. what is a progressive tax system? What are the core values that support the idea of a progressive tax income system?

Garrett Watson: 1:30

Yeah, so nowadays we hear a lot about the concerns about the fairness of the tax system. How taxes are collected by, various income groups, various kinds of people to fund, government services. And there's, some debate and even disagreement over how we define a progressive tax system. The one that I prefer, the one that Tax Foundation often presents is what portion of folks incomes should be taxed. Are being collected, to fund the government. is it 5%? Is it 10%? And how does that portion of one's income that's going to, say, federal tax collections or state tax collections, How does that change as your income changes? So a progressive tax system will be defined as one that a greater portion of your income Is going to tax collections as your income rises So if you're the bottom 20 percent of earners and you pay a 10 percent rate, all in And if you're in the top, top 20 percent of earners and you pay a 20 percent rate all in and it's rising as you go up the income scale, that would be a progressive tax system. That contrasts with a flat tax system where everyone pays a fixed percentage of their incomes in tax collections or a regressive system where the opposite is true, where a lower portion of your, of your income is going to taxes as your income increases. and so fundamentally, the discussion about the distribution of the tax burden is one about values. About what folks consider, fair. And, as we often emphasize a tax foundation, of course, that is ultimately a philosophical or subjective one. Everyone is going to land in different places, but what's really important as we get on the same page, of course, on two things. One is the existing state of the tax system and how progressive it actually is. and two, the trade offs of changing the distribution of the tax system, making it more progressive or less progressive. That will have other effects on people's economic incentives, their behavior, how fast the economy grows, how much revenue is collected. And so it's just important that we operate on shared facts here while folks are going to land in different spots in terms of how much emphasis we place on the distributional debate.

Kyle Hulehan: 3:34

yeah. So do you think it's important to have a tax system where higher earners pay a larger percentage of their income? How does this align with, broader societal goals and values?

Garrett Watson: 3:46

It's a great question. So generally speaking, the reason why a lot of folks are drawn to progressivity in the tax system is this general principle of ability to pay. Okay. And what that means, very simply is, this intuition that as you earn higher amounts of income, because folks living expenses are, either fixed or don't scale, exactly with income, it's easier for higher income earners to pay. a given share of their income toward taxes than lower income earners. It's much easier, say for someone earning, 5 million a year to pay 10 percent of their income to taxes than someone making 5, 000 per year. And so, that's one reason why some folks think it makes sense to have a progressive system. The other reason is the general benefit principle of government services. There's this intuition that, for many services, as income rises, you're getting more value from. Provision of, in a locality, police, fire, in the case of the federal government, national defense, the broader services they provide, when it comes to infrastructure and whatnot, and so taxes should therefore scale, when it comes to income, going up the big challenge, of course, is even if you agree with those principles and they're not completely uncontested, but even if we just take those as a given, it doesn't tell us exactly how to structure the tax code. how progressive it should be, what portion of federal revenue should be collected by the top one percent, for example. And that's why it's so subject to intense political partisan debate, because, there's no easy, principle to draw from that tells us exactly where to draw these lines. and so, and of course, the other reason is how to think about the trade offs. How much, emphasis should we place on, improving economic opportunity and mobility, versus, improving progressivity, how do we think about the trade off of making the tax code more complex in an effort to collect more income from the top? Those are important questions as well, both in terms of the facts of the matter, what those trade offs look like and how much weight we place on them. because there's some folks, they may find that, complexity matters a lot more than the distribution or the economic growth side of the things. Others may think that those matter less. And so, there is this commingling of, I think, the value side of things that's an important part of the debate. And the facts, but if you get the latter straight that at least can clarify the terms of debate for that, that values based conversation,

Kyle Hulehan: 6:01

Yeah, and I think one thing is, we're also even assuming maybe you, you want that progressivity. Of course, some people want the flat tax. Some people want a variety of different things. And it is just so complicated and nuanced. These taxes are never as straightforward as you want them to be. And especially these debates, we find ourselves in these just very complex gray areas where it's not as clearly defined, I think, as we want it to be. According to the IRS, the top 1 percent pay 40 percent of federal income taxes while the bottom 90 percent receive more in benefits than they pay. So. Do you think this system is sustainable?

Garrett Watson: 6:40

So I think you point to the really important fact that we've emphasized here, which is generally speaking, the federal system. And the combined federal state and local system of taxes and transfers is already very progressive in this country. We have a system where, the folks in the bottom 10 percent are especially, but even in the bottom 40 percent or so are net recipients of transfers, net of taxes. while the top 20%, including the top 1%, as we just mentioned, pay, the vast majority of taxes. And it really is a culmination of, over a century of work by folks who are supportive of creating, a social safety net and a broadly progressive tax system. And so, for a lot of folks, they enter into this debate not acknowledging that or not even knowing that is actually true. and that does a disservice to the debate in a couple different ways. One, one of which of course is, uh, for folks who are skeptical of moving even further in that direction, making the system even more progressive, establishing this baseline is important. But even for folks who are advocates of moving forward with an even more progressive tax and transfer system to denigrate the existing system would, make it harder to justify going even further. If, all the spending, all the transfers that we're engaging in amount to nothing, and they don't matter, why would it be the case that going further would make things any different? I think that's a really underappreciated point, that has been, I think, brought forward in the debate more so in the last couple of years, and it's really important to just get the facts straight. when it comes to sustainability, I think it is an important, question from a revenue perspective, because we are entering, of course, as most listeners know, right, into a very tumultuous period where interest rates are high, we're dealing with structural deficits and debt, that's really unprecedented in this country, right, where our debt is standing at over 100 percent of GDP in peacetime, which is unprecedented, looking back in American history, and that really calls into question, how are we going to balance all these fiscal commitments we've made? Much of which is on the spending side, but are still transfers, including social security and Medicare and Medicaid. but, we don't have the taxes to actually finance it. And we're very averse to broad based tax increases that would finance it or broad based spending cuts. And I think that's the question on sustainability. If you're going to, we can't even afford or pay for, given the existing structure of the system, our existing commitments. To go even further and to try to, say, radically expand the welfare state on the, revenue, from revenue collected off from higher earners just propounds that unsustainability. So I think we do need to have a serious conversation about those trade offs, and it does intersect with this debate about who to collect taxes from and how, especially given, that the current president of the United States is committed to not taxing those under 400, 000 a year. and that, that makes the math very hard to add up.

Kyle Hulehan: 9:16

The way I kind of see this when you're talking about it and taxing wealth and this whole balance is if you just kind of imagine a seesaw, like you don't want it to go too far to one side or the other. You want it to be balanced. You want there to be like. a levelness and evenness towards this when you're doing this, you don't want it to be completely lopsided. You can't go back and forth. You want a little bit of ground to shift. And I think that's just fundamentally important. Is there a point where the, the tax system is just going to backfire because it's too progressive and how do we find that particular balance?

Garrett Watson: 9:49

So I think one area where we see this in practice that has undamaged in the debate is the focus on raising most or all of our new revenue from the very highest of earners. And this is often in the context of trying to make the tax system more progressive. It's also to avoid hard political and policy discussions about, Tax changes for the rest of the 99 percent of us. Right. but if we're committed to, to right sizing the ship when it comes to our fiscal situation, unfortunately there's just not enough income and wealth, uh, for those earning more than 400, 000 a year, or amongst say billionaires to fund the tens of trillions of dollars on unfunded liabilities we have moving forward. To say nothing of additional commitments that may be worth trillions or tens of trillions of dollars over the next, 10 plus years. over and over the next several decades. And so that, I think that's one area where it's, maybe backfiring is not quite the right word, but it definitely has negative effects to focus just on that very small subset of taxpayers. And it's an ever shrinking number of taxpayers, right? Originally, about 15 years ago, it was folks earning more than 250, 000 a year. It's now increased to 400, 000. and, and so as the number of folks who are potential targets of new revenue, decrease, yeah, sustainability and the math problems increase. And so I think that's, a great example. The other, of course, bigger picture issue is, as we mentioned earlier, this trade off of, uh, the economic effects. That if you are to, uh, massively increase taxes on folks who are generally, uh, the innovators in this country, right? Entrepreneurs, business owners, of course they should be contributing to the FISC for government services that they use. But if you were deliberately trying to maximize the amount of revenue that comes from them, don't be surprised that you have, dragged from that, right? You have, avoidance opportunities for tax that distracts folks from productive activity. You have folks who are encouraged not to work and invest, especially if it's not structured well, and that has its own trade offs. And we see this, right? I think right now, the contrast between the state of the United States economy and the economies of Europe. Really shows this contrast. Well, not just in the short run right now, but over the long term, right? When we look at the value of innovative companies in the United States versus Europe, tax doesn't explain all of that, of course, but the relative amount of sclerosis economically in Europe versus the U. S. Shows that there's a lot of. damage that can occur to the U. S. if we're not careful about our policy, including tax policy.

Kyle Hulehan: 12:08

Yeah, I just feel like. if only things were so easy that we could just tax the rich, that would be great. I personally, I'm going to be totally honest with you. I would absolutely love it if we could just let Bezos and Musk pay for everything. That sounds great, but unfortunately we live in this world where sometimes things sound too good to be true. And they kind of are, I think that's the problem when it comes to something like, taxing wealth or a wealth tax in and of itself, it would be great if it worked. It would be simple. That would be so cool. But life is so much more complicated and so much more nuanced as we see. And as you've discussed here, so what are some of the challenges and potential pitfalls when it comes to implementing a wealth tax?

Garrett Watson: 12:51

So I think when taxing wealth in particular, it's hard. Well, there's a few things here. One is I think it's a distraction. It's one big problem. Because a lot of folks, I think, imagine that billionaires have such a large amount of wealth that a lot of our revenue issues can go away, or we can create new programs on, by using The problem is, even if we were to tax all billionaire wealth one time at 100%, it would fund current government spending for a couple of months. So, big picture, it really doesn't move the needle when it comes to, a few hundred billionaires funding programs that support hundreds of millions of people in this country. The math doesn't add up there, just practically. So it's a distraction from this bigger conversation of, Hey, there's a couple hundred folks we want to get revenue from, but it's ultimately going to come from a much wider pool of folks to make the program sustainable. But even if you wanted to do it as part of a broader effort to raise taxes, as we've seen, there are a lot of problems with taxing wealth that are well established. And it's a big reason why we decided to tax income instead, realized income. One of which is it's much easier to measure income than wealth. Wealth can and does have an ephemeralness to it in a lot of cases because it's locked into. Privately held businesses, it's locked into illiquid assets, it's locked into folks, brands, and that has a lot of complications when it comes to weighing what the value of the wealth is. It's not just in liquid stock markets, for example. And that makes a lot of complexity for the IRS for tax collectors. If you're going to assess that tax, and of course we're talking about the most well resourced folks in the world who can and will use every planning opportunity available to them. Including, international, shifting of wealth. And, one last resort that is under discussed, which is the, that actually encourages them to consume their wealth. If you're taxing wealth that's saved, they're going to consume it, more so because then they're not going to be taxed on it. And, that's also corrosive to economies where we want that wealth to be creating jobs, invest in new opportunities, rather than being consumed by the rich. which is, I would think the opposite of what advocates want here. Uh, but ultimately, and I think this is a broader point too, which is. While there do remain these trade offs in economic costs and complexity, when it comes to progressivity and taxing the rich. there is, of course, a way forward, I think. I don't think it's completely bleak, in that, I think it very much is consistent with, an efficient, simple tax system to maintain that progressivity, at least existing progressivity, by taxing consumption or by moving toward broad based tax reforms that, that approximate our current distribution. So, I don't think it's a hard either or there, that we have to either take the path of taxing wealth, Or some of these aggressive tax derived proposals, or, we have to stick with our current ineffective system that a lot of folks are dissatisfied with. There are other options. And I think that's another important point folks need to be educated on.

Kyle Hulehan: 15:26

And I think I know that this is, you know, state versus federal, but I think when it comes to the wealth taxes, also important to mention that there is a mobility factor here. I believe in the state of Washington, we saw that Jeff Bezos actually a Move to Florida, like right around the time when Washington proposed a wealth tax and he made up 45 percent of their projected revenue. So when you see something like that, you're like, Oh, if you really go hard on the wealth tax, maybe the leave, is that a possibility as well, is that a factor?

Garrett Watson: 15:56

it's definitely a factor, especially when some of these more aggressive proposals are being, you know, Uh, experimented with at a local or state level where mobility is much easier. You don't have to deal with issues of, trying to renounce citizenship or dealing with international financial flows. It's just as simple as moving across state lines. that really does demonstrate the power of tax policy to alter incentives and behavior. and it can have dramatic effects on states bottom lines. And I think those are pretty clear examples of the way in which tax policy affects behavior. but of course we see that too at the federal level and even at the international level where both individuals and businesses are doing their best to, to engage in planning, to minimize their tax liability. And so if it's not well structured, if there is a big incentive to move, to avoid tax, especially over time, folks are going to take advantage of that. And that's important to, consider because not only does this planning, obviate the effectiveness of raising these taxes, but it also, as you just pointed out, reduces. Uh, the revenue potential. So if you have new programs you're establishing, they're not starting out on a solid base either, because there's not stability in the revenue that's being collected. It's a big principle for us at Tax Foundation is that stability of the tax base. And so it does no one, any favors, neither proponents of, these new programs and spending, nor of, folks who are skeptical of those programs to. Rely on an inefficient tax base or a poorly structured, poorly thought out, novel way of raising taxes. That's not to say there aren't new ways we can think about tax policy and revenue raisers, but there's a reason why we have a well established income tax that's been designed in the way that it has over time. Rather than trying to tax assets like wealth. And we'll have to see how the state experiments go. It might tell us a lot over the next decade, if they pull back from those efforts,

Kyle Hulehan: 17:36

So if these wealth taxes have these significant drawbacks, what are our policy options available to maybe achieve some similar redistribution goals. Can you discuss maybe some viable alternatives that keep some progressivity in place?

Garrett Watson: 17:52

so there's a few, there's a few options here. Of course, one is, the more incremental option, which is trying to identify places in the tax code, particularly in the income tax, where there are, What we call, we tax economists call tax expenditures, basically deductions and credits and exemptions that deviate from an income tax that, very often actually accrue to higher earners, right? Congressional Budget Office had a great analysis of federal tax expenditures and found that many of the major ones, for example, the mortgage interest deduction, Even the exclusion for employee sponsored health insurance from the income tax, that even the charitable deduction generally benefit higher earners because those higher earners are the ones itemizing and taking those deductions in the first place. And so that's a place where if you did some base broadening, you got rid of some of those expenditures that raises revenue and, it can be done so in a progressive way, or at least in a way that, that protects say the bottom 20 or 40 percent of earners. And then, that revenue can be used to reform tax policy elsewhere while preserving, at least approximating where we are right now distributionally. So that's a more incremental option. We've, run the math on that, at, on our website, taxfinition. org. You can find our, for example, modeling of options for the upcoming expiration of the 2017 Tax Cuts and Jobs Act. Where we looked at, uh, trying to make it revenue neutral, broadening the tax base, keeping some of the fundamental reforms from TCJA, but also trying to be, accommodative to preserving, the existing distribution. another more broad based option we've looked at that's much more fundamental is moving the tax system from taxing income when we earn income to when we consume our income toward a broad based, Consumption tax, uh, where you can design, within that tax system elements to preserve progressivity, be it a broad based exemption for consumption for our lower earners or taxing consumption at higher rates as consumption increases. that's what been well established both through our modeling and from, Efforts, from folks at American Enterprise Institute and even as far back as the 2005, Council of Economic Advisors report that did a report on this, that progressivity can be preserved there too. and of course, it's also important to, remember, um, and this is a fair point for folks who are, I think, critical of over, overly discussing or focusing on distribution, which is we shouldn't keep our existing distribution locked in amber, and that actually is really important. There's nothing special about our existing distribution, necessarily. it may need to become more progressive in some ways. Some folks may want that. I think there are reforms that would make it more progressive. That would be sound policy in and of itself, but there are other policies that are really important that we need to prioritize to improve economic growth, improve mobility, improve opportunity that don't prioritize the distribution as much. And I think that's, Also important. And those can be iced out or overlooked if we just consider the current distribution as unchangeable. And in fact, our discussion about the tax pledge from the Biden administration is a great example of that, right? They don't want to change the distribution to raise taxes on anyone earning less than 400, 000. And that's what's keeping them in a very suboptimal place from a tax policy perspective. So, I think that's a really important point. there's nothing, we don't want to get stuck into status quo bias when it comes to distribution. But it is an important part of the discussion. It can't be overlooked. A lot of folks have strong views about this, right? It is a very big driver in tax reform debates. and we, at TaxFinition are doing our best to, to show the tradeoffs there and to show a path forward that can accommodate some of those concerns.

Kyle Hulehan: 21:07

there are 2 quick points. I kind of want to tie together 1 thing you talked about earlier and something you're talking about right now, which you're talking about maybe some broader base reforms. And earlier, you mentioned something called the tax gap and why they couldn't maybe fill that void. And I think that's kind of what you're getting at right here. And I just want to clarify for listeners, These broader reforms, they really make a bigger difference than what you could just get by taxing the top 1 percent or having something so narrowly defined. Is that right? Am I on the right track there?

Garrett Watson: 21:36

That's right. So I think it has several benefits. One, of course, is we avoid a fiscal calamity that's going to impact everyone, right? I mean, ultimately, part of the problem is folks are concerned about, tax hikes that may impact more than just the top 1%. But they're not thinking about the cost of. A fiscal crisis that may require big spending cuts that affects everyone or, in the, the most worst case, unlikely, but worst case scenarios, right? Very high inflation, or an economic calamity recession that goes along with it. That would harm everyone. And so you have to take that into account too. When we think about. The net, costs and benefits of some of these reforms. And then of course, on our end, try to emphasize that very often the benefits of economic growth and opportunity and having a dynamic economy are often very underrated. in the U S we tend to appreciate it a little bit more and other places, particularly to go back to the, not to pick on Europe too much, but there are, places in Europe where effectively their economies are in stasis, right? The United Kingdom right now, as has been well reported is in an economic crisis because their growth is stalled out, not just now, but the last couple of decades, and that has all sorts of negative effects for folks, long term mobility and opportunity, and, for other things we care about too, right? social stability is very well, uh, connected to economic growth. Folks ability to see positive, some outcomes for everyone in a society is correlated with growth. People can see it more when all boats are rising. So there's a lot of reasons that we need to ensure that our tax system. isn't in the way of a dynamic economy and by focusing on, I think very, into the politics of envy, if you will, or trying to hammer the rich, uh, through the tax code, that is a big risk and in general has not worked out well for economies and countries who have engaged in it. So, and I think that's the fine line, right? Where you can care about progressivity. You want to ensure that high income earners are paying into the system. and that there isn't, a distrust or, a feeling of, of, of anger from the broader population from the top, which is what some of what we've seen in the U S at the same time, if you go overboard there and make poor policy decisions, that definitely leaves everyone worse off. And, that's sometimes something that's missed in some of these debates where we treat. income and wealth that's being taxed as a fixed pie is just something out in the ether that we can just Uh, you know deal with on a chalkboard and that's not how the real world works. And, um, it's important folks to remember that as a big part of our work at Tax Foundation.

Kyle Hulehan: 23:53

So then how should lawmakers juggle this need to raise the revenue, ensure some fairness and support economic growth? Is it impossible to do this? Is are we just have to accept tradeoffs? Is that just a part of the deal?

Garrett Watson: 24:07

I think the point about trade offs is always going to be, there. I think that's been part of the challenges politically in our society. It's hard to have an honest conversation about trade offs and accepting those trade offs. that can be hard. There, of course, are, there's always that problem of concentrated interests and dispersed, uh, benefits where, you know, folks, there are specific, interests you may lose out in a tax reform that broadens the base, for example, and lowers the rate. but generally speaking from a, solid perspective, that's a net benefit. That's the right thing to do. And that does take courage on the part of the public to support those policies and the part of policymakers to make those hard decisions. Thanks. Uh, and that's a hard to do in a world or in a country that's very polarized politically. And so, there definitely are options on the table that can do that. We and others have illustrated that through some either incremental or fundamental reforms, we can on net simplify the system, improve economic growth, and, at least preserve, the distribution we have now. but that would require some sacrifices from some folks, right? We're still are going to see some. Net tax hikes relative to current law the problem is as we go back to the point before is the alternative is just hiding our heads in the sand and not accounting for the costs we're going to incur in the future by not dealing with these issues now you know ultimately it's not a question of do we want to? incur these costs or not. It's when and how do we want to incur them? It's much better to do that through an intentional policy process rather than, an unmitigated mess that may happen in the future. And I think the fiscal situation really pushes us to that point, right? It's one thing to have these philosophical debates about who pays taxes or whether or not the tax system could be. Simplified or not, but the debt situation really puts it in front of us that we have to deal with this issue. And at the same time, we should simplify things and improve growth if we can, while dealing with that. but that's, uh, we always tend to, I think, go for more pessimistic in those conversations, but there, there very much is, I think, some light there we have seen. Just to point out the last few years, some bipartisan efforts to pass policy, some of which we disagree with at Tax Foundation, but it does suggest that people can work together to solve issues. And I think that's, if anything, if there's a ray of light anywhere, that's a one area where, there could be some optimism moving forward into next year when the TCJA expires.

Kyle Hulehan: 26:16

And I think, from a cultural, maybe societal aspect, we love Michael Jordan, we love Tom Brady. We love winners. We love winning, the clean a hundred percent win, but something that is massively underrated is. In policy, a 52 percent win a 55 percent win something that works more often than it doesn't something that like, just, it is a little bit on the good side. You know, that's the kind of system we're in. We have trade offs people who want different things. You know, it wasn't designed for clean 100 percent victory where it's just all people. Democratic ideals are all Republican ideals. That's not the system we're in. We're set up for, these minor changes. And I think that's something maybe people really forget. So what are, the main takeaways for policymakers and the public when thinking about the future of the progressive tax policies?

Garrett Watson: 27:02

I think one, one main takeaway, of course, is making sure that we eventually establish ourselves on a shared set of facts. I think that's been an uphill battle, especially in an age of social media. where there's a lot of, myth making out there, a lot of miscommunication, a lot of outright fabrication, to get a better, good understanding of, the existing progressivity of the tax and transfer system that we have and the trade offs that exist if we were to change that system in any way. And I think that's where we have to start, because this is a mix of both facts and values. It's particularly hard, but if we can start with that first point about, education, that's always going to be a moving target, always an uphill battle, because, there's always going to be new misunderstandings and new developments that change our understanding of facts. and sometimes the facts aren't clear, right? I think that's also important, being clear about what we don't know. And there's a lot of, for example, really sophisticated, economic, empirical work being done on the effects of the 2017 tax law. We, uh, at Taxination, we co hosted a conference recently on Capitol Hill, trying to get into a lot of this literature, and it's not, easy to parse out, often, on the magnitudes of the effects and, uh, what was involved there. And so that's also important admitting what we don't know. if there are areas that we don't know. Being too overly confident can often, um, mislead the public. I think we've seen that on all sides, really. It's not just one, one faction or individual, right? Where, if we're overly confident on how certain policies impact, the economy or our society that can erode trust and have its own negative impact this trade off point, it is important that we are clear eyed about if we are to prioritize distribution of progressivity, that does come with clear trade offs, right? It can lead to economic effects if it's not well structured. If we do rely too much on taxes that discourage investment and work, for example, like a corporate rate hike or trying to tax wealth rather than income. or, narrowing the tax base, either when it comes to the number of folks being taxed or the types of income being taxed and, creating too many holes in the tax base. Those are all very tempting politically, but it's very important that we, fight back against those instincts. as I pointed out earlier, not just, for economic efficiency of the tax system, but also to preserve the revenue base for the various services that we're raising money for. So, lots to think about here, moving into the election season and into 2025, but I think it's important that we have, discussions like this to talk about the bigger picture. About a lot of these, disagreements about values and trade offs because they inform so many of the very specific debates that we see every day. even now with discussions about tariffs or about a corporate rate hike or what to do with the child tax credit, it all comes back to some of these bigger picture issues. So drawing from this can be important moving forward.

Kyle Hulehan: 29:31

Garrett, thank you for joining the show today. I feel wiser and more educated and understanding on this topic. I really appreciate the way that you always dive in and talk about these things and the, from the philosophical to the practical, it was very helpful today. Thank you for being on the show. Is there anything else, any other work you do in right now that you want to plug or get out there, to the listeners

Garrett Watson: 29:51

Well, we're continuing to watch the, uh, proposals by president Biden and former president Trump very closely. What we're having. A real time, releases and analysis, be it on the, the new proposal from the former president on tariffs or an update to president Biden's budget proposals out on our website at taxfoundation. org.

Kyle Hulehan: 30:09

I will check out Garrett's work at tax foundation. org. Thank you for being on the show today.

Garrett Watson: 30:13

Thank you.

Kyle Hulehan: 30:14

This has been another episode of the deduction to learn more about the tax foundation and the deduction. Visit us at taxfoundation. org slash podcast. You can follow us on Twitter, Facebook, and LinkedIn at tax foundation. If you've been enjoying our show and want to help us grow, please leave a five star review on Apple Podcasts, Spotify, or wherever you get your podcasts. It helps others find the show. And if you didn't enjoy the deduction, well, keep it to yourself. Another way you can support our work is by donating to the Tax Foundation on our website. Thank you all for listening, and we'll see you next time.