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Tax and Expenditure Policy

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PROGRAM DESCRIPTION

The Baker Institute Tax and Expenditure Policy Research Program is actively involved in research on tax and expenditure policy, with a focus on the effects of fundamental reform of our nation’s tax system. The broad goals of the program include providing economic analyses of tax and expenditure policy at the national, state and international levels that are publishable in top academic journals and in more policy-oriented venues that serve as a resource for commentary on current policy issues. In addition, program researchers actively participate in the policy-making process by advising various national government agencies, including the U.S. Department of the Treasury and the Joint Committee on Taxation; a wide range of state and international governments and multilateral development institutions – including the World Bank and the U.S. Agency for International Development – as well as various key individual policymakers. Program researchers also have been asked to testify before numerous federal and state government committees such as the U.S. House Ways and Means Committee, the U.S. House Budget Committee, and the Texas House Ways and Means, Senate Finance, Joint Select School Finance and Public Education Committees. Through all these activities, the program exemplifies the Baker Institute’s primary mission: to provide an essential bridge between the world of ideas and the world of action.

The research agenda of the Tax and Expenditure Policy Program focuses on four critical areas:

  • Tax Reform in the United States, where the primary focus is on the simulation of the effects of fundamental tax reform – replacing the current income tax with a consumption-based tax system – as well as more incremental income tax reform, using a large-scale dynamic computer general equilibrium model constructed by Diamond and Zodrow. Current research projects include (1) an investigation of the economic effects of such reforms, including transitional and distributional issues and reform-induced changes in equity prices and house values; (2) an examination of the effects of making the U.S. tax cuts of 2001 and 2003 permanent; (3) an analysis of the merits of “dynamic scoring” in preparing revenue estimates; (4) an evaluation of the case for reducing the taxation of capital income; (5) analyses of the taxation of natural resources, especially energy resources and the taxation of state-owned enterprises; (6) evaluations of the proposals recently recommended by President Bush’s Advisory Panel on Federal Tax Reform; (7) an analysis of the effects of integrating the business and individual income tax systems in the United States; and (8) an analysis of wealth holdings by age and income class.

  • State Tax Reform where recent and current projects include (1) evaluations of alternative public school funding options in Texas and New Mexico; (2) analyses of the use of state and local investment tax incentives; (3) an investigation of proposals to increase state sales taxation of consumer and business services; (4) an analysis of the optimal taxation of electronic commerce; and (5) an examination of the effects of local use of the property tax.

  • International Tax Issues including (1) an analysis of the effects of including international capital flows and trade in computable general equilibrium models of the effects of tax reforms; (2) an evaluation of international tax competition and tax coordination in the EU; (3) analyses of tax policy in small open economies; and (4) studies of tax reform in Latin America, including an investigation of estate and inheritance tax reform in Latin America funded by Fundación Daniel J. Chávez Morán. Gillis is currently working on higher education reform projects in South Korea, Germany and Vietnam. Zodrow is engaged in tax reform efforts in Canada and Colombia. And all four members of the program have served as consultants to numerous international governments as well as the World Bank, the U.S. Agency for International Development and other multilateral economic development agencies.

  • Expenditure Policy where current projects include (1) an examination of the efficacy of education vouchers; (2) an investigation of how the social security disability insurance program interacts with the supplemental security income and Medicaid programs; (3) an analysis of the extent to which low-wage workers are subsidized by high-wage earners through employer-provided health insurance; (4) an investigation of the extent to which states distribute the benefits of Medicaid among alternative groups of potential recipients; and (5) an examination of how government expenditures can foster technological advances in nanotechnology, biotechnology and information technology.

Research under this program has been presented and published in a variety of academic and policy-oriented venues. Recent working papers, reports and publications under this program are available through the Baker Institute and on its Website at www.bakerinstitute.org.

The Tax and Expenditure Policy Program organized a major conference in April 2006 that focused on the various proposals for tax reform currently under discussion in the United States. The conference, which included numerous internationally acclaimed tax experts and featured a keynote speech by the Honorable James A. Baker, III, was supported by a grant from the Alfred P. Sloan Foundation. The proceedings of the conference will be published in early 2008 by MIT Press in a volume entitled Fundamental Tax Reform: Issues, Choices and Implications, edited by Diamond and Zodrow. In addition, the papers presented at an earlier Baker Institute conference on tax reform were published in 2002 by Cambridge University Press in a volume titled United States Tax Reform in the 21st Century, edited by Zodrow and Mieszkowski.

PUBLICATIONS
2008
Welfare and Macroeconomic Effects of Deficit-Financed Tax Cuts: Lessons from CGE Models
Aug 19 2008
John W. Diamond, Alan D. Viard
The Impact of H.R. 25 on Housing and the Homebuilding Industry
May 05 2008
John W. Diamond, George Zodrow
Selecting Parameter Values for General Equilibrium Model Simulations
Mar 28 2008
Timothy S. Gunning, John W. Diamond, George Zodrow
Ideas That Will Actually Cut Into Global Warning
Feb 08 2008
Neal Lane, Malcolm Gillis
Using an Individual Income Tax Panel File to Measure Changes in Marginal Tax Rates: Opportunities and Limitations
Feb 01 2008
John W. Diamond, Ralph A. Rector, Mike Weber
2007
The Robert A. Mosbacher Global Issues Series Lecture by The Honorable Carlos M. Gutierrez
Dec 07 2007
Carlos M. Gutierrez
Consumption-Based Direct Taxes: A Guided Tour of the Amusement Park
Jul 01 2007
Charles E. McClure, Jr., George R. Zodrow
Testimony Before the Committee on Ways and Means
Mar 01 2007
John W. Diamond
Should Texas Adopt a School Choice Program? An Evaluation of the Horizon Scholarship Program
Mar 01 2007
John W. Diamond
Should Electronic Commerce Receive Preferential Tax Treatment?
Jan 01 2007
George Zodrow
The Property Tax as a Capital Tax: A Room with Three Views
Jan 01 2007
George Zodrow
2006
Dynamic Analysis of the Tax Reform Options Prepared for the President’s Advisory Panel on Federal Tax Reform
Sep 01 2006
John W. Diamond, Robert Carroll, Craig Johnson, James Mackie III
How Budgetary Choices Affect Work, Saving, and Growth: The Real Purpose of 'Dynamic' Estimating
Jun 06 2006
John W. Diamond
Time for U.S. Tax Reform? The Tax Reform Panel's Recommendations
Apr 01 2006
George Zodrow, Charles E. McClure, Jr.
Should Capital Income be Subject to Consumption-Based Taxation?
Apr 01 2006
George Zodrow
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