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Six Policies Economists Love (And Politicians Hate)

Filed by KOSU News in US News.
July 19, 2012

Tuesday’s show presented the common-sense, no-nonsense Planet Money economic plan — backed by economists of all stripes, but probably toxic to any candidate that might endorse it.

You can still listen to the show, but we’ve had some requests for a post with our six-step plan spelled out in brief.

So here they are, along with a few words about each of the economists who helped craft it:

The proposals

One: Eliminate the mortgage tax deduction, which lets homeowners deduct the interest they pay on their mortgages. Gone. After all, big houses get bigger tax breaks, driving up prices for everyone. Why distort the housing market and subsidize people buying expensive houses?

Two: End the tax deduction companies get for providing health-care to employees. Neither employees nor employers pay taxes on workplace health insurance benefits. That encourages fancier insurance coverage, driving up usage and, therefore, health costs overall. Eliminating the deduction will drive up costs for people with workplace healthcare, but makes the health-care market fairer.

Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that’s good. Don’t tax companies in an effort to tax rich people.

Four: Eliminate all income and payroll taxes. All of them. For everyone. Taxes discourage whatever you’re taxing, but we like income, so why tax it? Taxing payroll taxes discourage creating jobs. Not such a good idea. (

Five: Tax carbon emissions. Yes, that means higher gasoline prices. It’s a kind of consumption tax, and can be structured to make sure it doesn’t disproportionately harm lower-income Americans. More, it’s taxing something that’s bad, which gives people an incentive to stop polluting.

Six: Legalize marijuana. Stop spending so much trying to put pot users and dealers in jail — it costs a lot of money to catch them, prosecute them, and then put them up in jail. Criminalizing drugs also drives drug prices up, making gang leaders rich.

There you have it, six major proposals that have broad agreement, at least among economists. Though we should note that there were some pretty significant quibbles about just how to implement the income-tax and carbon-tax proposals.

The economists

Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C., and widely published blo “You could probably describe me as left of center. It’d be fair.”

Russ Roberts, George Mason University economics professor. “In the grand spectrum of economic policy, I’m a pretty hard core free market guy. I’m probably called a libertarian.”

Katherine Baicker, professor of health economics at Harvard University’s Department of Health Policy and Management. We simply called her a centrist on the show.

Luigi Zingales, professor of entrepreneurship and finance and the University of Chicago’s Booth School of Business. “What I like to say is that I’m pro-market, but not necessarily pro-business.”

Robert Frank, professor of management and economics at Cornell University’s Johnson Graduate School of Management. “I’m a registered Democrat. I think of myself as a radical pragmatist.” [Copyright 2012 National Public Radio]

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