Distorted Economy

NPR on Obama’s tax reform proposal:

Cutting corporate tax rates and deleting loopholes is just what most economists prescribe for the tangled U.S. tax code.

So why isn’t everyone cheering the plan President Barack Obama unveiled Tuesday to slash the top corporate tax rate and end breaks that let some companies pay little or nothing in taxes?

Economists note that Obama’s plan would upturn the very playing field the administration says it wants to level. It would give manufacturers preferential treatment: Tax breaks would effectively cap their rate at 25 percent. Other companies would pay up to 28 percent.

The current top corporate tax rate is 35 percent.

Some say such varying rates can distort the economy by diverting investment into some industries and away from others that might pack a bigger economic punch.

Jacob Sullum, senior editor at Reason magazine replies to NPR:

Distorting the economy is not, as NPR suggests, an unwanted side effect of Obama’s proposals; it is his avowed aim, because he thinks he knows how resources should be distributed better than the market does. As long as we have leaders with this kind of overblown faith in their own knowledge, wisdom, and competence, we will have “a tax system that’s a complex, inefficient, and loophole-riddled mess.”

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