When it comes to the tax code, there is less of a consensus than I had expected to find:
Health insurance receives preferential tax treatment. Should the U.S. change the income tax code so that health insurance benefits are taxed the same as income? Economists lean ever so slightly against this idea–44 percent oppose it, while 42 percent favor it. Should the U.S. amend the income tax code to eliminate the mortgage interest deduction? Again, economists are almost evenly split. Should internet sales be exempted from taxation? The majority of economists (57 percent) say “no,” while less than a quarter favor special treatment of internet-based sales.
That's from a survey of AEA members, conducted by Robert Whaples. The paper has other results of interest.
I assume that the results would have been different if they had asked about phasing out policies instead of eliminating. I wish I knew how much different. I don’t think the mortgage deduction should be eliminated, but it should be phased out or eliminated for new purchases. I’m not sure how it should be handled for existing homeowners, who purchased their homes with an assumption of the deduction.
These are complicated problems and the questions don’t always do them justice.
To be fair, for the mortgage interest deduction, more agree to remove it than disagree (~47% vs. ~38%). That’s not exactly “evenly split”. But I agree that more would support it if it were eliminated for new purchases (and thus in <= 30 years it would be gone forever).
All interest should be tax deductible, not just mortgage interest. The way it used to be. Long live the mortgage interest deduction.
As for health insurance, we want more people to have it, so of course, let’s tax it. Sheesh.
I wonder if younger economists are way under represented here. Only 1/4 of the sample is under 42. I’m not sure the exact number, but I wonder if they are more likely to get responses from
older tenured and retired faculty.
From the paper’s sample
“The median year of birth is 1955, with one-quarter born before 1943, and one-quarter
after 1967.”
Also I wonder since it was mailed rather than online would that impact the % of younger economists answering?
Although maybe being a young economist doesn’t matter since we were all taught by old economist, the age distribution is the one thing that jumped out at me.
Looking at the paper, it appears that a lot of questions are about “eliminating” this policy or that policy. I get the feeling that we’d get different answers if the same questions were asked differently (e.g. “should we have Laws mandating municipal curbside recycling?” instead of “should Laws mandating municipal curbside recycling be eliminated?”). There’s something mystical about the status quo, and the thought of “eliminating” it often met with scoffs, especially about something so obscure to many economists as municipal curbside recycling mandates.
In short, I’d guess that you would find much less support for a policy if the question were framed in a way that did not portray that policy as being part of the status quo.
Check this out:
Question 19: Economic growth in developed countries like the U.S. leads to greater levels of happiness. (N = 126)
19.2% Disagree 32.5% Neutral 48.4% Agree
Question 20: Economic growth in developed countries like the U.S. leads to greater levels of well-being. (N = 132)
2.3% Disagree 9.8% Neutral 87.8% Agree
That’s a pretty big difference. When answering the questions in my head, I was thinking of utility or total surplus being the measurement for both questions, therefore they should be have the same answer. The fact that economists’ answers vary so much between the change of word-choice is interesting, suggesting that utility/surplus is not the guiding factor in their answers.
The problem with the mortgage interest question is that there is a certain percentage of people who are going to be against increasing taxes regardless of the circumstances, and that’s going to bias you against eliminating the deduction. If we take the people who opposing taxing internet commerce as a proxy for this group, you find that approximately 13% of survey respondents oppose eliminating the mortgage interest deduction for reasons other than generalized anti-tax principles.
I agree with the other commenters that the questions are poorly phrased. You can’t ascertain the policy preferences and you also can’t tell if someone is opposing eliminating a tax benefit on policy grounds or because they get a personal economic benefit from it.
@ John
I agree that happiness and well-being are not synonyms in English for most people, but I’d expect economists to consider them as nearly the same. In economics courses, the concept of utility (cardinal utility at least) is often explained using the terms “happiness” and “well-being” pretty much interchangeably.
Interesting. I would not have guessed many economists would favor crushing internet retail under the iron-heeled boot of taxation. Learn something new every day I guess.
Instead of removing the tax break for employer-provided insurance, why not just extend it to apply to individually purchased insurance? You put individual plans on and even footing AND you avoid a tax increase. What’s not to like.
nmg: “why not just extend it to apply to individually purchased insurance? You put individual plans on and even footing AND you avoid a tax increase.”
Allowing insurance premiums to be deductible makes sense. I doubt it will reduce income tax revenue by a large amount. According to the Census Bureau, only 27 million Americans are covered by directly purchased health insurance. Of those, 10 million are 65 and older. I cannot find any statistics about income levels of those who directly purchase health insurance. But I think we can assume that a health insurance deduction would not change the income tax paid for most of them.
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