What's your opinion of Ned Phelps' wage subsidy program with no targeting at all (other than by income), just as a means to incentivize employment and labor force participation at the lower-end?
Thanks, Henry. That is a good question. Admittedly, its been a while since I analyzed Phelp's proposal in detail. My concern is that even if Phelps’s proposal is cleaner in theory than WOTC, we don’t implement policy on a blank slate. We already have the EITC plus an additional 174 credits, deductions, exemptions, exclusions etc.,. Adding another wage subsidy mostly increases complexity, worsens effective marginal tax rates, and reshuffles transfers rather than changing behavior. Without consolidation or simplification, a Phelps-style subsidy risks becoming just another layer in an already overdetermined system and vulnerable to the same political and administrative pathologies we’ve seen before.
What's your opinion of Ned Phelps' wage subsidy program with no targeting at all (other than by income), just as a means to incentivize employment and labor force participation at the lower-end?
Thanks, Henry. That is a good question. Admittedly, its been a while since I analyzed Phelp's proposal in detail. My concern is that even if Phelps’s proposal is cleaner in theory than WOTC, we don’t implement policy on a blank slate. We already have the EITC plus an additional 174 credits, deductions, exemptions, exclusions etc.,. Adding another wage subsidy mostly increases complexity, worsens effective marginal tax rates, and reshuffles transfers rather than changing behavior. Without consolidation or simplification, a Phelps-style subsidy risks becoming just another layer in an already overdetermined system and vulnerable to the same political and administrative pathologies we’ve seen before.