Should-Read: Greg Leiserson: The Tax Foundation’s treatment of the estate tax in its macroeconomic model

December 4, 2017
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Should-Read: Greg Leiserson looks to me to be correct here: the structure of the Tax Foundation’s model is inconsistent. Or, rather, the only consistency is: “what assumption about this piece will produce a result more to the liking of our Republican political masters?”: Greg Leiserson: The Tax Foundation’s treatment of the estate tax in its macroeconomic model: “Notably, this justification for the assumption that the marginal investor is domestic even as the rate of return is fixed…

…because the United States is appropriately modeled as a small open economy—appears to exist entirely outside its model. As best I can determine… the Tax Foundation model itself appears to include no explicit model of markets in government debt (or other low-risk assets), the composition of savers’ portfolios, and the allocation of assets between domestic and foreign investors. Thus, while the Tax Foundation asserts that a difference in risk tolerance between domestic and foreign investors justifies its modeling assumptions, it is simply impossible to consider these issues…

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