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I have been interested in social issues and politics over the last ten years or so. A few years back I realized I wanted to do more than just peruse my local Barnes and Noble on free nights and weekends; I decided to work towards a PhD in public economics. This will enable me to be involved in the cautious application of public policies in areas where the free market fails in order to attain a more efficient and equitable result.

The relationship between incentives and outcomes consumes me. While I am certainly a fan of policies designed to nudge people to make better personal and social decisions, I am becoming more interested in a direct approach: tax policy. The political and economic aspects both fascinate me.

Everyone knows the US tax systems is complicated and full of loopholes. Conservatives complain that job-killing corporate taxes are among the highest in the world (p.22 of pdf) while liberals decry the drop from a peak of 94% to the current 35% for the nation's highest income earners. While both are technically true, and may make a good sound bite, the substance is in the details. Taking into account itemized deductions, capital gains (disproportionately earned by the wealthy and taxed at only 15%), corporate subsidies, and other poorly-kept secrets, the rich never paid 94% and corporations almost never pay 35%.

The current debate in Congress over how to deal with our medium-term deficit problem is another example of the devil being in the details. This wonky piece outlining the "Gang of Six" plan provides some insight into this murky world.

Taxes affects everything: Social Security, health insurance (both public and private), the social safety net protecting the poor and vulnerable, job creation, the growth of suburbs, and what we eat, to name a few examples. Ultimately, tax policy affect the incentive structure that individuals use to make all kinds of decisions.

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