The Trump administration and congressional Republicans are staking everything on what they say will be the greatest tax reform agenda in three decades. The president has pitched massive tax cuts, time and again, as a way to help boost jobs and wages for working Americans. Mihir Desai, Mizuho Financial Group Professor of Finance at Harvard Business School, co-authored a paper touted by the White House as supporting the notion that cutting the top corporate tax rate from 35% to 20% will raise household incomes by as much as $9,000 annually. There is one dissenting voice, however: Professor Desai himself.
“The White House inflated the potential benefits to workers from a proposed corporate tax cut, according to a Harvard University economist [Desai] whose work informed the estimate,” says The New York Times. “The actual income gain implied by his study, he estimated, would be $800.” In a climate of political polarization, there is always the danger of either side exaggerating the benefits or costs of a policy proposal.
As an academic and author of the recently published book “The Wisdom of Finance” (Houghton Mifflin Harcourt, May 2017), Professor Desai has retained a greater sense of proportion. “I’m a believer in corporate tax reform, and I’m a believer in corporate tax cuts, and I believe they would go to workers,” Desai is quoted as saying in the NYT article. “But I don’t believe those numbers add up.”
The president’s economic team has disputed Professor Desai’s dissent, but the episode is a reminder of the increasingly rare trait of objectivity in public policy debates. On the issue of tax reform, when billions of dollars and the livelihoods of millions are at stake, the casual inflation of numbers could be quite dangerous. Politicians and policymakers owe it to the American people to get the math right and to communicate honestly with all stakeholders. To this end, Professor Desai has embraced honesty and transparency in regard to a policy – corporate tax cuts – that he himself supports.
To keep up with the story, follow Professor Mihir Desai on Twitter, @desaimihira.