Provocative Tax Policy Questions for Mr. Geithner

Treasury-Secretary-designate Timothy Geithner is facing confirmation hearings today. If confirmed as Treasury Secretary, he would oversee the IRS and advise the President on tax policy issues, among other responsibilities. The NYT published some suggested questions for Mr. Geithner, several of which related to tax policy:

1. The American tax code is so complex that even Treasury secretary nominees can easily make mistakes on their returns. Furthermore, while income tax rates are 10 percent to 35 percent for individuals and 35 percent for corporations, because of the proliferation of deductions, credits, exclusions and loopholes, the revenue from income tax amounts to only 10 percent of gross domestic product. Should you give priority to simplifying the code and enforcing compliance before raising rates?

— CHARLES O. ROSSOTTI, the commissioner of internal revenue from 1997 to 2002

(NOTE: Mr. Rossotti is referring to statutory marginal tax rates. As we have seen, effective marginal tax rates can easily be as much as 50%, even on taxpayers with very modest incomes, due to phase-outs and clawbacks.)

1. The income tax code favors those with employer-provided health insurance over those who buy their own health insurance or pay medical bills out of pocket. It also favors homeowners over renters, through the mortgage interest deduction. Is this tax treatment efficient or fair? Might you favor a more level playing field?

2. President Obama supports the estate tax. Why should a person who leaves his money to his children pay more in taxes than another person with the same lifetime income who spends all his money on himself?

— N. GREGORY MANKIW, a professor of economics at Harvard

Note: Both of Professor Mankiw's comments raise questions about horizontal equity. His first question also raises the issue of economic efficiency.