Summers Backs ‘Careful’ Push to Hike Taxes on Wealthy, Companies
(Bloomberg) -- Former U.S. Treasury Secretary Lawrence Summers backed moves to examine a broad range of tax increases on the wealthy and companies in order to help pay for longer-term investments in the economy amid moves by Senate Democrats to potentially target areas including stock buybacks and executive pay.
“There’s a lot of stuff that we should be going after” with taxes, Summers said Friday on Bloomberg Television’s “Wall Street Week.”
He urged that the spending increases now being considered in Congress be subject to “fiscal discipline,” including “genuine” measures to raise revenue. Tax measures also shouldn’t be “back-loaded” in comparison to front-loaded spending in a multi-year package, he said.
Among the potential areas for boosting revenue, Summers flagged:
- Stock buybacks. “I do worry about interest-financed debt being used to not make productive investments, but to repurchase stock”
- Executive pay. “There are abuses in ways in which executives are paid that enable them to escape taxes to a substantial extent”
- Some individual retirement accounts (IRAs). “I do hear stories about Roth IRAs with billions of dollars in them and wonder what the hell is going on, and think that somebody ought to close that down”
- Capital gains. “Why is it that if a multimillion, $100 million real-estate developer wants to sell his property, he can do it through some kind of exchange and avoid capital gains taxes?”
“Those things have to be sorted out on a very careful economic basis,” Summers said about proposed tax hikes. “I don’t think it’s a helpful strategy to simply frame it as ‘all success should be tax-criminalized.’ And so I think we need to find the right kinds of balance.”
While Summers, a paid contributor to Bloomberg and a professor at Harvard University, said he agreed with some of the concerns outlined this week by moderate Democratic Senator Joe Manchin about a $3.5 trillion fiscal package now taking shape in Congress, he stopped short of backing Manchin’s call for a “pause” in the discussions.
“My own instinct, rather than pausing the debate -- which it seems to me is well teed up right now -- is to translate that into making sure that new spending is paid for with genuine pay-fors in terms of, tax increases or increases in tax compliance.”
Summers reiterated the worries about “overdoing” monetary and fiscal stimulus he’s detailed throughout the year. He also said that Friday’s jobs report underscored issues with labor shortages and may suggest further grounds for concern about inflationary pressures.
“It’s not that employers don’t want to hire. That’s not what’s holding down job growth. What’s holding down job growth is, in many cases, they’re having great difficulty finding the people that they want to hire,” Summers said. “Ultimately, my suspicion is that that’s going to lead to more wage increases, more wage pressure. And from what I’m hearing, businesses aren’t having a lot of difficulty passing price increases on.”
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