Alex Tabarrok offers up A Real Stimulus Plan:
As you know, I’m not enthusiastic about a fiscal stimulus plan. What we need is a stimulus plan that does not increasing the budget deficit or waste taxpayer funds but that does increase the incentive to produce output. So what would I do? Here’s a new idea.The IRS knows how much income that each taxpayer reported last year. So let’s cut everyone’s marginal tax rate based on last year’s income. In other words, suppose that last year Joe earned $66,520 which puts him in a 25% tax bracket. Joe’s tax schedule this year will be exactly the same as last year except for every dollar earned above $66,520 the tax rate drops to 15%. We do this for all taxpayers so that each taxpayer has their own schedule and for each taxpayer there is a decreasing marginal tax rate.
Note that this plan increases the incentive to work and it doesn’t increase the deficit. In fact, the Tabarrok plan increases tax revenues! The key is a marginal tax cut with a different margin for every taxpayer based upon last year’s return.