Krugman Yearns for a Golden Age of 91% Tax Rates
The award for lamest Twinkie tie-in goes to Nobel Prize-winner and New York Times columnist Paul Krugman. His latest bit of demagoguery posing as serious thought drops a quick mention of America’s favorite cream-filled golden goodie followed by what he really cares about: raising taxes.
Krugman yearns for a return to the days of a whopping 91% top marginal income tax rate which puts him at odds even with former members of President Obama’s economic team.
In a 2007 paper examining the effects of tax changes on the economy, former Obama White House economist Christina Romer and her husband concluded: “[T]ax increases appear to have a very large, sustained, and highly significant negative impact on output.” [h/t Matt Mitchell]
Considering that most economists believe that raising the highest marginal income tax rate to 39.5%, combined with other tax hikes and indiscriminate spending cuts that make up the fiscal cliff, would result in a recession, just imagine pushing tax rates to “Twinkie Era” levels!
Another counterargument to Krugman comes from the American Enterprise Institute's James Pethokoukis, who offers what he calls a "natural experiment" in Great Britain:
Its Independent Fiscal Oversight Commission—which reviews all of the budgetary assumptions—just ruled that cutting the top rate of tax from 50% to 45% was revenue neutral, implying the revenue maximizing rate is in that range.
Finally, if 91% tax rates were so wonderful in the 1950s, why did President John Kennedy call for tax cuts in 1962 to create more jobs?
Krugman calling for higher taxes will never get old, just like the shelf life of America’s greatest snack food.