Krugman: Newt Economic Thinking (tax cuts for the rich are good for the economy)
But can you collect more taxes from the rich? Won’t the money just go underground? No. Yes, raising rates will lead to more tax avoidance and evasion – but bear in mind that the United States has moved top tax rates around a lot over the years, giving us very good evidence on how taxable income actually responds to rate hikes and cuts; and what that evidence tells us is that rates would have to be a lot higher than they are now, at least 70 percent and probably above 80, before you’d need to worry that we might be on the wrong side of the Laffer curve.
Finally, should we worry that raising tax rates on the rich will deeply damage the economy? Well, that’s always what they say. Back when Bill Clinton raised rates in 1993, one prominent politician (Newt) said this:
“The tax increase will kill jobs and lead to a recession, and the recession will force people out of work and onto unemployment, and actually increase the deficit.”
Now, I know what you’re going to say, Newt, because of what you did when Lawrence O’Donnell tried to hold you accountable here – you’re going to say that it was all because of Republican tax cuts. But it won’t wash. The US economy added 6.7 million jobs during Bill Clinton’s first two years in office, that is, before your guys came in. That’s 278,000 jobs a month. And while there were some tax cuts further down the line, it’s still true that the average tax rate on the top 1 percent was higher in every year of the Clinton administration than in any year of either the Bush I or the Bush II administrations. That didn’t stop us from having an economic boom. Sorry, Newt, but you were wrong pure and simple, and you really should man up and admit it.
Oh, and the high top tax rates of the generation that followed World War II didn’t stop that from being the greatest generation of economic growth, and in particular of rising middle-class living standards, in U.S. history. So, should we raise taxes on the rich? Yes, for various reasons, but first of all because we could use the money. Can we actually raise more money that way. Yes. Will it hurt the economy? No. Let’s do it.
http://krugman.blogs.nytimes.com/2013/05/31/newt-economic-thinking/
