The federal deficit commission pre-released their report yesterday and we will write more about it later, but the NYT’s Paul Krugman doesn’t like what he sees so far. Krugman has been calling for higher taxes and higher spending to improve the economy and he doesn’t seem to have much room for anyone who disagrees with his analysis – including the commission assembled by Pres. Obama. The commission did address federal taxation, and contrary to what many people thought (that the commission would only focus on tax increases), they actually proposed some pro-growth reforms to the tax code, which included lower rates on capital investment. This doesn’t sit well with Krugman.
I mean, what’s this about? There is no — zero — evidence that income taxes at current rates are an important drag on growth.
What’s “an important drag on growth”? What growth is he talking about, anyway?
As I said, we’ll get into more detail about the commission’s early recommendations, but Krugman’s notion on tax rates reminds me of Bill Gates Sr’s letter to Arthur Laffer where he said, “I would say our country has prospered from using [a progressive tax] system—even at 70% rates to say nothing of 90%.”