A 91 percent tax rate? Really?
So is the liberal Democratic position that tax rates don’t really matter? First comes a deficit reduction plan put forward by Rep. Jan Schakowsky would reduce the budget deficit by $427 billion in 2015 by raising taxes by $283 billion, cutting defense by $111 billion and only ever-so-slightly trimming nondefense discretionary spending by $8 billion and Medicare by $17 billion. She doesn’t do a long term analysis because unless you cut entitlements or jack taxes through the roof (and ignore the subsequent economic impact), the numbers won’t work.
Then we have this amazing op-ed in the LA Times by one Moshe Adler:
What did the new president do about the economy? President Clinton in 1993 proposed to raise the highest marginal tax rate immediately from 31% to 39.6%. … In the seven years that followed, the unemployment rate decreased steadily, every single year, until it reached 4% in 2000. .. The highest tax rate is currently 35%, and if the George W. Bush tax cuts are allowed to expire, this rate will return to 39.6%. But charging the same tax rate for all levels of income above $380,000 is unfair. The highest marginal tax rate should be what it was during the Eisenhower years — 91% — and one way to reach it would be in steps of, say, a 1% increase for every $1-million increment in family incomsecond million would be taxed at 40.6%, and the third at 41.6%. A family whose income exceeds $53 million a year would pay the maximum rate of 91% on each dollar above this sum.
Again, when Clinton signed his tax increase in August 1993, the economy had been growing for 10-straight quarters and was able to power through the tax hikes. Clintonomics started on third base and Adler thinks it hit a triple. As for raising top rates to 91 percent? Look, even Paul Krugman doesn’t advocate that. There is a mountain of evidence, both from academic research and historical experience, that suggests such a move would crush economic growth and leave America in a poor competitive position. Fun fact: Tax rates are way lower today than in the 1950s and yet tax revenue as a share of the economy is just as high. Guess the Laffer Curve does work after all.