Saturday, October 2, 2010

Tax Policy Simplified

Here is Austan Goolsbee giving a nice clear explanation of the two contrasting positions on the table with respect to income taxes.  The one with all the huge pink bubbles is of course the Republican proposal, while the one with the reasonably-sized blue bubbles is the administration's plan.  I actually think most people understand this, and most people favor the Democrats' plan to extend the Bush tax cuts on the first $250,000 of income, but allow those tax cuts to expire for income above that threshold.  A majority of both Houses of Congress is also in favor of this idea, and the President is eager to sign it into law.  In a democracy, that ought to be enough to get it done. 


  1. If Mr.Goolsbee wants to be logically consistent with his deficit reduction argument—extending lower taxes for 2% of the population would increase the deficit—why not also eliminate lower taxes for the rest of the 98% of the population? If he is suddenly so concerned with deficits after blowing trillions, this would lower the deficit far faster. But I don’t think Mr. Goolsbee, a good little Keynesian, is really concerned about deficits.

    Conveniently, Mr. Goolsbee doesn’t mention that raising the tax rate for the hated 2% is essentially raising taxes on businesses and investors. And that one way to stimulate the economy is through economic growth provided by capital investment in productive endeavors (unlike government programs). Is it any wonder that businesses and investors are on a capital strike when the Obama administration is hell bent on making a political point rather than really caring about growing the economy? I wonder how much the deficit is going to grow when GDP continues to crawl along at a snails pace when taxes go up on this easily scape-goated minority group.

  2. Being in the majority doesn't make any of us right (correct). Think Civil Rights legislation; or gay marriage initiatives and how they may play out in courts. Pure voting _might_ does not equal correctness -- or fairness -- even if it is legal. Each of us has an idea of what is fair. In our system a majority isn't always enough. How would you feel about Health Care Reform repeal? The majority of Americans might want it.

    Hypothetically, what if the Republicans suddenly had enough votes to repeal it; would that make it right? Not legal, but right?