Which Clinton tax rates does he mean: Twice a week, Paul Krugman’s column appears. On those occasions, Americans actually have a chance to learn something from their daily newspaper.
Krugman is fundamental. That’s why we found this morning’s column frustrating. What exactly did Krugman mean by the highlighted passage:
KRUGMAN (11/2/8/11): The supercommittee was a superdud—and we should be glad. Nonetheless, at some point we’ll have to rein in budget deficits. And when we do, here’s a thought: How about making increased revenue an important part of the deal?In that highlighted passage, Krugman proposes reinstating the Clinton-era tax rates—and he proposes going beyond them. But an obvious question came to mind: Which “Clinton-era tax rates” does Krugman have in mind?
And I don’t just mean a return to Clinton-era tax rates. Why should 1990s taxes be considered the outer limit of revenue collection? Think about it: The long-run budget outlook has darkened, which means that some hard choices must be made. Why should those choices only involve spending cuts? Why not also push some taxes above their levels in the 1990s?
Let me suggest two areas in which it would make a lot of sense to raise taxes in earnest, not just return them to pre-Bush levels: taxes on very high incomes and taxes on financial transactions.
Which Clinton tax rates does Krugman mean? Does he mean we should return to the Clinton tax rates on those who earn above $250,000? Or does he mean that we should return to all the Clinton tax rates?
On its face, Krugman seems to be talking about all the Clinton tax rates. But in the past few years, the debate about the Clinton tax rates has narrowed down to the tax rates on high earners. Ever since he was a candidate, President Obama has rejected the idea of letting the Bush tax rates expire on families which earn less than $250,000. Within the liberal world, discussion of the Bush and Clinton tax rates has thus collapsed into a discussion of tax rates on high earners only.
We’ll promise you this: Whatever Krugman may mean, many of his readers will think he’s talking about restoring the Clinton tax rates on just the top two percent.
Does Krugman want to restore all the Clinton tax rates? Or just those on the highest earners? We’ll guarantee that his readers don’t know.
We don’t know which he means either.
Visit our incomparable archives: In July, Krugman discussed his views about future taxation on a Charlie Rose program. This same point of confusion arose at that time. See THE DAILY HOWLER, 7/26/11.
One additional question: Have you ever seen a news report about what it would be like to return to all the Clinton tax rates? About how middle-income families would be affected?
Answer: Of course you haven’t! Your “press corps” writes about hair and friendship patterns. That other shit is so tedious, so boring!
Darlings! It can go fly!
We should, of course, return to the Clinton tax rates at all income levels and should add some new, higher tax rates at incomes above $500K. The ones that are really suffering in this economy are the unemployed, and they will not be affected by tax rates.
ReplyDeleteConvincing me that someone making $80K is "suffering" is going to be hard to do. If he/she is supporting a handful of children, what is his/her (we need another pronoun) taxable income and what overall tax rate does he/she pay? You know the answer.
I'm no better a mind reader that Bob, but based on his other writings, it's unlikely that Krugman wants to raise rates on the middle class *at this time*, since this group can hardly be described as "thriving" in the present economy.
ReplyDeleteThe very rich, by contrast, particularly the top .1%, have done spectacularly well; their incomes were up something like 12% last year. Nor is it unreasonable to ask >$250K earners to pay a little more, even if these people are not "rich" by conspicuous consumption standards.
The idea here is, we definitely need to do something about long-term deficits, but the time to do it was when we were/are prosperous (which, of course, is the time when Republicans want to cut taxes), not when we're in a depression, which could easily get worse, and with no end in sight. The fact that there's no pleasant solution now shouldn't mean we make the worse of two choices, which would be raising taxes on people who can ill-afford it.
The New York Times search engine shows that on several occasionals, Krugman referred to Bush's tax cut as a "tax cut for the rich." It must be embarassing to him to acknowledge that undoing those cuts would mean substantial tax increases for the non-rich.
ReplyDeletePersonally, I think we should consider adding more tax brackets. But, go ahead and throw that idea on the "things that never get discussed" pile.
ReplyDeleteBob sailed right past the point on this one... Krugman's column is not about restoring Clinton-era tax levels in general. Rather, he explicitly says that, instead of framing debates about budget options exclusively in terms of whether or not to restore Clinton-era tax levels, as if these represented an outer bound on the possible, we should consider raising two specific taxes above their Clinton-era levels: (1) taxes on very high incomes, meaning over $2 million per year; and (2) taxes on financial transactions. As I read the column, he does not discuss taxes on income between $250,000 and $2,000,000 one way or the other. In fact, one of his explicit points is that, whatever you think of the pros and cons of other sources of revenue and/or spending cuts, there's a lot of revenue to be had from higher taxes on incomes over $2 million, so this should be on the table.
ReplyDelete@David in Cal
ReplyDelete"It must be embarassing to him to acknowledge that undoing those cuts would mean substantial tax increases for the non-rich."
Ah, no. Like all "across the board" tax cuts, there's *some* benefit for the middle-class, to give cover to the pols who design these giveaways -- it's just that, compared to what high income earners get, it's quite small on a per person basis. And this at a time when the top 1% had seen huge income gains during the preceding 20 years, and the lower 90% saw no real gains at all.
In a depression economy, you don't want to do *anything* that will keep ordinary people from spending. The very rich, by contrast, spend far less of their disposal income or devote it to speculative activity with no economic benefit. Bidding up the stock market, for example, isn't going to put anyone to work.
seen a news report about what it would be like to return to all the Clinton tax rates?
ReplyDeleteYes. The first time was on my favorite news show: The Daily Show which had the graph where half the 10 year deficit goes away by restoring all of the Clinton tax rates.
@Tom M
ReplyDeleteFor the record, letting the Bush tax cuts expire -- all of them, for everyone -- produces an estimated $3.8 trillion, over 10 years.
Amusingly, this is more than just about anyone but Obama (who wants to cut your "entitlements" in return for ending corporate jet subsidies), is proposing. And with no spending or "entitlement" cuts" -- to anything or anyone.
But of course you'd never guess as much, reading or listening to the American media.
How about a different kind of 9-9-9 plan: 9 percentage point higher rates (i.e., 44%) on income above $1 million, another 9 points higher (53%) for income above $5 million, and still another 9 points (62%) on income above $10 million? Wonder what the revenue haul on that would be. (And yes, in a time of recession middle class rates must not be increased.)
ReplyDeleteBy the way, it's always TAXABLE income we are talking about. That's the only income that rates are applied to. That's after all adjustments (giving you Adjusted Gross Income), exemptions, deductions and credits. With the bare minimum of tax planning -- 401 Ks, IRAs, mortgages, state and local taxes, contributions -- someone with $250 K in Taxable Income probably "makes" -- which always in the vernacular means Gross Income -- at least $400 K. That pretty much takes away the "I only make $250 K and I'm not rich in Manhattan" distraction. But liberals, of course, tie one hand behind their back by failing always -- and I do mean always -- to make that point that we aren't talking about people who "make" $250,000, but people who are quite a bit richer even than that.
Actually, I read it as meaning all of the rates. We're talking about not much money at the lower levels and lots of money at the higher levels. You know, a shared sacrifice if we really think there is a deficit and debt problem we have to "solve."
ReplyDeleteI'm okay with it, and so are a lot of other folks. No confusion. I doubt there are that many confused, after all.