Tax the Rich, part II

Is the New Supply Side Better Than the Old? by Austan Goolsbee is getting a lot of play in the econoblogosphere today. It’s an interesting article that points out some of the weaknesses in the supply-side argument for cutting income tax rates on the highest income people. One small point of correction, however: when referencing the fact that top incomes soared after the tax cuts of the 1980s and 2001, but also soared after tax hikes in other periods, Goolsbee says:

Seeing the same pattern when taxes rose as when they fell indicates that tax cuts weren’t responsible. It suggests that cuts for high-income taxpayers likely gave windfalls to those whose incomes were already rising sharply because of broader market forces.

One might note the impact of the policy climate in various periods, as well. Since the 1980s, it hasn’t just been tax policy that has favored high-income earners over their less fortunate fellows, but deregulation and lax enforcement on a broad range of policies including labor and the environment, as well as overt war-on-the-poor measures such as welfare reform.

Hat tip to Mark Thoma.