But I also think the flat tax will boost the economy’s performance, largely because lower tax rates are the key to good tax policy.
There are four basic reasons that I cite when explaining why lower rates improve growth.
As you can see, there’s nothing surprising or unusual on my list. Just basic microeconomic analysis.
Yet some people argue that lower tax rates don’t make a difference. And if lower tax rates don’t help an economy, then presumably there is no downside if Obama’s class-warfare tax policy is implemented.
Many of these people are citing David Leonhardt’s column in Saturday’s New York Times. The basic argument is that Bush cut tax rates, but the economy stunk, while Clinton increased tax rates and the economy did well.
The defining economic policy of the last decade, of course, was the Bush tax cuts. President
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