I wrote a column for the Wall Street Journal last week about the policy debate over whether it’s better to lower tax rates or to provide targeted tax cuts for parents.
Since this meant I was wading into a fight between so-called reform conservatives (or “reformicons”) and traditional conservatives (or “supply-siders”), I wasn’t surprised to learn that not everyone agreed with my analysis.
James Pethokoukis of the American Enterprise Institute, for instance, doesn’t approve of what I wrote.
…why are some folks on the right against giving middle-class families a big tax cut and letting them keep more of what they earn?…Cato’s Dan Mitchell, in aWall Street Journalcommentary today, concedes Stein’s idea would indeed help middle-class families right now… Yet Mitchell still thinks cutting marginal tax rates is the better idea.
Pethokoukis accurately notes that I want lower marginal tax rates because, from my perspective, faster long-run growth would be even more beneficial to middle-class families.
He disagrees and offers five counter-arguments. Here they are (summarized fairly, I hope), along with my response.
1.) House Ways and Means Chairman Dave Camp has put forward tax reform with a top rate of 25% vs. 40% today. Yet his plan would likely increase the economy’s size by less than 1% over the next decade, according to the Joint Tax Committee. …This is not to say lower tax rates aren’t good for economic growth. But marginal rates at those levels are almost certainly already deep on the good side of the Laffer Curve.
I have a couple of reactions.
First, the top tax rate in the Camp plan is 35 percent rather than 25 percent, so we shouldn’t be surprised that the plan doesn’t generate much additional growth.
Second, the JCT’s model is flawed and it should not be given credibility by any supporter of good tax policy. The Tax Foundation has a much better model.
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