Greg Mankiw:Larry points out:At least Obama will be nice enough to create millions of new jobs for us to make up for the new jobs that would have been made by those entrepreneurs he plans on taxing.A high-income entrepreneur would see his or her federal marginal tax rate rise to 53% from 37.7% under Sen. Obama's tax plan.I believe this would be the highest tax rate on earned income since 1971.
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Obviously, there is a debate to be had on the optimal level of taxation.
Such an optimal level, I think we can all agree, exists somewhere between 0% and 100%.
Now consider that what we have now is not working so well...we have record deficits, and a weak dollar, and this amounts to a de facto tax increase on the American people.
Many independent analyses, including those published in the Wall Street Journal, agree that McCain's economic plan, which is pretty much the same as Bush's, except adding even more tax cuts on some, will balloon the deficit far higher than Obama's. The one I read in the WSJ had McCain's deficits being 3 times higher than Obama's.
The bottom line is that you cannot have it all, which is pretty much what the Bush/McCain proposals try to sell the American people. This is second nature to economists...the nature of trade offs.
Yet they'd have you believe that you can have all the tax cuts you want, all the government programs you want, and somehow magically you get a balanced budget.
Even under Reagan, his tax cuts produced record deficits. I believe the tax cuts were worth it, but the arguments that somehow we'd get balanced budgets were way off.
Some balance has to be restored. The Obama proposals may not be perfect, but it's simply economic malpractice to think that one can just be against all tax increases, and somehow arrive at a balanced budget.
McCain's answer is to cut "earmarks" and govt waste, but that will not do nearly enough, and economists have taken him to task for suggesting so.
For the past 7 years we've had a stagnant middle class, and the vast majority of the tax cuts and wage gains have indeed gone to the wealthy. We had an economy propped up and made to look far better based on a housing bubble.
We can do better. It's time for a change.
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