Club for Growth

Steve and Phil respond to Brad DeLong

This is from Stephen Moore, president of the Club for Growth, and Phil Kerpen, a research assistant at the Club for Growth. bq. Brad DeLong missed the point of our recent NRO piece. Yes, the CBO study assumes that incomes grow at a constant rate from the 2001 base year they used--we criticize it for this specifically in our piece. But the choice of a base year in which upper bracket incomes were still anamolously high, combined with static analysis, makes the results of the study both misleading and meaningless. Bush cut the top marginal income tax rate, so, if income growth were constant, the share of taxes paid by the rich would be expected to fall. This is a trivial result, which was why we disagreed with the misleading media coverage of the CBO report in the first place. A study that "does not account for incomes changing in response to the tax cuts" is not worth the paper its written on, which is why we focus more on the Treasury Department analysis and the effects of the recession on upper bracket income. bq. The way our piece was edited, it does look like we were talking about the CBO study reflecting the fall in incomes, which is not true. We apologize if it was misleading, but it's not relevant to the substantive point we were making. The real reason for the decline in projected tax share paid by the rich, as the Treasury Department study and the New York Times article we referenced indicate, is that the recession caused a collapse in upper bracket incomes. Because incentives do matter, incomes have not grown at a constant rate since 2001 at all. Upper bracket incomes remained in free fall in 2002 as a hangover from the stock market collapse and recession. When the economy rebounded sharply following Bush's tax cuts, upper bracket income began to recover, which is why the the share paid by the rich is expected to rise again, and, according to the Treasury Department, is expected to be significantly higher in 2004 than it would have been absent the tax cuts. Rich Pay More Under Bush Tax Cut 2004 Income Tax Shares

Posted at Andrew Roth at 2:24 PM | Comments (0)