In watching various news talk shows over the past few weeks, I have seen Democratic partisans make the following argument:
President Obama just wants to return top tax rates to where they where in the 1990s under President Clinton. And that was a great time for the U.S. economy. So one shouldn't be concerned about the impact of higher tax rates.
There are two things wrong with this.
First, the premise is incorrect. President Obama wants to raise
income tax rates to where they were during the Clinton years. But because he has already raised the payroll tax as part of his healthcare reform (and also expanded the base of this tax to unearned income), the total tax rate under President Obama's proposal would exceed that during the Clinton years. All economists agree that it is the total tax rate that matters.
Second, it is worth remembering that the Clinton boom was in large measure driven by the dot-com bubble, which was coming to an unhappy conclusion during President Clinton's last year in office. (By the way, as I recall, President Bush did not spend as much time blaming his predecessor for bequeathing him a sick economy as President Obama has.) It seems unlikely that President Obama's tax increase will happen to coincide with another technological bubble that will drive the economy forward.
Reasonable people can disagree about the virtues of raising the top tax rate. But it is important to separate valid arguments from political spin based on a faulty recollection of history.
