THE STASH AUGUST 10, 2009
This is not the first time I’ve had my doubts about Clive Crook as an economics columnist. I had a debate with Crook in 1997 about the benefits of economic globalization. I had misgivings; Crook did not. “Growing economic interdependence,” he wrote, “is on balance an enormously good thing.” Four months later, the Asian financial crisis hit. And look at the world economy today, plagued by currency imbalances and excess capacity in key industries.
Now Crook, who is a featured columnist for The Financial Times, is back at it again. He is advising American President Barack Obama to raise taxes. His column is headlined, “Why Obama will have to raise taxes. ” Is this a good time to raise taxes or even to threaten to raise taxes? Do I have to repeat the mantra about what happened in the United States in 1937 when Franklin Roosevelt got convinced by the Clive Crooks of that era to worry about the federal deficit or what happened in Japan in 1997 when the Crooks of Tokyo convinced the government to hike the consumption tax. Hint: the recoveries in both countries stalled.
And which taxes does Crook think should be raised? It is possible, I’ve argued (as have others who know more than I do) to raise taxes on the very wealthy during a recession as long as the revenue is spent and not saved without endangering the economy. But Crook doesn’t want to do that. According to Crook, the American economy “is heavily skewed toward taxing the rich.” “Before long, especially if you add state incomes taxes” Crook warns, “the U.S. will be a conspicuous outlier among industrial countries in how progressive its taxes are.” Say what? Maybe in 1960 that was true, but no more. As economists Thomas Piketty and Emmanuel Saez conclude their study, “The progressivity of the U.S. federal tax system at the top of the income distribution has declined dramatically since the 1960s.” Of the major industrial countries, the U.S. has one of the least progressive income tax rates. Combining federal and states rates for the U.S., which gives you about a 39 percent top rates, I counted 26 countries with higher tax rates on top incomes.
Here’s a chart put out by the Australian government of the comparison of top rates:
You can see where the U.S. is on this chart. The U.S. is not an “outlier,” but in the middle, if not lower middle, of the pack. Really, where do these nutty ideas about taxes and taxing the rich come from?