Here’s a letter to the New York Times:
Paul Krugman writes: “But a large part of the tax cuts, especially those for the wealthy, would not be spent, so the tax-cut extension increases the budget deficit a lot while doing little to reduce unemployment” (“Obama’s Hostage Deal ,” Dec. 10).
Prof. Krugman is unfair to your readers in his failing to at least acknowledge the main argument that many economists offer against raising tax rates. This argument is that higher tax rates on incomes and capital-gains – by reducing the return to work effort, savings, investment, and risk-taking – constrict economic activity and, thereby over time, diminish economic opportunities and reduce real wages.
The chief argument for lower tax rates is not that these lower rates prompt more immediate consumer spending but, instead, that they prompt more investment, risk-taking, enterprise, and production .
Donald J. Boudreaux
I thank my buddy Hans Eicholz for the title of this post.