Since high-income people have, by definition, a lot of income there’s always a lot of market demand for arguments about why high-income people should pay less in taxes. And exactly as basic economic theory would predict, this has produces a kind of blossoming of innovative thinking about why this is a good idea. It turns out that human beings are capable of coming up with any number of different policy problems to which tax cuts are the solution. But recently, I have noticed diminishing returns in this field. Which is what makes these remarks from John Taylor so remarkable. He’s gone beyond first-order innovations in the field of tax cut rationalization to offer an important meta-innovation:
Ed Prescott had the most dramatic policy proposal which he argued would cause a major boom and restore strong growth. He would simultaneously reform the tax code and entitlement programs by slashing marginal tax rates which would increase employment and productivity.
See what he did here? Ed Prescott came up with the absolute most banal idea imaginable for a conservative economist and Taylor just asserted that it was dramatic and exciting! What’s that? Tax cuts? How “dramatic.” If only the Bush administration had thought of that we wouldn’t even be in this situation. For substantive commentary on Taylor see Noah Smith. For smart ideas on taxes see Robert Frank.