Math and Facts are Harder


I’m sure Paul Krugman thinks he made a morally justifiable argument in his recent NYT article supporting ¡Ocasio! She Guevara’s proposed higher tax rates, but he’s dead wrong on both the facts and his math. He wrote,

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? … And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

It’s a fact that World War II ended in 1945. You can look it up.

It’s also a fact that the top U. S. personal income tax rates were cut from 70 percent to 50 percent in 1964. Paul Krugman could have looked that up in the NYT’s archives.

1964 – 1945 = 19 and 19 < 35.

Also, the peak period of post WWII economic growth in America was after that tax cut, a fact that Krugman would have also found if he researched his paper's own archives.

Space prohibits a full discussion of the impact of the tax cut, but current data show that inflation-adjusted G.D.P. increased 5.8 percent in 1964 after a 4.4 percent rise in 1963. Growth improved to 6.5 percent in 1965 and 6.6 percent in 1966. These were the three best back-to-back years for economic growth in the postwar era, and economists generally credit the Kennedy-Johnson tax cut for much of it.

Sometimes Truth just refuses to fit The Narrative.

UPDATE—To be fair to Paul Krugman, the Kennedy/Johnson tax cut became law just before his 11th birthday, so he probably has no real memory of the economic conditions he was writing about.

4 thoughts on “Math and Facts are Harder

  1. And if I recall correctly, weren’t taxpayers allowed to deduct the depreciation on certain assets during this period as well?

    That had the effect of reducing taxable income levels and moving many, if not most, of the highest income earners out of the maximum marginal brackets.

    I’m sure Krugman either doesn’t know this, or REALLY doesn’t want to talk about it. Probably both.

  2. There was a whole financial industry sector built around “tax shelters” that lost money on paper. Fake loses became less profitable when the max return was cut to 50% with the 1964 tax cuts. They were essentially wiped out when the Reagan tax cut took the top rate to 28%.

    My father had a real estate investment that was depreciated each year for tax purposes. Of course, the eventual capital gain tax was figured on the sale price minus the lower depreciated value, but the capital gains tax rate was lower than the personal income tax rate, so the family came out ahead.

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