President Obama’s move to raise taxes on the top 1 percent of households would actually bolster the economy, former chair of the Council of Economic Advisers Austen Goolsbee said Tuesday.
Earlier in the day, Obama delivered a speech in support of the “Buffett Rule,” which called for increased tax fairness and a higher rate on people making more than $1 million per year.
“The share of our national income going to the top 1 percent has climbed to levels we haven’t seen since the 1920s,” he said. “The folks who are benefiting from this are paying taxes at one of the lowest rates in 50 years. Do we want to keep giving those tax breaks to folks like me, who don't need them, or give them to Warren Buffett, he definitely doesn't need them, or Bill Gates. He says, ‘I don’t need them.’ Or do we want to keep investing that keep our economy growing and keep us secure? That’s the choice.”
Goolsbee, an economics professor at the University of Chicago’s Booth School of Business who was Obama’s youngest Cabinet member, said there were elements of the president’s plan with which he disagreed.
“However, I do think it contributes some to reducing the deficit,” he said on “The Kudlow Report.” “And, look, the tax cost of cap investing is the lowest in years. The tax rates paid by people is the lowest in 65 years. The top capital gains rate is the lowest it’s been in decades. Where is the evidence that that has been working? We’ve had that in place for almost 10 years, gone through the worst episode we’ve had in our lifetimes. I don't see how going back to the ‘90s type of taxing would be so terrible.”
The White House estimated the 400 highest income households in the country, who all earned over $110 million, paid an average of 18.1 percent of their income in federal taxes in 2007, well below the 29.9 percent those households paid in 1995.
Goolsbee said he agreed with host Larry Kudlow in that corporate tax rates should be reduced, especially if they are investing with debt, which was tax-free.
“But the way we should reduce the corporate rate is by getting rid of the loopholes and broadening the base,” he said.
Challenged on whether revenue from such a move would make a noticeable dent in the defecit, Goolsbee defended the incremental steps.
“Look, the deficit is a big problem,” he said. “What single thing, besides abolishing Social Security would you advocate that would actually address the whole deficit? It’s made up of a series of steps.”
"The Kudlow Report" airs weeknights at 7 p.m. ET.
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