I’ll also note, parenthetically, that Krueger’s discussion of the Clinton-era tax rates is potentially problematic:

The reason why I pointed to the performance of the ’90s is to show that a return to taxes that will be lower than they were in the ’90s should not be expected to stymie the economy. The evidence suggests the ’90s were much better years than when we went through the experiment of the tax cuts in the 2000s. [Emphasis added]

Is this the trajectory of future tax policy? Krueger’s argument makes sense if we believe that it is the average level of taxes that impacts decision-making and labor supply. But if it is marginal tax rates that have an effect, and if capital income is more sensitive to taxation, the Unearned Income Medicare contribution, the increase in the Medicare tax, and an increase in capital income taxation consistent with the Buffet Rule would presumably give us a tax code very different from the Clinton-era tax code. 

In a recent essay in City Journal, Josh Barro writes the following:

It’s important to remember, though, that one reason that we care about lowering marginal tax rates is that higher rates squelch economic activity—and capital is more sensitive to that effect than labor is, in part because capital can so easily flee to lower-tax jurisdictions. Tax the income of a corporate lawyer, and he’ll probably keep working, at least up to a certain point. Tax the stocks of an investor, and he may consider investing in firms located abroad, thus avoiding the corporate tax altogether and depriving the U.S. of investment capital. 

It is possible that Krueger does not believe that higher capital income taxation will depress investment levels, and that the composition of tax increases are immaterial. That is, the relevant consideration isn’t whether aggregate tax levels are higher or lower, but rather the composition of tax increases — and the tax strategy embraced by the president may leave us with a tax mix that is less conducive to growth that what we saw during the Clinton era.