"We are all Reaganites now"

Former student John Tamny critiques Senator Obama's tax plan:

Reagan's ideas about incentives and taxation seem to have positively infected both political parties to varying degrees, and this means there's reason for moderate optimism no matter who wins in November.

Still, Obama's tax plan is unfortunate because it flies in the face of his own objectives. Indeed, as Furman and Goolsbee noted, "Sen. Obama believes that one of the principle problems facing the economy today is the lack of discretionary income for middle-class wage earners."

But if that's the case, Obama won't help the middle class by penalizing the wealthy. This is so because wages can only rise when the amount of available investment capital increases. Simply put, without capital there are no wages.

So while Furman and Goolsbee argue that "Obama's middle-class tax cuts are larger than his partial rollbacks for families earning over $250,000," they misunderstand the origin of middle-class comfort. In short, a 10% rate cut on income of $250,000 and up frees up far more capital than a tax cut on income of $50,000.