Good article Mr. Cohn, and a topic that needs to be explored fully in the years to come.  I maintain that the internal revenue code is the worst place to do anything other than collect revenue with the minimum pain.  For example, say government wants to increase research in the private sector, so government creates a technology credit.  The result is three groups: (1) people who push the envelope and define something as technology that isn't technology; (2) people who would have done the technology anyway and get the credit; and (3) a small slice of people who actually change their behavior because of the credit.  The same wasted money could be sent to the colleges and universities for grants to students who will work on technology and we will benefit the individual student, increase technology available to the private sector, and the economy.  Similarly, when you lower taxes to stimulate the economy you lower them for people who live in areas of the country that are doing fine, as opposed to specific infrastructure or other types of spending in areas that will benefit economically directly from such spending,

These arguments about taxes and the economy would be a lot more persuasive if (1) the changes proposed were actually large, and (2) the people who make the argument had actually demonstrated some predictive power in the past. Last I checked, the supply-siders and others who maintain that marginal tax rates determine the economic universe have shown themselves to be almost completely wrong in every prediction. Perhaps the most obvious case was Clinton;s 1993 tax increase, which they said would ruin the economy (it didn't, in case you are too young to remember, instead the economy boomed as soon as Clinton signed a combination of tax increases and spending restraint that started to reduce the Federal deficit for the first time in over a decade.

The idea that people will simply stop making investments if we dare to tax investment income at a slightly higher rate than today is farcical. Not only are today's rates the lowest in decades, but what else are people going to do -- bury their money in coffee cans to avoid making income that will be taxed? Invest it all in countries with looser rules and no taxes, and also much higher risks? If our economy is just a few percentage points from catastrophe, then we are already screwed. If not, small changes in the tax code will have little impact on economic growth.

Or, to take a passage from Jon Chait's book:

"From 1947 to 1973, the U.S. economy grew at a rate of nearly 4 percent a year -- a massive boom, fueling rapid growth in living standards across the board. During most of that period, from 1947 to 1964, the highest tax rate was 91 percent. For the rest of the time, it was still a hefty 70 percent. Yet the economy flourished anyway."

Great points by Cohn and the other people that have commented.  The claim that top marginal tax rates at the level Obama is proposing cause slow economic growth is demonstrably false,

One interesting thing about the tax argument is that it's almost never focused on how high taxes should be in an absolute sense, but is always cast in relative terms.  Ask a conservative how high taxes should be and the answer will generally be "lower."  It's tax *cuts* rather than any particular level of taxation that Republicans support.  Where was the Republican outrage when the top tax rate was 50% under Reagan, 70% under Nixon, and 91% under Eisenhower?

Palin was out on the stump claiming we could have tax cuts and spending cuts to balance the budget.  What I am curious about is the ramifications of cutting taxes and cutting government spending so that the budget is in balance.  Since government spending also stimulates the economy, would the economy be stimulated by a cut in both taxes and spending to achieve a balanced budget?  I expect that the reduction in funds going back to the states would cancel out the tax rate reductions (although it is possible for some to be better off more and others are worse off.)  Also, I expect that the fact is that you can't possibly cut spending enough to balance the budget with an irresponsibly low tax rate and that was the wizardry of Reagonomics -- to have people believe you could cut taxes, stimulate the economy and balance the budget.  Something that never happened.  I believe taxes should be as low as possible to fund government and that certain expenditures, (supporting our educational system, for example) are more valuable to the economy than tax cuts at a lower implicit cost.  I agree with AlanSP (and everybody else,) except that in 1986, the code was changed substantially, reducing various deductions, so the rates do not mean the same as they did before 1986.  But, Clinton's rates worked out fine.