The Fiscal Times, Buffett May Be Right, but the Top Tax Rate is Wrong, by Bruce Bartlett:

On Monday, financier Warren Buffett ignited a tax debate by recommending a tax increase on the super-rich. The reaction by some Republicans and others has been that if Mr. Buffett wants to pay more, he should simply write a check to the Treasury Department and send it to Washington. While such a sound-bite response may go over well on Fox News, it is a completely unserious response to the point he made.

It’s axiomatic among Republicans that taxes on the rich are the single most important factor determining economic growth. If that were true, then the period from 1988 to 1990, when the top rate was just 28%, should have been the most prosperous in recent American history. During that time we had the lowest top rate since 1931. But although 1988 started out okay with a real GDP growth rate of 4.1%, it fell to 3.6% in 1989 and just 1.9% in 1990.

Conversely, the period from 1993 to 2000, when the top rate rose from 31% to 39.6%, should have been a period of dismal growth. But in fact, that period was the most prosperous in recent American history. Real GDP growth averaged 3.9% per year – more than 50% above the average postwar growth rate.

Then there should have been a burst of even faster growth when the top rate was reduced in the 2000s to 35% – a rate that is still in effect. But during that period, real GDP growth has averaged just 1.8% – 30% below the average postwar rate. 

So where is the data supporting the argument that taxes on the rich are the sine qua non of growth? I don’t see it. On the contrary, the data from the last several decades would in fact support the opposite conclusion – that higher tax rates on the wealthy stimulate growth. …

The obvious compromise is for those like Mr. Buffett who believe that the top rate should be increased, for both financial and distributional reasons, to make clear that they are talking only about people who really are rich. The top rate ought to stay at 35% for those in the $370,000 to $1 million income range. But those making $1 million can easily afford to pay 40%, which was the top rate in the 1990s, and those making $10 million annually could pay 50%, the top rate under the Reagan administration.