Is it a free market position to set tax rates to maximize revenue?
No, of course not.
I think the question of whether 70 percent top marginal rates is a free market position is a tougher question. How "top" is "top"? Why are you doing this?
A free market economist is concerned about costs that are involuntarily imposed on others. That sort of concern doesn't lead to easy, clear-cut solutions on questions of public intervention but it does provide a template for thinking about when intervention is legitimate. Given an intervention that is legitimate, you need to finance it. I could see very high top marginal tax rates being appropriate in some cases to do that. But you set taxes to achieve that goal, not to maximize revenue.
Does Paul Krugman think we should set taxes to maximize revenue? I don't know. If he does I was not aware of that before, and that would be disconcerting to me.
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