More Tax Cuts for the Rich? No Way! -- 6 Key Points About the Tax Debate Raging in Washington
Continued from previous page
What’s really at stake are the very large cuts for those at the very top. According to CPBB, households with incomes of over $1 million would receive an average tax break of nearly $104,000 if the high-income measures are extended, versus $6,349 if they’re not. So, the issue is pretty simple: do we want to take on $1 trillion more in national debt over the next decade, on which we’d have to pay interest, to lop $98,000 from American millionaires’ tax bills?
There’s no “class war” between the rich and the middle class; the battle is between those who are wealthy today and all American workers who will be saddled with a bunch of additional debt in the future.
2. Budget Busters
According to the Congressional Budget Office, the sum total of the Bush tax cuts, if extended, would represent the single largest contributor to the deficit over the next decade. Conservative deficit hawks -- or deficit chickenhawks as the case may be -- respond to that reality by whistling as they pass the graveyard. Senator David Vitter, R-Louisiana, recently opined, “I don’t think we have to quote unquote ‘pay’ for that because it’s about Americans keeping their own money and our simply keeping the present tax rates in place.” He didn’t offer any proposed spending cuts, and didn’t mention the $2.7 trillion that extending all of the cuts would add to federal deficits over the next 10 years (or the cool trillion it would cost to extend only those cuts targeted at the top 2 percent of U.S. earners).
3. The Wealthy Don’t Invest the Money They Save in 'Job Creation'
One thing almost every conservative believes to be true, and all respectable economists agree is nonsense, is the idea that the wealthy take those tax breaks and funnel them back into the economy, spending lavishly and stimulating businesses to invest and create tons of new, high-paying jobs.
The reason that narrative is false is simple: they spend the same amount of money on their lifestyles either way, and simply take those cuts and add their value to their already healthy estates.
According to a study of high earners’ spending and saving patterns conducted by Moody's, “Tax cuts in 2001 and 2003 under President George W. Bush were followed by increases in the saving rate among the rich.”
The Moody’s research covering couples earning more than $210,000 found that spending by the wealthy is more likely to be influenced by the ups and downs of the stock market than changes in income-tax rates.
Stock-market performance is the “primary factor that is driving the savings of the top 5 percent of households,” said Mustafa Akcay, economist and co-researcher of the savings data.
Increasing Americans’ saving rate is a worthy goal; borrowing a trillion dollars to do so for the wealthiest would be nothing short of a brain-dead policy.
4. Actually, Extending the Millionaire Cuts Will StymieLong-Term Growth
Adding significant amounts of national debt threatens to send interest rates upward, which constrains new business investment and job creation. According to an estimate of that relationship conducted by former Bush Council of Economic Advisers chair Glenn Hubbard, Federal Reserve economist Eric Engen, outgoing OMB director Peter Orszag and William Gale, “the overall effect of the Bush tax cuts on economic growth has therefore been negative -- and it will continue to be negative if the cuts are extended.”
And as the economy sputters back to life and the demand for new loans increases, the upward pressure on interest rates is likely to grow even more.