Wednesday, November 17, 2010

More Evidence Tax Cuts at the Top Don't Work

Democrats, at least some of them, and many in the progressive blogosphere, have been making a set of arguments on tax cuts, and why they should not be extended to the very wealthy. It is very simple, though it clearly makes little difference to Republicans set on rewarding their benefactors. The evidence against tax cuts may be on our side; the power to implement stupid policy is clearly on theirs, especially if President Obama, in his obsessive quest for bipartisanship, wilts in the face of the constant right-wing haranging.

Yet more evidence of the ineffectiveness of marginal tax-rate reduction comes from Moody's Analytics, an outfit that has long served hand in glove with Wall Street. As reported in Bloomberg, Moody's Analytics recognizes that Bush's tax cuts in 2001 and 2003 largely resulted in increased savings for the very wealthy. As Chris Cornell, an economist who researched the issue for Moody's, states, “I would tend to wonder how much the tax cut actually influences spending behavior...Spending by the top 5 percent of households seems much more closely tied to business-cycle issues than it does to tax-cut issues.”

Of course, Chris; wealthy households have far more than they know what to productively do with already. Giving them a tax break just compounds the effect.

Despite this, Republican leaders, John Boehner and Mitch McConnell in particular, continue to make the case that we must plunge ourselves further into debt roughly $700 billion so that rich people will have even more.  And they do this while howling that we must cut the deficit. That's chutzpah.

I suppose they deserve some sort of credit. No matter how inane their arguments may be, no matter the evidence that contradicts them, and no matter how blatant their class-warfare rhetoric may sometimes be, they remain consistent on some level. They know how, as Matt Taibbi puts it, "to set big groups of voters off angrily chasing their own tails in response to media-manufactured nonsense, with the Tea Party being a classic example of the phenomenon."

And they know Wall Street, having thrown shitloads on money at Repubicans, expects a return on its investment. And they know how to deliver, don't they?

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