Taughannock Falls

Taughannock Falls
from: althouse.blogspot.com

Monday, August 23, 2010

Billions for those who don't need it

From Paul Krugman's NYT blog:

What’s at stake here? According to the nonpartisan Tax Policy Center, making all of the Bush tax cuts permanent, as opposed to following the Obama proposal, would cost the federal government $680 billion in revenue over the next 10 years. For the sake of comparison, it took months of hard negotiations to get Congressional approval for a mere $26 billion in desperately needed aid to state and local governments.

And where would this $680 billion go? Nearly all of it would go to the richest 1 percent of Americans, people with incomes of more than $500,000 a year. But that’s the least of it: the policy center’s estimates say that the majority of the tax cuts would go to the richest one-tenth of 1 percent. Take a group of 1,000 randomly selected Americans, and pick the one with the highest income; he’s going to get the majority of that group’s tax break. And the average tax break for those lucky few — the poorest members of the group have annual incomes of more than $2 million, and the average member makes more than $7 million a year — would be $3 million over the course of the next decade.

We need to find a way to help ordinary folks in America understand what's going on. Many people simply accept that tax cuts for rich and poor alike are equally good for the general economy. The reason they believe this is that they generalize from their own experience. When your living expenses eat up most of your income, a cut in taxes is a significant change. Having a little more after-tax money to play with means the opportunity to eat out, buy a new microwave, save towards a vacation at Disney World. Even more affluent people, like doctors and lawyers, might be tempted to spend a little more if they can pay a bit less to Uncle Sam. But when you get to a certain level, the tax-break doesn't translate into dinners at Pizza Hut or new bicycles that would otherwise not be purchased.

The majority of this deficit-growing $680 billion would go to a group of Americans who have an average income of $7 million/year. Do you think these folks might already have a pretty nice house? A comfortable car? Do you think if we give them each an extra $3million they'll stop sitting home, pinching pennies, and run out to JCPenney's to jump-start our economy? No, there's a very good chance the extra money will be put someplace safe, to earn a guaranteed return. Or, if it is spent, does the choice to buy that diamond tennis bracelet really generate a lot of new jobs? How about another racehorse? What if the money finances a new villa in the south of France? Is that a good investment for the rest of us taxpayers? If we are to defeat Republicans in the fall, we need to do a better job of helping voters understand the true cost of their "No billionaire left behind" program.

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