Ending the Bush tax cuts for the rich will be good for the economy (updated)

[ProSense]

Redirect it to actual stimulus.

From 2005:

Do Tax Cuts for the Wealthy Stimulate Employment?

By ROBERT H. FRANK
Published: July 7, 2005

<...>

A second way the Bush tax cuts might have stimulated employment is by inducing the wealthy to spend more on consumption. But a large share of the tax windfalls received by the wealthy are not spent in the short run. And even among those who are induced to spend more, the main effect is not increased demand for domestically produced goods and services, but rather increased bidding for choice oceanfront property and longer waiting lists for the new Porsche Carrera GT. Such spending does little to stimulate domestic employment.

Had the dollars required to finance the president's tax cuts been used in other ways, they would have made a real difference. Larger tax cuts for middle- and low-income families, for example, would have stimulated immediate new spending because the savings rates for most of these families are low. And their additional spending would have been largely for products made by domestic businesses - which would have led, in turn, to increased employment.

Grants to cash-starved state and local governments would have prevented layoffs of thousands of teachers and police officers. And many useful jobs could have been created directly. For instance, people could have been hired to scrutinize the cargo containers that currently enter the nation's ports uninspected.

Economists from both sides of the political aisle argued from the beginning that tax cuts for the wealthy made no sense as a policy for stimulating new jobs. And experience has proved them right. Total private employment was actually lower in January 2005 than in January 2001, the first time since the Great Depression that employment has fallen during a president's term of office.

The Center on Budget and Policy Priorities agrees, and goes even further to debunk the latest Republican claim that small businesses will be hurt.

High-Income Tax Cuts Should Expire on Schedule

Extending Tax Cuts for One or Two Years or Exempting “Small Business” Income Would Be Ill-Advised


<...>

Some argue that now is not the time to allow the 2001 and 2003 tax cuts for high-income households to expire because the economy is weak. But analysis in recent Congressional Budget Office (CBO) report decisively refutes this argument.<2> CBO examined 11 options to stimulate growth and job creation and found that extending the 2001 and 2003 tax cuts in general came in last in effectiveness, well behind measures such as boosting unemployment insurance, providing a tax credit for new hires, extending state fiscal relief, and increasing infrastructure spending.<3>

Furthermore, CBO indicated that extending the tax cuts for high-income households in particular would rate even lower in effectiveness than extending all of the tax cuts. This is because, as CBO explained, “higher-income households … would probably save a larger fraction of their increase in after-tax income.”<4> An economy in a recession or the early stages of a recovery needs more spending, not more saving. That is why putting money into the hands of people who will promptly spend most or all of it, like unemployed workers, is much more effective at spurring economic and job growth than putting money into the hands of high-income people who are likely to save a significant portion of any additional income they receive.

<...>

Most small businesses are just that — small. Their incomes are not high enough to face the top marginal rates. According to the Joint Committee on Taxation, allowing the two top tax rates to return to their pre-2001 levels would have no impact whatsoever on 97 percent of taxpayers with business income. Only the top 3 percent of such taxpayers are in the top two brackets.

Those who claim that raising the top rates would seriously harm small businesses also tend to rely on an extremely broad definition of “small business.” Because the IRS does not publish specific, satisfactory data on the taxes that small businesses pay, analysts are left to examine various sources of business income that individuals receive. Some analysts define any taxpayer who shows any business income on a tax return — including passive income that very wealthy investors secure — as a small business. Defining small businesses in this manner greatly overstates the actual number of small businesses, particularly among households with very high incomes.<9>

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Edited to add: Anyone notice that Republicans just voted against small business lending, but are using small businesses as an argument for extending Bush's tax cuts?

[The Magistrate]

1. Spot On, Ma'am

At this point, with businesses hoarding cash, the thought there would be a stimulating effect to giving them more money is more nonesensical than usual....

[ProSense]

2. Grover Norquist is trying to push the

Republicans' argument

[The Magistrate]

3. And Does So Very Clumsily, Ma'am

The fact remains that only about two percent of the households in the country report incomes in excess of a quarter million dollars a year. If, as Norquist claims, two thirds of 'small business' income falls within this slice, then the definition of small business used is faulty. It must include a number of businesses grossing at least three or four millions in a year, which while small compared to, say, Home Depot, will certainly dwarf the take of the average franchisee or neighborhood baker, and a number of contracting consultants and other specialist free-lancers at the top of their fields. The whole point of the style of argument he presses is to make people with low incomes imagine themselves to have things in common with their betters, so that they will think, and vote, in ways that benefit those above them in the economic system, even though they themselves will be harmed by doing so.

[ProSense]

4. There is also the story about

Target funding Republicans who want to eliminate the minimum wage for waiters. Republicans don't just want to help the rich, they want to crush the middle class.

[Hansel]

14. Please BOYCOTT Target!

Local news is doing stories about the Target boycotts here in MN. There were 2000 officially signed up to boycott as of last week, but I know many others who are doing so without pledging. Local left radio is encouraging boycotts constantly and even Republicans are calling in supporting it.

My daughter's accounting instructor who works at Target and is a Republican is furious over the decision because it really isn't in the best interest of their customers, it's not going to buy the company anything, and because they tried to hide it behind a front organization. She called it a truly stupid decision. My daughter said her classmates were angry as well. I know Target will lose a few hundred dollars a month from our family, but we will save a ton of money by not shopping there anymore.

It is angering people here because Target is a Minnesota icon. Mark Dayton, who is also running for governor, belongs to the family that founded Target to add insult to injury. Minnesota has one of the highest voters participation and voters don't like corporations messing in their elections.

Target is going to regret this decision. MN is a blue state despite the media trying to make it seem purple. We only end up with Republican governors because there is a plurality in elections and we usually have more liberal independents who split the vote with Democrats. Pawlenty has never won 50% of the vote. They think they can get away with it by reaffirming their support of the gay and lesbian community, but I don't think anyone is being fooled by that.

Emmer is being destroyed by the commercials on him already from independent groups, Dayton, Entenza and the DFL nominee. He has been arrested twice for DUI's and then tried to get the penalties for DUI's reduced. There is a mother of a boy who was killed by a drunk driver doing a powerful commercial against him. The local ads are saturated against him calling him another Pawlenty (who is unpopular in this state) and destroying him on his servers wage reduction proposal fiasco and his plans to cut education and health care. He truly looks as bad as he is.

This was truly an arrogant move on the part of Target to support this right wing extremist. I hope they pay big time for it.

[NorthCarolina]

5. Ending Social Security as we know it will probably be the compromise

for letting the Bush tax cuts expire. Just saw Ed Rendell on MTP talking as if eliminating entitlements was a done deal.

[ProSense]

7. "Just saw Ed Rendell on MTP talking "

Ed is never a good barometer for measuring reality.

[butterfly77]

8. And Bloomberg is speaking for ..

wall street and the rich NO FINGER POINTING ...please.

In other words don't blame wall street and chamber of commerce.

[Patiod]

10. +1

take it from a Philadelphian

[lunatica]

6. Giving tax breaks to the richest households doesn't create jobs

unless you're talking about the number of new maids, chauffeurs, yatch crews and personal servants that are hired to maintain their every growing properties. Give those exact same breaks to businesses of all sizes and you've got yourself a growing economy based on jobs. If you want jobs then put the money directly into the places that create the jobs. Not into the hands of people who convert it into jewelry and more acquisitions.

[and-justice-for-all]

13. Right! How many jobs has the Kardashians created? nt

[Cosmocat]

9. It is a counterintuitive meme ....

if anything, IF it is small business ownwers it will spur them to put money into their business to write off the expense ...

It really does prey on superficial thought processes, as noted trying make everyone feel they could end up paying ...

[BlueIdaho]

11. Absurd republican talking point.

Just find the tape of W talking about the surplus created by the Clinton Administration. He said the surplus proved the government was taking in too much money and it was his intention to give that money back. So all that hard work, balancing the budget and attempting to reduce the national debt iwas sabotaged by W, the republican party, and their "base." unfortunately he didn't tell folks he planned on giving all that money to his fat cat cronies - his "base."

The bill was only given a sunset clause because of the Byrd rule in reconciliation. On the day this bill passed the republicans knew full well the disastrous effect it would have on our economy. The GAO and told them so. The sunset clause shows their cynical calculations, their absolute greed, and their distain for ordinary Americans.

This stunt wasn't eve trickle down economics, it was greed pure and simple.

[LatteLibertine]

12. Yep if they let them expire

on just the top 2% it will yield 680 >billion< dollars over ten years.