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Here is an article to keep handy for next time you're confronted with the argument that higher taxes on the wealthy will hurt the recovery by discouraging spending by the wealthy. And it comes from, of all places, CNBC. The title of the article is remarkabkly clear,  Wealthy Say Higher Taxes Haven’t Hurt Spending, Investing So apparently the economics that I was taught actually works.

If the point of economic policy is to improve the economy, we can now see that targeted tax hikes work very well. People who have plenty of money to spend keep spending because the extra taxes they pay do not cut into the maney they have available to spend. As the article states,

According to a new poll, a majority of people making $500,000 or more (those paying the higher income tax rate) said that the tax hikes have not impacted their spending, charitable giving or investment strategies.
This should encourage Democrats to stick to their guns regarding revenue increases in the budget negotiations. If you want to help the economy and shrink the deficit, there is no better way than smartly targeted tax hikes on the wealthiest, not as a penalty, but because it is the best way to help the economy. And in the end everyone profits.
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Comment Preferences

  •  Man, if this doesn't make Boehner cry, (4+ / 0-)
    Recommended by:
    niaman, mconvente, basquebob, elwior

    nuthin' will.

    Good news for the economy + bad news for conservatives = a lovely win/win.

    Can you call yourself a real liberal if you aren't reading driftglass?

    by CJB on Wed Mar 27, 2013 at 12:49:33 PM PDT

  •  Higher taxes encourage charitable giving (3+ / 0-)
    Recommended by:
    niaman, basquebob, elwior

    Because for higher income people the higher tax rate leverages the value of the deduction

    "We didn't set out to save the world; we set out to wonder how other people are doing and to reflect on how our actions affect other people's hearts." - Pema Chodron

    by teacherken on Wed Mar 27, 2013 at 01:15:04 PM PDT

    •  Excellent point (2+ / 0-)
      Recommended by:
      basquebob, elwior

      The underlying theme is that tax hikes, as long as they are not punitive or arbitrary, can be used to aid an economic recovery, especially if they free up funds to be used to stimulate the economy and assist worthwhile endeavors.

    •  Higher taxes also discourage high risk (4+ / 0-)
      Recommended by:
      basquebob, niaman, Aquarius40, elwior

      financial products because the reward for success is relatively lower after tax.  It also makes having employees in the US or paying them more relatively less expensive because of the tax deduction for wages and benefits.

      “The future depends entirely on what each of us does every day.” Gloria Steinem

      by ahumbleopinion on Wed Mar 27, 2013 at 01:31:41 PM PDT

      [ Parent ]

      •  small business is very risky. (0+ / 0-)

        properly understood, your point is veering on right wing talking points.

        •  I'm not talking about small business and it has (0+ / 0-)

          nothing to do with left or right wing, just the mechanics of financial analysis.

          I'm talking about the analysis that corporations and banks make when assessing projects.  The lower taxes are, the bigger the potential reward - meaning that more risky projects have the potential to payout.  If the after tax return is lower, then they will not undertake the most risky projects, because the potential payout is lower.

          Since wages and benefits are tax deductible, the government essentially subsidizes hiring.  The higher taxes are, the bigger the subsidy.  The lower taxes are, the more costly, on a net basis, employees are.

          Financial analysis is done on an after tax basis, and taxes impact the decisions in ways that are not always obvious.

          “The future depends entirely on what each of us does every day.” Gloria Steinem

          by ahumbleopinion on Wed Mar 27, 2013 at 03:45:53 PM PDT

          [ Parent ]

  •  FOR YEARS (1+ / 0-)
    Recommended by:

    The very idea of high end tax hikes, or even allowing the temporary Bush tax cuts to expire, has been resisted fiercely because everyone knows that higher taxe swould mean the inevitable contraction of the economy & growth.

    So the experiment being run right now (post PP-ACA taxes, 2013 tax increases) is "What if we raised taxes anyway, can we just see what happens?"

    The beauty of just running the experiment instead of arguing about whether to try it or not, is that you get real observations out of it.

    A few more sightings like this article and you could begin to make the case that the "economy can't grow if taxes go up" balloon is in mid-burst.

  •  the claim has been that higher taxes (0+ / 0-)

    encourages spending relative to investing by dropping the comparative cost of the former.  so the claim that the wealthy are spending more is consistent with the righty saw about the effects of higher taxes.  if there's more investing, then thats what you focus on.

    / this is basic

  •  Niaman: R U able 2 document the Poll? (1+ / 0-)
    Recommended by:
    •  According to the article it is the (0+ / 0-)

      I googled it and I think you have to subscribe to get the complete poll information.

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