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.