Tax Cuts for High Earners Leads to Savings
Hand the wealthiest Americans a tax cut and history suggests they will save the money rather than spend it.
Tax cuts in 2001 and 2003 under President George W. Bushwere followed by increases in the saving rate among the rich, according to data from Moody’s Analytics Inc. When taxes were raised under Bill Clinton, the saving rate fell.
The Moody’s research covering couples earning more than $210,000 found that spending by the wealthy is more likely to be influenced by the ups and downs of the stock market than changes in income-tax rates.
The above is both interesting and strikes me as not especially surprising. If one is making a large amount of money, one is already likely to be able to buy more or less what one wants in terms of basic consumer goods. As such, the likelihood that a tax cut would lead such a person to spend more seems smaller than, say, putting more money in the hands of someone who makes less money.
As such, the stimulative effect of extending the Bush tax cuts for upper level earners is questionable. This is not to say that there aren’t various arguments for various approaches to said tax cuts, but it does blunt the GOP’s current arguments on the subject.
Of course, this is a moot point in many ways as at the moment it would seem highly unlikely that the Bush tax cuts for upper-level earners will be extended.