Wednesday, September 22, 2010

House Dems Counter Blue Dogs' Letter Supporting Tax Cuts For Rich

Posted By on Wed, Sep 22, 2010 at 10:52 AM

Given Blue Dog Democrats' self-professed obsession with budget hawkishness, it may seem strange that they'd call for an extension of tax cuts for the wealthy that will cost an estimated $700 billion — at a time when we've (among other things) warred ourselves into a record budget deficit.

In response to the 31 Blue Dog signatures asking for the extension of the Bush tax cuts for the wealthy — among them those of Reps. Lincoln Davis and Jim Cooper — 36 House Democrats have signed a counter petition calling for their expiration and a vote.

Yet even more perplexing is the fact that Moody's Analytics finds that history shows the wealthy tend to save their tax cuts, while the rest of us spend them on stuff like, y'know, food and electricity. In these recessionary times, saving is the new bourgeois pastime. That kind of blows the whole stimulus aspect of tax cuts for the rich out of the water. When Clinton raised the top tax rate in 1993, Moody's economists found, the savings rate among the wealthy fell. The 2003 Bush tax cuts saw the rise of saving among the rich.

Of course, rich is rich, and one Moody's analyst cautions that spending in the top 5 percent has more to do with business cycles than with taxes — meaning the upper crust will spend or save regardless of the prevailing tax rates.

So any way you slice it, there's no point in extending tax cuts for the wealthy, at least according to the smart guys over at Moody's. For a more in-depth discussion, check out this Bloomberg story.

Republicans are banking on this tax-cut kerfuffle as a winning issue this fall. Even though most of us scrape by these days, we still want to know it's possible to hump The American Dream, or something like that. If they're right, they could ride our collective longing to the ballot box.

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