Tax Cuts for Rich Unlikely to Spur Growth

[Toro]

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. Bush were 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 findings may weaken arguments by Republicans and some Democrats in Congress who say allowing the Bush-era tax cuts for the wealthiest Americans to lapse will prompt them to reduce their spending, harming the economy. President Barack Obama wants to extend the cuts for individuals earning less than $200,000 and couples earning less than $250,000 while ending them for those who earn more.

“I would tend to wonder how much the tax cut actually influences spending behavior,” said Chris Cornell, an economist who mined government reports back to 1989 for West Chester, Pennsylvania-based Moody’s Analytics. “Spending by the top 5 percent of households seems much more closely tied to business- cycle issues than it does to tax-cut issues.”

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.

Stock-market performance is the “primary factor that is driving the savings of the top 5 percent of households,” said Mustafa Akcay, economist and co-researcher of the savings data.

Rich Americans Save Tax Cuts Instead of Spending, Moody's Says - Bloomberg

 

[elvis]

what if it's unexpected?

 

[Oddball]

So what?...It's their money.

Besides the feds can just print up some more money, anyways.

 

[jillian]

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. Bush were 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 findings may weaken arguments by Republicans and some Democrats in Congress who say allowing the Bush-era tax cuts for the wealthiest Americans to lapse will prompt them to reduce their spending, harming the economy. President Barack Obama wants to extend the cuts for individuals earning less than $200,000 and couples earning less than $250,000 while ending them for those who earn more.

“I would tend to wonder how much the tax cut actually influences spending behavior,” said Chris Cornell, an economist who mined government reports back to 1989 for West Chester, Pennsylvania-based Moody’s Analytics. “Spending by the top 5 percent of households seems much more closely tied to business- cycle issues than it does to tax-cut issues.”

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.

Stock-market performance is the “primary factor that is driving the savings of the top 5 percent of households,” said Mustafa Akcay, economist and co-researcher of the savings data.

Rich Americans Save Tax Cuts Instead of Spending, Moody's Says - Bloomberg

and yet they still pretend that there's such a thing as trickle down.

 

[elvis]

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. Bush were 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 findings may weaken arguments by Republicans and some Democrats in Congress who say allowing the Bush-era tax cuts for the wealthiest Americans to lapse will prompt them to reduce their spending, harming the economy. President Barack Obama wants to extend the cuts for individuals earning less than $200,000 and couples earning less than $250,000 while ending them for those who earn more.

“I would tend to wonder how much the tax cut actually influences spending behavior,” said Chris Cornell, an economist who mined government reports back to 1989 for West Chester, Pennsylvania-based Moody’s Analytics. “Spending by the top 5 percent of households seems much more closely tied to business- cycle issues than it does to tax-cut issues.”

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.

Stock-market performance is the “primary factor that is driving the savings of the top 5 percent of households,” said Mustafa Akcay, economist and co-researcher of the savings data.

Rich Americans Save Tax Cuts Instead of Spending, Moody's Says - Bloomberg

keep in mind "save" can mean paying down your debts.

 

[Paulie]

Besides the feds can just print up some more money, anyways.

 

[elvis]

Besides the feds can just print up some more money, anyways.

you are acting as one of Satan's whores.

 

[loosecannon]

I think we already had an econ thread that covered this exact same terrain: The tax cuts won't stimulate the economy, they will merely defer debt from the private sector to the public sector.

But whatever....

 

[lizzie]

Tax Cuts for Rich Unlikely to Spur Growth

10, 20, or 30 years ago, it would have spurred growth, becaue it would have stimulated investment in private sector business, but nowadays, the atmosphere for business upstarts, big or small, is lackluster due to increasing government control and regulation, especially the health care reform legislation. People with money are hesitant to spend and invest, because there are several disincentives.

 

[boedicca]

The OP is inane.

What happens with money that is saved by Rich People? They don't stick it in a mattress or bury it in a coffee can in the backyard like some ACORN staffer. They money gets invested, hopefully in endeavors that create jobs (as what would have happened if we didn't have such regulatory and tax uncertainty and increases).

On a side note, it's interesting how Obama has recently upleveled the definition of Rich to be those who make over $1M per year and who will be "on average" $100,000 if their tax cuts are extended. So, how does this relate to The Rich who are making only $200K?

What is Rich anyway?

 

[Paulie]

Rich is subjective, just like "unhealthy" and "junk food" is.

That's why we shouldn't be creating a label for that, either.

 

[boedicca]

Agreed. As I pointed out in that thread, it would be better if we got government out of the social engineering & income transfer business altogether.

 

[loosecannon]

The OP is inane.

What happens with money that is saved by Rich People? They don't stick it in a mattress or bury it in a coffee can in the backyard like some ACORN staffer. They money gets invested, hopefully in endeavors that create jobs

That almost never happens in the US anymore.

"Investments" means non productive second hand stocks, US bonds, inflating commodity bubbles.....

No jobs get created except within the trading floors of the financial icons.

 

[ConHog]

I love how dip shiits just totally ignore the FACT that the top 10% of earners in this country pay 90% of the taxes. How about taxing the lower half of earners until things are at least equitable? As I've said a million times, no one should be making a profit off of their tax returns, but many do. End that little entitlement.

 

[Ravi]

Save it or spend it overseas.

It always makes me laugh when people claim the "rich" will hire more people if they get a tax cut.

 

[CrusaderFrank]

Hmm, lemme see, so the rich don't create jobs, Obama Stimulus didn't create jobs, maybe we could ask Penn and Tell what creates jobs, magic, sleight of hand?

[ame=http://www.youtube.com/watch?v=yi3erdgVVTw]YouTube - Penn And Teller Get Hippies To Sign Water Banning Petition[/ame]

 

[mudwhistle]

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. Bush were 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 findings may weaken arguments by Republicans and some Democrats in Congress who say allowing the Bush-era tax cuts for the wealthiest Americans to lapse will prompt them to reduce their spending, harming the economy. President Barack Obama wants to extend the cuts for individuals earning less than $200,000 and couples earning less than $250,000 while ending them for those who earn more.

“I would tend to wonder how much the tax cut actually influences spending behavior,” said Chris Cornell, an economist who mined government reports back to 1989 for West Chester, Pennsylvania-based Moody’s Analytics. “Spending by the top 5 percent of households seems much more closely tied to business- cycle issues than it does to tax-cut issues.”

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.

Stock-market performance is the “primary factor that is driving the savings of the top 5 percent of households,” said Mustafa Akcay, economist and co-researcher of the savings data.

Rich Americans Save Tax Cuts Instead of Spending, Moody's Says - Bloomberg

Course if you have more money to put away in a nest-egg then you tend to put it away. If taxes are raised people tend to lose their jobs or tend to pay their bills with their savings instead using their extra cash to pay them.

I mean...what are you trying to say other then people are poorer when they are heavily taxed?

 

[Titanic Sailor]

So we'll rob the rich to feed the rich Democrats working in government and none of it will go towards the deficit or Obama's pig spending, or the lower and middle class.

How stupid are people anyways?

 

[Titanic Sailor]

It always makes me laugh when liberals think the Democrats care for the lower and middle class..........

 

[Toro]

The OP is inane.

What happens with money that is saved by Rich People? They don't stick it in a mattress or bury it in a coffee can in the backyard like some ACORN staffer. They money gets invested, hopefully in endeavors that create jobs (as what would have happened if we didn't have such regulatory and tax uncertainty and increases).

On a side note, it's interesting how Obama has recently upleveled the definition of Rich to be those who make over $1M per year and who will be "on average" $100,000 if their tax cuts are extended. So, how does this relate to The Rich who are making only $200K?

What is Rich anyway?

Over $200k in this case. That's from Moody's.

Tax cuts along with spending cuts can bring increased investment over the long-term, but it does little to help us now. If the goal is to spur the economy now, it doesn't necessarily do much good. But as Moody's discovered, tax cuts to that cohort doesn't do much now.