Friday, December 10, 2010

POLITICS - Another Opinion of Tax Cut Options

But what about the stimulative effect of the upper-income, as opposed to lower-income, tax cuts? How big will it be? Mike Konczal points us to research on this subject by the Congressional Budget Office. In September, the CBO found that those $100 billion in tax cuts on income above $250,000 would reduce unemployment in 2011 and 2012 by...somewhere between 0.1% and nothing at all.

(click for better view)

"Do Tax Cuts for the Wealthy Create Jobs?" by Megan McArdle, The Atlantic 12/8/2010


Over at The Economist's Democracy in America blog, Matt Steinglass is pondering the differential stimulus effect of tax cuts for the wealthy, and tax cuts for everyone else (chart & comment at top)

The implication is that tax cuts for the rich aren't very stimulative, while tax cuts for the middle class are. But this is not quite how I would interpret that chart.

According to the CBO, the low estimate is that temporarily extending the Bush tax cuts for the middle class aren't very stimulative, while extending the tax cuts for those who make over $250,000 doesn't show up at all; in the high estimate, extending the tax cuts for incomes above $250,000 reduces employment by about a tenth of one percent, while extending the tax cuts for incomes below $250,000 lowers it by about half a percent.

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