Tax Hikers Senselessly Stuck on Saving

J.D. Foster / September 15, 2010

Tax-hike advocates have erected yet another straw man to protect their high-tax policy, now arguing that little economic harm would be done if Congress and the president were to raise taxes on higher earners because these high-tax sufferers would have saved the money anyway. Yet the issue is not saving vs. consumption; the issue is incentives, as Robert Barro points out in today’s Wall Street Journal.

Of course, the tax hikers prefer to talk in terms of whether tax cuts for the wealthy would help the economy. But we’re not talking about tax cuts. No cuts are on the table, unfortunately. The issue at the moment is whether taxes go up.

This fixation on saving vs. consumption is a diversion, and worse than a diversion. It’s a diversion because it shifts the debate from what really matters, which is that higher tax rates on work, entrepreneurship, and creating jobs will produce less work, less entrepreneurship, and fewer jobs. It’s worse because it falsely demonizes saving. (more…)