I oppose tax cuts for the wealthy but support lowering taxes for the middle class.
When the middle class has more income after taxes, they tend to spend the money on consumption or paying off loans rather than on investment. The wealthy, having already satisfied most of their consumptive goals (and for whom each additional dollar is less valuable), tend to spend additional income on investment.
Those in favor of extending tax cuts for the wealthy contend that increased taxes will siphon off money that would have been used for investment and that, investment diminished, the economy will stagnate. The truth is quite different: the economy is currently saturated with capital.
Graham Bowley’s Oct. 3 article in the “New York Times”, “Cheap Debt for Corporations Fails to Spur Economy,” points out that corporations are using freely available capital to update equipment, refinance loans, and buy back shares of stock. Thus, adding to our capital through investment would probably do little to increase hiring and restart growth. Instead, we should be focused on increasing consumption, which has been growing very slowly over the past few months. Several quarters of consistent growth in consumption would spur industry to begin hiring again.
Since the market is saturated with capital, the wealthy, who would spend their additional income on investment, are poor candidates for a tax break. The middle class, who would spend the money immediately on consumption, should be our focus.
Edward Seyler can be reached at
