JONATHAN COHN AUGUST 27, 2010
The rhetoric in the debate over extending the Bush tax cuts for high-earners is confusing at best and disingenuous at worst. Plenty of politicians--generally Republicans, but some Democrats as well-- favor extending the cuts because raising taxes during a recession hurts the economy. They're correct, but if their main concern is generating economic activity, extending tax cuts for the wealthy isn't the way to go. The $128,000 the average millionaire will save would generate no more than...
$76,800 of economic activity
By comparison, spending the same amount of money on infrastructure would generate between $128,000 and $320,000 worth of economic activity, according to the CBO's estimates of stimulus effectiveness. Same amount of expenditure, wildly different impacts on the economy. It's fine to argue that the rich should pay lower taxes--arguing that cutting their taxes is a good way to stimulate the economy, however, is unreasonable.