Sen. Mitch McConnell, the Senate Minority Leader, introduced legislation to extend tax cuts for the wealthiest Americans yesterday -- the same day Moody's Analytics published a study showing that the wealthiest Americans are more likely to save tax cuts than spend.
The Moody's report is getting some buzz, but it can be said with a great deal of certainty that this study will change nothing. The Congressional Budget Office has repeatedly stated that income tax cuts for the wealthy are among the least effective forms of stimulus, because cash in the hands of the rich is more likely to be saved than cash in the hands of the poor. It's not like those reports changed the tenor of the debate.
The rebuttal from conservatives who would like to see the tax cut extended for a few years or longer is that lower tax rates on income and investment will lead to more income and more domestic investment, both good things. But this is exactly the kind of argument that is impossible to win. One side argues, correctly, that taxes on investment discourage investment. The other side argues, correctly, that there is no way to pay for anything resembling the kind of government Americans want without a progressive tax system. As readers know, I'm belong to the "we gotta tax where the money is" crowd, and if that makes me sound like Willie Sutton, then so be it.
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