The idea of a tax increase on the well-off is in play courtesy of the president. He's looking to get about $150 billion a year out of the pockets of folks making more than $250K a year.
I've been asking the question "what size of government do we want and how do we pay for it." Obama answered the first question "about what we have on the books now." The plan has very few 'real' cuts save counting the money not spent on Iraq/Afghanistan as a credit to the plan; most of that would happen regardless of any deficit fighting.
He answered the second part largely with "tax the rich", the near-immortal battle cry of the left. Can you be pro-little-guy and be against diverting money from the comfortable and putting it to better use in more meaningful ways than another summer home or an extra ski trip to Vail?
If you put it that way, it's hard to say so. But one of the places the excess money will go is into starting and expanding businesses. This does a double-whammy on investment; the first is that of that $150 billion, a good $30 billion would likely come out of decreased investments. That will, all else being equal, slow the economy, as there will be less money available for borrowing or stock investment.
On top of that, the higher tax rates will discourage some projects from getting started in the first place. Business finance looks at the present value of expected cash flows from a project and compares it to how much it costs today. When tax rates go up, that decreases the cash flows since Uncle Sam gets a bigger cut; that makes the project less worth doing. Thus, marginal projects that would be worth doing otherwise might not get done.
We need to factor in the loss of those businesses and jobs that are discouraged from a tax increase along with any pain the rich guy feels from having his wallet lighted by the government and add that to the scale of "is the government spending worth doing?"
Easier said than done, and far easier to talk about in theory. Conservatives tend to undervalue the good government does and liberals tend to undervalue the effects of taxes on the economy.
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