The Spectacle Blog

Washington Post Goes Supply Side

By on 9.9.09 | 12:18PM

Today the economy/business section of the Washington Post has a news story that, in parts, reads as if it could have been written by Art Laffer:

In this new era of frugality, well-to-do shoppers have gone into hiding and stowed away their splashy logos. But they may hold the key to a consumer recovery.

Affluent shoppers are the most important segment of consumer spending, which in turn drives the national economy. The top 20 percent of the nation's households -- with income of at least $150,000 -- account for 40 percent of all spending, according to government data. That makes them a crucial spoke to any turnaround.

Of course, at no point in the article does the author draw a connection between spending among affluent Americans and tax policy. But if Obama follows through on his promises, it's this very segment of the population that will see their taxes go up substantially as the Bush tax cuts expire at the end of next year. And if the House Democratic health care bill passes -- along with its additional income tax surcharges on the wealthy -- the top tax rate would hit over 57 percent in some states, according to the Tax Foundation. The analysis also found that the top rate would be over 50 percent in 39 states, and no lower than 47.3 percent in any state.

Whether or not it's fair, the reality is that the wealthy have more flexibility to adjust their behavior in response to changes in the tax code. If the key to the economic recovery, as the Post acknowledges, is to encourage wealthy Americans to spend more money, raising their taxes doesn't exactly seem like sound policy.

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