What the Rich Don’t Need

Richard Thaler says "Demanding that the rich get a tax cut as a condition for tax relief for others is simply elitist":

What the Rich Don’t Need, by Richard Thaler, Commentary, NY Times: Want to give affluent households a present worth $700 billion over the next decade? In a period of high unemployment and fiscal austerity, this idea may seem laughable. Amazingly, though, it is getting traction in Washington.

I am referring, of course, to the current debate about whether to extend all, or just some, of the tax cuts of President George W. Bush... President Obama has proposed retaining the current rates on incomes up to $200,000 for individuals and $250,000 for couples. ...

 Republican leadership has drawn a line in the sand, saying it will oppose Mr. Obama’s bill unless all taxpayers remain at current rates. Although it wouldn’t put it this way, the Republican position is, in effect, that if the rich can’t share in the bounty, rates should rise for everyone.

They offer three arguments to support their view. The first is that it is folly to raise taxes in a weak economy. ...

Tax cuts are one of many ways to stimulate the economy. Building infrastructure, for example, is another. We have to choose. And if the primary goal is stimulating the economy, tax breaks to the rich are simply not cost-effective. ...

The second argument is that not extending the tax cuts to high-income earners would impose an excessive burden on small businesses. Here, however, ... the fact that 3 percent of the businesses earn nearly half of the money is precisely what many people are concerned about: growing income inequality.

Which brings us to the third argument. Conservatives say that to do anything other than extending tax cuts to everyone would amount to “class warfare.” The best response to that notion comes from Warren E. Buffett: “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” ...

And what about incentives? Will the owners of the profitable small businesses work less hard, or hire fewer people, if their own after-tax income falls? This is a much-researched question, and ... we shouldn’t expect significant real reductions in economic activity...

The question comes down to whether we want a society in which the rich take an ever-increasing share of the pie, or prefer to return to conditions that allow all classes to anticipate an increasing standard of living. Demanding that the rich get a tax cut as a condition for tax relief for others is simply elitist. Tea Partiers, take note.

Is it possible for an outcome to be equitable when, as in recent decades, nearly all of the gains from growth accrue to one class?