Trickle-Up Economics?

16 08 2010

You’ve probably heard of trickle-down economics: the idea that tax cuts for the wealthy manage to also help the middle class and poorer. Well, in the world of marginal tax rates, welcome to trickle-up economics: the idea that tax cuts for the middle class and poorer also help the rich.

This is a point that has gotten somewhat overlooked in the debate about the Bush tax cuts, which are scheduled to expire at the end of this year.

President Obama has proposed that the tax cuts for the very wealthiest Americans expire as planned, but that the tax cuts for all other American households be extended. One interesting quirk of our tax system, however, means that the tax cuts for the “middle class” also benefit Americans who are much richer than “middle class.” In fact, these “middle class” tax cuts benefit richer Americans more than they benefit middle-class Americans.

Here’s a chart, from the Center on Budget and Policy Priorities, showing the average tax savings for each income group that comes from the Obama administration’s tax proposal, rather than letting the tax cuts expire in their entirety:

Continue Reading: http://economix.blogs.nytimes.com/2010/08/13/trickle-up-economics/?ref=economy

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