According to this article, Rudy wants to “stimulate the economy” with more supply-side tax cuts, including dropping the rate on capital gains to 10% from 5%, and cutting (nominal) corporate taxes from 35% to 25%.
This will in effect represent a new federal subsidy to the already-rich in the hopes that they will turn around and re-invest that in the economy. However, the rich are actually not very likely to turn around and spend their windfalls – a separate study shows that every dollar given to the rich returns 9 cents of economic stimulation, whereas a dollar increase to the poor (by extending unemployment etc) creates an economic impact on the order of $1.73. If we want to stimulate the economy, we should be giving money to those who will spend it.
I read Barbara Ehrenreich’s excellent book “Bait and Switch” this month. It makes clear that the benefits of increased worker productivity are being reserved to employers and not being shared with workers; instead, workers are seeing an average decline in salaries, and typically a loss of benefits, as they’re forced into the pattern of serial employment. Corporations maintain their economic level of activity with fewer overworked employees. Rudy’s tax cut proposal would allow rich investors to keep more of the same benefits, instead of keeping that money in the federal coffers, and using it to stimulate the economy by actually giving it to people who actively participate in it.
