Poll: Tax cuts will help economy more than spending
Posted by Foon Rhee, deputy national political editor January 21, 2009 12:31 PM
A poll released today confirms that the economy is job one for President Barack Obama, who is pushing a recovery package of $825 billion or more….
“Americans think that tax cuts would do more to help the economy than government spending, although they may not be right about that. Only one in five say that they would spend the money from a proposed $500 tax cut, while most say they would save that money or use it to pay off bills,” Holland said….
Once again the economic analysis of non-economists in the media misses half the story. Availability of capital for spending is only part of the tax cut equation. The other half is the expected return on investment.
At lower tax rates, people get a better return on their investment and are more likely to take risks. This increases the number of new businesses started and expands existing businesses. It’s about risk vs reward. To be more technical, tax cuts increase marginal propensity to invest.