If the highest income tax rate increases from its current 35% to 44% (including Medicare and Obamacare tax increases) on the wealthiest taxpayers, a high income family making $500,000 will have $45,000 less to spend. That family may decide to cut out a gardener, housekeeper, vacation, or even a new yacht. A progressive might say "so what, they are rich, and they...
He's only half right. Increased taxes will reduce investment and distort savings, but reduced Federal spending will actually help the economy. Federal spending is overhead and it has to be financed by borrowing since tax increases will lower investment, increase tax avoidance, revenues will not grow or will decline. Reduced spending in contrast removes dead weight loss from the economy and frees people doing harmful things to seek work doing productive things. Reduce welfare would cause some folks to seek work or relevant training. This will add output and revenues while cutting spending. The notion that cutting Federal spending is harmful is Keynesian and wrong.
It may not be intuitive to nonbusiness people and economists why increased taxes and reduced federal spending will send the US into a recession. However, it is not hard to understand the economic logic that causes this result.
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