“Tax cuts” is a phrase politicians love, especially in election season—but they may not do the economy much good at all. Those in favor of extending the Bush tax cuts (Republicans and a few Democrats) argue that ending the tax cuts, thus increasing taxes, for anyone—even the wealthiest Americans—will kill an already-struggling economic recovery. But new nonpartisan research finds that extending the tax cuts is actually the least effective way to help the economy, the New York Times reports.
Tax cuts for the wealthy are the least effective of all, since they are the people most likely to save, not spend. Better options include direct payments to Social Security recipients or the unemployed, or offering a payroll tax “holiday,” but those options sound more like a stimulus—and no politician wants to mention that word right now. The tax cut decision will have more of an impact on the deficit, experts say, than on unemployment or the struggling economy.
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