Do Tax Cuts for the Rich Help the Poor?

Photo: yachtfan

In 1990, we imposed a sales tax on yachts, which was quickly repealed. One argument made by business groups supporting repeal was that the tax hurt workers who manufacture yachts. That’s correct: assuming that the yacht industry is fairly competitive, the incidence of that tax was on buyers and on yacht sales, and thus indirectly on shipbuilding employment.
The altruism of yacht-buyers towards shipyard workers has now been surpassed by those arguing for an extension of the Bush tax cuts of 2001 for the very well-to-do (family income above $250,000, probably the top 2 percent of taxpayers), scheduled to expire on December 31. A recent objection is that, by reducing net incomes of the rich, failing to extend this tax cut would reduce job creation, placing a burden on working-class families. True, but if we are concerned about job creation, are tax cuts for the rich target-effective? A general rule should be: beware of spokespeople for business seeking help for the rich in order to help workers!