According to the White House, hitting the fiscal cliff and forcing across-the-board tax hikes would slam the economy to the tune of $200 billion. The White House sent an email this morning making precisely this point, hoping to pressure Congressional Republicans into caving on tax hikes for the top 2% of income earners: “As we approach the holiday season, which accounts for close to one-fifth of industry sales, retailers can’t afford the threat of tax increases on middle-class families.”
There’s only one problem: this logic extends to the top 2%, too. Raising taxes stifles economic growth because it stifles consumer spending. Stealing money from those who earn more of it in order to give it to those who earn less – or to fill spending gaps created by a profligate government – doesn’t heal the economy. In the long term, it decreases tax revenues, because the overall economy shrinks. If the White House understands dynamic scoring – if the White House understands that tax increases shrink the economy – it is absurd for President Obama to continue pushing tax increases as a solution to America’s fiscal problems.
The White House continued:
The typical middle-class family will see their taxes go up by $2,200 next year, negatively impacting businesses and retailers across the nation. The president has called on Congress to take action and stop holding the middle class and our economy hostage over a disagreement on tax cuts for households with incomes over $250,000 per year.
This is pure demagoguery, since the White House cares very little about raising taxes on Americans. Instead, the White House merely wants to raise taxes on a vast minority of Americans who already foot a vastly disproportionate share of the tax burden. In the process, the White House will kill the economy. But from this email, it’s clear they already know it.