New data from Moody's suggests wealthy Americans will save any money they get from tax cuts rather than spending it.
History suggests as much: tax cuts in 2001 and 2003 under President George W. Bush were followed by increases in the saving rate among the rich, according to Moody's data. When President Bill Clinton raised taxes, the savings rate fell.
President Barack Obama wants to extend the cuts for individuals earning less than $200,000 and couples earning less than $250,000 while ending them for those who earn more.
"High unemployment has cast a shadow on Americans' collective psyche that will only darken with higher taxes, raising the already-uncomfortable odds that the economy will suffer a double-dip recession," says the new analysis by Mark Zandi of Moody's Economy.com. By contrast, "allowing the tax cuts for high-income households to expire over, say, a three-year period would not harm the economy," the analysis says.
The Moody's research on couples who earn more than $210,000 found that spending by the wealthy is more likely to be influenced by how well the stock market is doing and not changes in income-tax rates.
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