Thursday, November 6, 2008

 

Taxing the Rich and National Savings

Now that Obama has won, it is time to start thinking about raising taxes on the rich. I wonder what that will do to the saving rate?

This is trickier than I thought. It might be that net saving by the rich is more than 100% of net national saving, if government and the poor are net borrowers. In that case, our national savings rate could actually go negative as the result of even a 5% increase in the marginal tax rate on the rich.

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