March 03, 2012
An article in the NYT on a proposal by French presidential candidate Francois Hollande to raise the top marginal tax rate on people earning more than $1.3 million a year to 75 percent told readers:
“Many economists argue that a 75 percent tax bracket — compared with the current top bracket, 48 percent — would be self-defeating, driving high-paying jobs and the spending that comes with them to countries like Britain and Switzerland.”
It is unlikely that many economists complained about the prospective loss of spending associated with rich people leaving the country. While most countries (including France) are suffering from inadequate spending at the moment, economists are more typically concerned with too much spending in an economy, hence the obsession with deficit reduction.
Private sector spending on current consumption pulls away resources from investment in the future in the same way that public sector spending on consumption does. If rich people opted not to spend, most economists would argue that the resources would be freed up for investment.
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