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A reminder from @JosephEStiglitz & @KittyRichardsDC: tax increases are better for the state's economy than spending cuts during a recession, especially when they are targeted to higher-income people. 1/ https://www.nytimes.com/2020/09/03/opinion/sunday/progressive-policies-taxes.html?smid=tw-share
Why? A $1 reduction in direct government spending is a $1 decrease in consumption, while a $1 tax increase results in a decrease in consumption of less than $1, since part of that tax increase will show up as reduced saving. 2/ https://www.cbpp.org/research/budget-cuts-or-tax-increases-at-the-state-level
This is especially true if the tax increase is targeted to high-income people, who save larger shares of their incomes, whereas people with lower incomes tend to spend more of their income. 3/
This also means that cuts to financial assistance to low-income households are more detrimental to the economy than tax increases on high-income households, since financially-strapped families are likely to spend rather than save most of the financial assistance. 4/
And, of course, higher-income households have been less harmed by the COVID-19 recession and are more able to afford to contribute more to ensure that all Californians have the health and economic protections they need. 5/ https://calbudgetcenter.org/resources/job-loss-figures-052120/
Budget cuts are also likely to fall heavily on families with low incomes, hurting Black & Latinx families, who - due to historic and ongoing discrimination - are over-represented among low-income families and have been disproportionately affected by the pandemic & recession. /end
