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Could a 'big spender' surtax pay off?

Even before the ink from Obama's signature on the jobs bill dried, the debate was on as to just how much it would do to get people working and the economy moving.

Robert H. Frank, economics professor at the Johnson Graduate School of Management at Cornell University, says we need to come at the problem from another direction: a surtax on extremely high levels of consumption.

Wealthy older woman with chauffeurMost households would be exempt from Frank's proposed tax since it would be levied only on families earning more than $1 million and who consume more than $500,000 annually.

But even if limited to the very top incomes, Frank says a progressive consumption surtax at that level would produce immediate, off-budget economic stimulus by giving wealthy families powerful incentives to accelerate future spending. For example, a family that had been planning to build a new wing onto its mansion, or buy a yacht, would want to make those purchases now rather than be taxed on them later.

That "later" tax comes from Frank's proposal that the tax be enacted immediately, but that it not take effect until unemployment falls below 6 percent.

Frank elaborates on his proposal, as well as probable objections to it and what might happen to the economy once the surtax took effect in Hey, Big Spender: You Need a Surtax.

Consumption taxes are not new. And Frank has championed one on higher income earners before.

And since Washington, D.C., has decided that consumers are the engine that will drive the economy out of the current ditch, perhaps it is time to rethink the route we've been taking.

People used the previous rebates and now are using the Making Work Pay money to make ends meet rather than heading to shopping centers for spending sprees. So something that might spur spending among those with the most disposable income is worth a look.

But this surtax on the wealthy strikes me as just the stick to the failed carrot of bribing consumers with tax incentives.

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The prime motivation now is to get more money flowing through our consumer-sustained economy. More purchases, more jobs for people selling and making items. Those jobs then would produce taxable income. And states would get sales taxes.


This proposal seems to be incomplete, with the ability that millionaires have to make large purchases prior to the bill being passed what type of money can it gain for the government?

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