Friday, February 26, 2016

Put The Money Where It Will Do the Most Good

That's the advice of Dylan Marando, who, like many others, has come to the conclusion that tax breaks for the wealthy and corporations just means greater wealth accrual and dividend payouts, not job growth. The fact that corporations are currently sitting on over $500 billion is something no one should be proud of.
Mounting evidence demonstrates that measures like an increased minimum wage can be an effective means of boosting aggregate commercial activity, even when we take into account the potential negative effects on business investment.

A study from the National Bureau of Economic Research demonstrates the stimulative benefit of concentrating tax breaks on lower-income groups versus those in top income categories. The Reserve Bank of Australia and the Congressional Budget Office offer similarly encouraging analyses of low-income households’ marginal propensity to consume as the result of income shocks like tax cuts, rebates, or lump-sum transfers.
Despite the popular stereotype of the poor spending their money on alcohol and cigarettes, a study conducted last years suggests something quite different. Examining the Canadian Child Tax Benefit and the National Child Benefit, a group of Canadian economists found
that receipt of these programs coincides with increased expenditure on things like food, child care and education for low-income families, as well as large declines in alcohol and tobacco use in the all families sampled.
While hardly discounting big-spending items like infrastructure improvements to boost the economy, Marando suggests that perhaps the biggest stimulatory 'bang for the buck' may indeed lie in quieter, progressive improvements where they are needed most: the poor among us.

It may not be the message the business agenda wants us to hear, but perhaps it is time that we all thought outside the increasingly narrow and confining corporate box.

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