Op-Ed Contributor
The Tax Cut We Can Afford
By MARK ZANDI
Published: August 14, 2010

http://www.nytimes.com/2010/08/15/opinion/15zandi.html

UNLESS Congress and President Obama act soon, Americans’ taxes will increase in 2011, when the cuts enacted under President George W. Bush are due to expire. Almost everyone agrees that this makes little sense given the economy’s fragility. But consensus ends there. The president supports permanently extending the current tax rates for all except the highest-income households, while Congressional Republicans want the entire basket of cuts to be made permanent. The prudent middle ground would be to forestall any tax increases in 2011 and to phase in higher rates on upper-income households in 2012, when the economy will be on firmer ground.

The president’s plan would be taking an unnecessary gamble with the struggling recovery. Businesses have only recently begun to add jobs, and they appear to be a long way from hiring fast enough to reduce unemployment. Even under the best of circumstances, the unemployment rate will remain near 10 percent well into next year. The high rate of joblessness has cast a shadow on the collective psyche that will only worsen with higher taxes, raising the already uncomfortably high odds that the economy will suffer a double-dip recession.

In most times, raising taxes on the wealthy by such a modest amount has had little impact on the economy. But these aren’t most times. The well-to-do appear unusually sensitive to changes in their finances, probably because their nest eggs are significantly smaller with the drop in stock and housing prices. Only the top 3 percent of households would have to pay higher taxes if the president got his way, but this rarefied group currently accounts for a fourth of consumer spending. If they pull back, even a bit, the recovery could be derailed.

Successful small-business owners, who power the nation’s job-creation machinery, make up one-third of these high-income taxpayers. They have set up their businesses so that their profits are taxed at personal rates. Raising marginal tax rates, even a little, on those who have suffered during the past several years would be a mistake.

In logic, an argumentum ad populum (Latin: "appeal to the people") is a fallacious argument that concludes a proposition to be true because many or all people believe it; it alleges: "If many believe so, it is so."

This type of argument is known by several names,<1> including appeal to the masses, appeal to belief, appeal to the majority, appeal to the people, argument by consensus, authority of the many, and bandwagon fallacy, and in Latin by the names argumentum ad populum ("appeal to the people"), argumentum ad numerum ("appeal to the number"), and consensus gentium ("agreement of the clans"). It is also the basis of a number of social phenomena, including communal reinforcement and the bandwagon effect, the spreading of various religious beliefs, and of the Chinese proverb "three men make a tiger".