Summers Is Wrong. Raising Taxes on the Wealthy Will Make Inflation Worse.

Over-taxing the wealthy will not reduce demand or inflation. High taxes on the wealthy will reduce capital formation and make inflation worse.

Former Clinton administration Treasury Secretary Larry Summers has suggested that Congress raise taxes to reduce inflation. His plan is to only raise taxes on the wealthy. Unfortunately, that plan will make inflation worse and will make it more difficult to bring inflation down in the future.

Summers reasons that the inflation we have today is mostly caused by excess demand. In the past he has warned that the huge deficit spending by the federal government and the expansive monetary policy of the Federal Reserve, have caused the excess demand in the economy. Last year he tried to emphasize this point.

In May 2021, Summers urged President Biden to put the brakes on more stimulus. “I think policy is rather overdoing it,” Summers said. “The sense of serenity and complacency being projected by the economic policymakers, that this is all something that can easily be managed, is misplaced.”

Then he added, “We’re taking very substantial risks on the inflation side.”

Summers also criticized the Federal Reserve for keeping interest rates near zero and for their $120 billion monthly…