Reply #2: i just love the 'joe will work less' line

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economic theory does say that the if the payoff is less, people will invest less. so from a theoretical standpoint, yes, the higher the tax on savings, the less likely you are to save, and the argument would be that you're less likely to work to produce income in the first place because the reward of income is reduced by a higher tax on savings.

true is theory, and maybe true in practice at the extremes (imagine a 95% tax on savings) but in normal, everyday practice, it doesn't work that way.

would you seriously work less overtime or take a pay cut or refuse to get the training needed for that next promotion just because the tax on the interest you would earn from the savings from your marginal earnings was taxed at 25% instead of 15%?

real people don't think that way. they work hard, then pay an extra $100 in taxes come april 15, or they get $100 refund, whichever. they don't plan their income strategy on such minor matters.

and even those who DO might do the OPPOSITE! that's right, if the taxman takes more of your money, you might just work HARDER to maintain your standard of living. the value of an hour of labor goes down, so you work more hours. you're not happy about it, but that's what you do. economists call this a 'geffen good'. it's not the usual pattern, but labor is not your typical widget.