Higher rates or fewer tax breaks: what's worse?

WASHINGTON (AP) - In the fiscal cliff wars, President Barack Obama is insisting on raising tax rates for the nation's highest earners. Republicans say raising rates would hurt the economy but are offering to instead curb deductions available to the wealthy.

Which formula is better for the economy? Analysts say it depends.

Many say the economy theoretically would get a boost if the tax code provided fewer preferences because more money would be used for smart investments, not clever tax dodges. But they say that in reality, the answer would depend on which of the tax code's scores of deductions and other breaks are limited.

The clash has become a pivotal dispute in the effort to avert big tax increases and spending cuts due to begin in January, the so-called fiscal cliff.

(Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)


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