WHY Do So Many Think Middle Class Tax Cuts Will Jump Start The Economy?
February 10, 2009 12:59pm CST
About a week and a half ago there was a poll indicating that as things worsen in our economy, savings continue to rise. No surprise there. The middle class are doing what they always do in a bad economy: saving money. Yet the myth persists that giving a tax cut to the middle class will stimulate the economy by putting money in circulation. Apparently, Republicans all think if you give the the middle class $2,000 they will immediately go out and buy a wide screen TV or put a down payment on a car. The reality is that middle class spending is ALWAYS the first to freeze up in hard times. I was a case worker once for the Department of Public assistance in Philadelphia. We all noticed back then (late 70's, early 80's)that every time a financial indicator took a dive, the regs loosened just a tad and the prosecutions were shelved for a while. The powers-that-be knew that the poor would put money on the street and loosen a recession. They were right. (It's the poor who would run out and buy the $2,000 TV because they know if they don't get it then they'll never get it.) Nowdays, there's not enough of a welfare sector left to make much difference when it comes to putting money on the street. But if the middleclass run out and start spending their tax savings, it'll be a first. Does anybody really believe that that will happen?
11 Feb 09
I grew up in a middle class family and when times got tough we cut back and saved more. We didn't go out and buy anything that wasn't a necessity. Everyone in our neighborhood did the same. Tax savings go into the bank for a rainy day. No one in their right mind will go out and buy a $2000 tv when they know the economy is ailing. A down payment on a new car. No way. Money goes in the bank for when they must replace their old car.
• United States
10 Feb 09
I don't think giving money or tax breaks to any class of citizen is going to help the economy. The best thing the government could do is to decrease our huge corporate tax. If corporations had to pay less in taxes than they would keep jobs in the country. The higher our corporate taxes soar the farther away the jobs go.
17 Jul 09
One of the big problems here in the U.K. is the high taxation (especially on petrol), but also on VAT and income tax as well. Those on middle incomes have had so much taken away from them that with the fear of losing jobs or unable to pay any mortgage and losing their house that they have cut back spending by a lot, this leads to more people losing jobs (and government getting much less in taxes), so now they are targetting the higher paid people (some are going to lose hundreds of thousands of pounds in extra tax), this will lead to them spending much less as well so more will lose jobs,leading to the government getting less in taxes again. There are some countries now which have fixed the income tax rate to around 10% for everyone, and think that they won't need any more in tax.
• United States
11 Feb 09
This is very true. My husband and I cut our expenses and put more money away when things started to turn sour. Aside from what we're spending getting our business up and running we're still not wasting money on toys or unnecessary items. We've also never been tempted to buy a new car/truck every year like so many other folks I see who I know have a much lower income but, as soon as that income tax refund arrives, they're sporting a new ride. I don't believe the solution to our economic problems is spending by consumers. Small businesses as well as larger ones need help so that folks can work. The more people who are working, the more money will be spent which will help to keep other folks working.