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Investment Analysis Clubs / Macro Economic Trends and Risks
|Subject: Re: The Fiscal Cliff-Solving the wrong problem||Date: 11/14/2012 12:47 AM|
|Author: brucedoe||Number: 408427 of 510616|
Your post is well taken but there is a caveat. Raising of the taxes on the wealthy will probably not affect their spending because their incomes will still be far more than they spend; however, a rise in the taxes on the middle class that spends nearly everything they earn will be lowered and hurt the economy.
Take a "comfortable" couple like my wife and me. Five dollar gasoline would not alter our spending at all because: a. we don't drive all that much, and b. we drive a Prius and get 48 mpg. We might save just a little less. But there are people of modest incomes who can only afford older low milage cars and may drive as much as 50 miles each way to work (When our oldest grandson was a fireman for D.C. he lived 70 miles from work but didn't have to do it every day). I knew a salesman who drove 50,000 miles a year. It is the same with a tax increase. This is the rational for just raising the income taxes on the wealthy.
One of the things in the "fiscal cliff" is that the child tax credit will drop from $1000/child back to $500. This money is subtracted from your taxes and not just from income (for which you get another $600). For one thing, a lot of people who now pay no income taxes (the infamous 47%) will have to start paying some. You may think this is a good thing, but they will have less money to spend per year and thus harm the economy. For another, a lot more people who pay some income tax will just have to pay more.
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