Taxation and Middle-Class Americans

Paper Summary:

While middle-class families in America now enjoy higher incomes than they did a few decades ago, they also exhibit more symptoms of personal financial distress and a reduced willingness to support basic public services. An important cause of both changes is the fact that taxes are increasing for middle-class families at a steady rate. We are in the beginning stages of a technological revolution that promises to increase the income and wealth gaps, already very high, still further. As a result, middle-class families will find it still harder to save and still harder to come up with a down payment on a house in a good school district. Their commutes will continue to grow longer, along with their reluctance to support essential services. Savings rates will continue to decline. These problems merit serious attention from economists and America's leaders. While there is no single solution to the woes of America's middle class, this paper hypothesizes that a feasible tax cut is in order. Many people argue that a tax cut is not the answer, saying that tax cuts usually disproportionately benefit the rich and harm the middle class. This paper addresses how the American tax system is increasingly disadvantageous to the middle class and demonstrates why tax cuts are needed and how they could benefit the middle class.

From the Paper:

"It has long been said by the political left that the tax cuts of President Reagan and current President George W. Bush have favored the rich at the expense of the poor (Frank, 2000). Critics claim the rich are not paying their fair share of the tax burden while middle and lower class citizens are struggling to pay for health care, education, and other basic necessities. The obvious solution for big government advocates to level the playing field is to raise taxes on the rich. However, despite the political rhetoric denouncing the Bush tax cuts as a windfall to the rich at the expense of the poor, recent empirical evidence finds the rich do actually pay a substantial amount of the federal tax burden."

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