Is A Tax Cut Really Going To Fix The Middle Class Problem?


By Ryan Velez

The middle class and its issues are often put at the forefront of many political conversations, with all different sides having their own ideas on how to fix them. One major part of the Republican upcoming tax plans are cuts for the middle class, but this may not be an ideal solution. Washington Post business and economics writer Steven Pearlstein says that rather than tax cuts, “what it needs and wants after years of tax and spending cuts is more and better government services for the taxes it already pays.”

Part of his reasoning is in the math already on the books. According to the nonpartisan Tax Policy Center, the average rate of income tax paid by the American middle class — the 20 percent of households in the exact middle of the income ladder — has been going down for decades. As of 2013, the most recent year that numbers are available, it was at 2.6 percent of gross income. “For the 40 percent of household below them — what you might call the working class — the average household not only paid no tax, but because of refundable tax credits actually got money back from the government equal to 1.2 percent of income, helping to offset payroll taxes (Social Security and Medicare) that averaged around 8 percent,” he adds.

When asked by Pew researchers, Americans said in April that what they would like the most is more government spending on education, infrastructure, and safety nets for the elderly, veterans, and the poor. While the current tax plan is Republican, Pearlstein says Democrats have their own role in this current situation.

“If Democrats had the courage of their pro-government convictions, they’d be saying all that. But because they’ve spent the past decade reflexively adding the words “middle class” to every talking point, they’ve badly boxed themselves in. Democrats can rail all they want about the skewed nature of Republican tax cuts, but in framing this and every other economic issue in terms of the greedy rich vs. the struggling middle class, they’ve implicitly forfeited the ability to declare that there’s no need for a tax cut at all, including one for the sainted middle class.”

As a result, the only winners that we can really see here are businesses, but not necessarily small businesses, but the major corporations that already appear to be doing just fine.



Personal Finance