Tax Cuts For The Non-rich Stimulates Economy

November 11, 2011

Unlocking Word Meanings
Read the following words/expressions found in today’s article. 

1. stimulate (v.) [stim-yuh-leyt] – to encourage (something) to start or progress further
Example: Encouragement from his boss stimulated him to work harder.

2. differentiate (v.) [dif-uh-ren-shee-eyt] – to determine the differences from other things
Example: Her love for sports differentiates her from her sister who loves painting.
3. abruptly (adv.) [uh-bruhpt-lee] – suddenly or unexpectedly
Example: His bad mood abruptly changed when he realized that today is his pay day.

4. spur (v.) [spur] – to urge forward hurriedly
Example: The soldiers bravely spurred on to their destination despite the snowstorm.

5. standard of living (n.) [stan-derd uhv [liv-ing]  – the level of comfortable life as measured by available goods, services and luxury
Example: Rich countries have high standards of living.

Read the text below.

Decreasing taxes for low and middle income families stimulate the economy faster than tax cuts among the rich, according to a US economist.

Economist Alan Vlard made this comment in response to politicians who criticize President Obama’s proposal to increase tax among wealthy Americans.

Vlard differentiates the results of tax cuts between the rich and the non-rich. He says that the rich can save more money from tax cuts, because they have enough money to live on. The rich may spend money on luxury, but they will still have enough left to invest in business through banks or the stock market. That could result to more investments which can eventually lead to more jobs. However, it takes a long time for the benefits to be felt.

Vlard suggests that if politicians want to create more jobs right away, tax cuts should be focused on the non-rich. He says that whenever the poor and the middle class get extra cash, they spend it immediately to make up for what they lack or what they need, such as groceries and home appliances. As the spending for immediate demands increases, the economy abruptly spurs. Vlard says this battles the number one reason why business owners freeze hiring – poor sales.

Vlard also takes note of tax policies that have long term and short term effects. Although increasing immediate demand creates more jobs within a year, increasing the national savings raises a country's standard of living in the next 10 to 20 years. This makes tax hikes among the rich significant.

Viewpoint Discussion
Enjoy a discussion with your tutor.

Discussion A

·         How do the tax rates in your country compare with those in neighboring countries?
·         Do you agree with hiking the taxes for the wealthy? Explain your answer.

Discussion B

·         How important are tax policies for a country’s economy?
·         What changes would you like to see in your country’s tax system?

November 11, 2011