Middle Class Economics

By: Dr. Lynn Reaser

In his State of the Union address for 2015, President Barack Obama called for tax cuts for the middle class and higher taxes for the rich. While some of the proposals in his speech were sound economics, unfortunately, politics commandeered much of the talk.

Middle America needstaxclock more jobs and larger increases in wages. The President’s proposals to give dual wage-earner families tax breaks, along with larger tax credits for younger children, should cause greater participation in the work force. While a positive result by itself, ironically, it may slow the descent of the jobless rate and the upward pressure on wages. A higher capital gains tax rate targets the wealthy, but it could also hurt middle income households through an adverse impact on stock prices.

The President has called for no net reduction in taxes for the U.S. economy but rather a reshuffling in who pays the burden. In contrast, a reduction in the corporate tax rate could give companies a greater incentive to expand and hire more domestically. Hopefully, this topic will be given attention in 2015.

On balance, we need a bigger economic pie, not just a resizing of the pieces various parties receive.


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