Folks freak at size of tax hikes if fiscal cliff isn’t averted in the coming days is a story from Thursday’s NY Post.
Three reporters interviewed New Yorkers (most of whom, statistically, voted for Obama) of all income groups, asked them what they earn per year, and passed on how much extra they’ll be paying unless a comprehensive deal is worked out.
The story is a terrific primer on the impact of higher taxes on a consumer economy—how what Person A spends on goods and services from Person B affects what Person B can afford to buy from Person C, who in turn… You get the idea.
Unfortunately, the Post didn’t realize that it was publishing such a story and left unsaid the best stuff. So let’s fill in the picture.
“It’s that much higher?” asked IT worker Vikas Kataria, 34, who discovered that his combined household income of about $250,000 per year will cost him nearly $10,000 more in taxes.“I thought it was a couple thousand — but that’s a lot,” said Kataria, who works at Merrill Lynch in Manhattan and is married to a systems analyst for a brokerage firm. “That’s huge!”With higher taxes, the couple would have to cut out on traveling and family vacations.
Kataria represents tens of thousands of Americans who will each be cutting back on $10,000 worth of traveling, meaning hundreds of thousands fewer airline tickets, hotel rooms, rental cars, souvenirs and other merchandise, restaurant meals, sightseeing tours, etc—all of them not bought from individuals and companies that would have otherwise paid income taxes (both federal and state), sales taxes, and excise taxes.
You’ve heard of the multiplier effect on every dollar spent at retail? Call this the divisive effect.
Clothing designer Peter Opie, of Canary Wharf Clothier, made about $2 million this year — and would see his tax bill spike by a staggering $100,000.
Even if we assume that Opie can handle the additional hundred grand—and that there are “only” about a couple hundred thousand such people (though of course the more they earn, the higher the tax hit)—there’s little question that the Opies and their cohort will cut back at least somewhat on spending. Which translates to billions in unspent dollars on travel and merchandise and meals, etc, with the concomitant impact on the economy all down the line.
Small-business owner Haim Hagon, 51, said it’ll be tough to afford college for his two high-school-aged children.“Every dollar counts when the situation is tough,” said Hagon, who makes about $150,000 and already moved his son from a private school to a public school due to financial concerns.
Bad news for private schools’ staff and teachers. Good news for public schools…which generally get paid public monies according to the number of pupils.
He works 12 hours a day, six days a week to keep his children’s-clothing store in Forest Hills, Queens, afloat — and is now mulling staff and pay cuts.
Multiply those staff and pay cuts by millions, and keep in mind that the “staff” involved come disproportionately from the middle- and working-class.
If there’s any good news, it’s that more Americans will soon, if they don’t already, understand that nobody ever got a job from a poor person.
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