What happens when taxes increase?
Government taxation has an impact on the amount of disposable income available to households (after-tax income). Due to the money being taken from households, a tax hike will reduce disposable income. As a result of households having more money, a tax reduction will enhance discretionary income.
What happens to consumer spending when taxes increase?
In the first place, consumers are more likely to increase their spending if the change in tax liabilities is long-term. Second, until a tax adjustment has an impact on their take-home income, customers won't boost their spending.
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