Question
Senate Approves Obama Tax Cut Plan The U.S. Senate has passed legislation extending Bush-era tax cuts for high-income earners to middle-class Americans earning up to
Senate Approves Obama Tax Cut Plan
The U.S. Senate has passed legislation extending Bush-era tax cuts for high-income earners to
middle-class Americans earning up to $250,000 per year.
Source: Financial Times, July 26, 2012
Fact: Middle and low-income earners spend almost all their disposable incomes. High-income
earners save a significant part of their disposable incomes.
a. Explain the intended effect of extending tax cuts for middle-class Americans but not for
high-income families. Draw a graph to illustrate the intended effect.
b. Explain why the effect of tax cuts depends on who receives them.
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