Tim Hartford offers an interesting youth perspective on the economic stimulus rebates here. He argues the younger generation will be affected more than others.
Since neither the U.K. nor U.S. government intends to alter its spending plans, these tax holidays will be funded by government borrowing, borrowing that must eventually be repaid. That will require taxes to go up in the future or not to fall when they otherwise might.
Who should celebrate? Not the typical taxpayer, that is for sure. The tax cut makes no difference to her. Say her rebate check is $600; if she had wanted an extra $600 right now, she could already have it in her pocket, either by borrowing the money or by withdrawing it from savings. If she did that, of course, she would later have to pay $600 back plus interest. But that is exactly what some future administration will be demanding to repay government debt. Or, to look at it another way, the rational taxpayer should save the $600 windfall now, keeping it to pay the higher taxes that are surely on the horizon.
