Effects of Surtax Discounted
ANN ARBOR, Mich., Nov. 16 ÛÓExtension of the income tax surcharge beyond its expiration date next summer will not adversely affect consumer spending, economists at the University of Michigan were told Friday.</br></br>ÛÏMost consumers either do not know that Congress made the tax increase a temporary measure, or believe that the surtax will be extended,Û said Prof. George Katona, an economist and psychologist at the university.</br></br>Katona recalled that when the tax went into effect last summer it did not have a dampening effect hoped for because it came at a time when large wage increases were frequent and when expectations of further wage increases were strong.</br></br>There was some slowing of consumer demand in anticipation of the boost, he noted, bul it was quickly overcome after the tax became a reality since the additional payments were only small extra deductions from weekly paychecks.</br></br>Now, consumers have become accustomed to the tax and still are optimistic over future salary boosts, the economist said. Abandonment of the surtax, however, will have an expansionary effect on spending, Katona said.