This is a post from a WSJ blog (http://blogs.wsj.com/wealth/2010/12/07/will-tax-freeze-for-wealthy-create-jobs) referening AARC’s research about spending trends for the affluent market.

December 7, 2010

By Robert Frank
One of the core arguments for extending the Bush tax cuts for the rich was that the wealthy create jobs. Extending their low rates, conservatives argued, would encourage them to hire.

“I think that extending all of the current tax rates, and making them permanent, will reduce the uncertainty in America, and help small businesses to create jobs again …” said U.S. House Republican leader John Boehner.

We’ll now get to see whether the theory works. With President Obama making a deal with Republicans to extend the cuts for everyone for two years, the wealthy will keep their marginal tax rate at 36%. Just as important, rates on dividends and capital gains will remain unchanged and the estate tax threshold got pushed to $5 million.

I remain skeptical that keeping rates low will result in an increase in hiring. When I ask wealthy business owners and entrepreneurs why they’re not hiring, they rarely mention taxes. They say consumer demand. And jobs.

Countless surveys recently show that the wealthy also remain bearish when it comes to personal spending. Again, the reason isn’t taxes. The main reasons are larger issues like unemployment, the deficit, Europe and the education system.

“This is a group that will say ‘show me’ before they start spending,” Ron Kurtz, president of the American Affluence Research Center, based in Alpharetta, Ga., told Henry Unger of the Atlanta Journal-Constitution. “It’s got to get better before they’re really going to spend … and that goes for creating jobs, as well.”

According to Mr. Kurtz’ surveys, 41% of wealthy households (in top 10%) expect to spend less this year. He thinks their holiday spending will be flat or up 1%.

In other words, the wealthy aren’t likely to bankroll a recovery. They’re going to wait for one to start, then jump on board.

There are some economic benefits to the tax extension. Spending by the wealthy is one of the few forces keeping the consumer economy going, as the top 5% of Americans by income now account for 37% of consumer outlays. If their taxes had gone up, their current spending levels might have gone down.

So in the end, the extensions are more about doing no harm to the economy, rather than actually helping it. Not exactly the formula for a strong recovery.

Do you think the tax extensions for the wealthy will create jobs?

Posted in Affluence Research, Holiday Spending | No Comments »

This is a blog post from the Atlanta Journal-Constitution (http://blogs.ajc.com/business-beat/2010/12/07/wealthy-remain-cautious-in-spending-and-risk-taking/) referencing AARC’s latest research about affluent spending.

December 7, 2010

There’s been a lot of talk these days about whether tax cuts for the wealthy should be preserved to help stimulate the economy.

Turns out, it may not make much of a difference — especially in the short run — because the wealthy are not in a spending or risk-taking mood.

I sat down with Ron Kurtz, president of the American Affluence Research Center, based in Alpharetta. Kurtz has been conducting detailed economic surveys of the top 10 percent of American households twice a year since 2002. And right now — tax cuts or no tax cuts — the wealthy are cautious.

“This is a group that will say ‘show me’ before they start spending,” Kurtz said. “It’s got to get better before they’re really going to spend … and that goes for creating jobs, as well.”

Kurtz’s fall survey of the top 10 percent showed that they regard current business conditions as poor. The average on a 0-200 point scale was only 41. That was up from a dismal 11 in the spring of last year, but well below the 127 registered in the spring of 2007.

Before we go further, here’s who the survey attempts to gauge — 11.4 million households that account for nearly half of all consumer spending. Their average income is $256,000 and their average net worth is $3.1 million. The net worth of the top 10 percent accounts for 70 percent of the U.S. total.

“These people are so important to the overall economy,” Kurtz said. “It’s a small number of people with lots of power.”

As for their outlook about the future, the scores are better than their assessment of current conditions. But they’re far from upbeat.

When three results are combined about how they think the financial situation will look in 12 months — regarding business conditions, the stock market and personal income — the score is 97 out of 200. That’s up from 90 in the spring of 2009.

“They’re not expecting a big improvement. They’re not good numbers,” Kurtz said.

That’s reflected in their investment strategy, which is quite defensive.

Forty-six percent of the survey participants said their primary goal was to preserve capital. That compared to 33 percent who are looking for appreciation. While these numbers are a little less conservative than they were in spring 2009, they still indicate a cautious approach favoring Treasuries, certificates of deposits and other fixed-income plays.

On the spending front, 41 percent said they will make a conscious effort to reduce expenditures over the next year. That’s an improvement from the 60 percent who said that in the spring of last year.

As for the holidays, the wealthy said they will cut back this year. Participants said they will spend an average of $2,305 — 3.9 percent less than last year. Kurtz, however, believes that consumers generally spend a little more than they think they will. If he’s right, he thinks spending will be flat to up around 1 percent.

Unlike what some people think, Kurtz said, the wealthy are generally not conspicuous consumers. Most come from the middle-class and have retained those values.

“They’re aggressive savers and careful spenders,” Kurtz said. “They live within their means. The recession has made [that idea] even more important to them.”

To the not so wealthy, too.

Posted in Affluence Research, Holiday Spending | No Comments »