Economic Stimulus Package Taxes Teenagers

Many Americans have been eagerly anticipating their economic stimulus checks, the first of which were distributed in early May. But, as teenagers are so often told, money doesn't grow on trees. The money being distributed now has to come from somewhere.

Because the U.S. government does not intend 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," according to Tim Harford of Slate.

The government, Harford pointed out, is handing its "citizens cash that was borrowed—and the citizens themselves are liable for the debt. If my bank manager arranged a surprise loan in my name and handed me the cash, I might feel pampered or put-upon, depending on whether I was planning to take out the loan myself anyway. Either way, doubt I would feel any richer."

Though it is impossible to tell exactly when and how taxes will be raised in the future, Harford predicts that teenagers, "very few of whom pay income tax today but most of whom will pay income tax in the next few years", will take the financial fall.

Recession Forces Teens To Curb Spending

In a previous post, I talked about how the tightening job market would bode poorly for teens--there will be more competition for fewer summer jobs.

A recent Associated Press article documented another way in which the slowing economy is affecting life for teenagers: the recession has made frugality cool.

"Teen hiring has slumped by 5 percent since March 2007, with many mom-and-pop stores, which typically hire younger workers, laying off employees. Hiring in the overall job market fell by just 0.1 percent during the same period," according to the article.

Because of the recession, "jobs for teens are less plentiful, and parents who supply the allowances are feeling the economic pinch themselves," according to the article. "The stalwart retailers of teen apparel, such as Abercrombie and American Eagle Outfitters Inc., are reporting sluggish sales, defying the myth that teen spending is recession-proof: It holds up longer, but can eventually fold."

Teenagers always want to be trendy, but now they have less money to spend on trends. So, "Last week, Ellegirl.com, the teen offshoot of Elle magazine, launched a new video fixture called Self-Made Girl, which shows teens how to make clothes and accessories. The first video offers tips on how to create a prom clutch," according to the article.

For those who aren't crafty (such as myself), thrift shops, consignment stores and second-hand stores are all great options for saving money on close. An added bonus is that buying used clothes allows people to reduce their carbon footprints.

"Kerstin Block, president and co-founder of Buffalo Exchange, a Tucson, Ariz.-based chain that sells second-hand clothing, said Gap jeans there run $9 to $20. A new pair runs $50 to $60. Block noted that buying second-hand is also appealing to a growing eco-friendly sentiment among teenagers," according to the article.

"Economists say this teen spending slump could be the worst in 17 years, when teen frugality led to the demise of once-hot Merry-Go-Round Enterprises Inc. and ushered in an era of flannel shirts and torn jeans," according to the article.

I grew up in Seattle, and had no idea that flannel and ripped jeans were popular because they were cheap. I just thought everyone was into grunge. And while we're on the subject, the 14th anniversary of Kurt Cobain's tragic death was this month. May the voice of his generation rest in peace.