It appears that when personal tax as a percentage of personal income goes down, deposit balances go up and vice versa, according to Market Rates Insight.
The research firm found with the enactment of the Economic Growth and Tax Relief Reconciliation Act in June of 2001, personal tax decreased from 14.76% to 9.23% in August, a decrease of 5.53% according to data from the U.S. Bureau of Economic Analysis. During the June 2001 to August time period, deposit balances increased from $4.3 billion to $7.6 billion, according to data from the FDIC and MRI.
"The relationship between the percentage of personal tax and deposit balances is very logical," said Dan Geller, executive vice president of MRI. "When the relative amount of disposable income decreases due to higher percentage of personal tax, it simply means that people have fewer funds to spend and save."
Geller said EGTRRA made significant changes in several areas of the Internal Revenue Code including income tax rates, estate and gift tax exclusions, and qualified and retirement plan rules. Many of the tax reductions were designed to be phased in over a period of up to nine years, he added. However, the phase-in time was accelerated by the Jobs and Growth Tax Relief Reconciliation Act of 2003.