In 1991 the federal government changed the withholding amounts for personal taxes

Economics Oct 09, 2020

In 1991 the federal government changed the withholding amounts for personal taxes. The change meant that people would not have as much withheld from their paychecks. But there was no change in the tax code itself, so the amount of tax due in April 1992 was not changed. How would consumption and saving respond to this withholding change? Fully support your answer with a theoretical basis.