Wednesday, January 23, 2013

How Big Was the Tax Hike for Everyone Earning a Paycheck?

In total it was a huge tax hike. Ed Yardeni explains (my highlights):
The payroll tax paid by workers increased from 4.2% to 6.2% at the start of the year. It was temporarily cut back in 2010[...]The regressive tax is paid by everybody who earns $113,700 annually or less. That means someone making the median income of about $50,000 will pay $1,000 a year more in taxes, or a little more than $19 a week. These receipts are supposed to pay for Social Security and Medicare, but they are actually spent along with all other revenues.

I monitor the 260-day moving sum of withheld income and employment taxes deposited at the US Treasury. It was $1,791 billion on December 18. It jumped $25 billion to $1,816 billion on January 18. That’s a significant tax increase, especially if it is annualized, that could depress real GDP at least during the first quarter.

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