Payroll tax hike to decrease consumer spending

By By Lance Traweek / American Press

Take-home pay for many Americans has fallen because of recent changes to federal tax laws. The changes may affect discretionary

purchases and government tax revenue collections, a local expert says.

The two-year payroll tax “holiday” expired this year, and the rate returned to 6.2 percent on the first $113,700 of annual

income, up from 4.2 percent.

Workers earning $30,000 a year will net

about $50 less a month. For people earning $100,000 each year, the

change represents

a decrease of more than $150 a month. To compensate, almost 75

percent of respondents in a National Retail Federation survey

said they were eating out less, cutting travel plans and limiting

daily indulgences.

The change probably won’t affect sales

of durable goods, but it will affect discretionary spending, said

Michael Kurth, professor

of economics at McNeese State University.

“The strength of our local economy is likely to mask that,” Kurth said Thursday. “That doesn’t mean it’s not hurting us. If

you see it happening nationally, then it is also happening here.”

Governments are likely to see their sales tax revenues fall 2 percent to 3 percent in areas of the state that are not directly

affected by the natural gas boom, Kurth said.

“You have to buy food and gasoline. People will travel less and spend less money on entertainment,” he said. “When you get

less money you can’t cut your mortgage note, gasoline bill or your car note, but you may eat out less and go to the movies


Kurth said it’s those luxury goods that a household may limit, especially in the lower- and middle-income brackets. The change

won’t affect upper-income people as much, he said.

Nearly 50 percent of those will delay major purchases, such as a new vehicle, TV or furniture, and almost 60 percent will

cut back the amount they eat out, the survey reads.

“We cannot grow the nation’s economy until consumers consume,” NRF President and CEO Matthew Shay said in a news release.

“A smaller paycheck due to the fiscal cliff deal early last month, higher gas prices, low consumer confidence and ongoing

uncertainty about our nation’s fiscal health is negatively impacting consumers and businesses across the country.

“Every day we hear about building the middle class. We can only do that if we tear down barriers that prevent consumers from

investing their hard-earned money back into our nation’s economy. It’s really that simple.”

The purpose of the Tax Returns survey, conducted for NRF by BIGinsight, was to track consumer behavior and shopping trends

related to tax returns.