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Today’s Top Headlines

Payroll Tax Hike Hits US Consumer Confidence

by Leroy Baker,, New York

01 February 2013

The Conference Board Consumer Confidence Index (CCI) in the United States, which had declined in December, fell further in January, due, it was said, to the expiry of the temporary payroll tax cut at the end of 2012.

The 2% reduction in the social security tax withholding rate to 4.2% was in effect for the whole of 2011 and 2102. The tax rate reverted to its previous 6.2% from January 1 this year as an extension to the tax cut was not included in the recently-enacted American Taxpayer Relief Act.

The CCI, by its January 17 calculation date, had decreased sharply to 58.6 (1985=100), and Lynn Franco, Director of Economic Indicators at The Conference Board pointed out that the index "posted another sharp decline in January, erasing all of the gains made through 2012."

"Consumers are more pessimistic about the economic outlook and, in particular, their financial situation," she added. "The increase in the payroll tax has undoubtedly dampened consumers' spirits and it may take a while for confidence to rebound and consumers to recover from their initial paycheck shock."

TAGS: individuals | tax | business | employees | payroll | social security | United States | tax breaks

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