Consumer spending strong despite payroll tax increases

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INDIANAPOLIS–Many Hoosiers are learning to live with smaller paychecks after new payroll tax increases went into effect at the beginning of the year.

“It’s affected me to a certain extent, I can’t say greatly, but yes, it did,” said shopper Carl Riley.

That sentiment was reflected in Wednesday’s report from the Department of Commerce that showed a 1.1 percent increase in February retail sales compared to January’s sales and a 4.6 percent increase compared to February 2012.

However, many economists pointed to the fact that much of that spending went toward higher gas prices.

Grant Monahan with the Indiana Retail Council said middle and low income families will likely be the first to feel the pinch due to a combination of factors.
“The payroll tax cut, two is gasoline prices affecting family budgets, and income tax time is right around the corner and the federal government, because of the sequester, has slowed down some refunds for income taxes,” Monahan said.

On the flip side, he said many investors are feeling optimistic about the future and stocks have recently rebounded. Housing market indicators are also pointing to a healthier market. Still, some experts caution that the impact of the Social Security tax increase could just take a little bit longer to show up.

“Consumer confidence numbers are up from January to February by almost 10 points, I guess that’s a good sign…. But I think the tax situation impacts middle an lower income families and you’re going to see that play out over the next several months,” Monahan said.

6 comments

  • ClanSmokeJaguar

    Hope and change 0bama promised us.

    I'm glad I didn't vote for him!

    Those that did…enjoy the higher costs of most things and lowered paychecks.

    • 'Thor'

      Those higher costs have just begun and will get worse and the young people are going to get hit hard paying for Obamacare. The low-informed don't even see it coming.

  • 'Thor'

    I bought 500 more rounds of rifle ammo today, cupboard is full as well as the freezers. We really don't want for anything, but we have worked at this since 2008. Soon we'll need to move more things off property,
    Pray, vote, and buy more ammo.

    • 'Thor'

      The low-informed like you who can't see what is coming probably don't care and that is okay, but I have those that are part of my responsibility that really do. That comes with the misses and me being the patriarchs of our family. Of course being a country kid who can take care of himself (and others) goes a long way to accomplish that. Farm is paid for and we cash rent the land (I doubt you know what that means or how it works) and being retired at 49 (mid 50's now) gives me the time to teach family members and a few others. I really doubt that you have a month's worth of food on hand right not like 90% of the other people. Good luck.

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