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.