The Land :: www.TheLandOnline.com

Nuts & Bolts

January 11, 2013

Here's why your paycheck just shrank

WASHINGTON — Many Americans just received their first paycheck of 2013. That sound you hear is the collective "What the . . ." they have emitted upon looking at their pay stub.

For all the self-congratulatory back-patting from the White House and Congress on the deal that averted the "fiscal cliff" of tax increases — the deal locked in the George W. Bush-era tax cuts for households making under $450,000 — they tended not to mention what the deal did, or rather didn't do, on the payroll tax. A 2 percentage point reduction in the Social Security tax, which hits all American workers, had been enacted at the end of 2010. In the fiscal cliff deal, Congress and President Barack Obama neither extended it further nor agreed on any other policies that might have the similar effect of leaving more money in workers' pockets.

The numbers, for anybody who hasn't checked their paycheck yet (or won't get paid in 2013 until later in the month): For someone who makes the U.S. average for private sector workers of $818.69 a week and is paid every other week, that adds up to a reduction of $32.75 in each paycheck. For higher earners, anyone making over $113,700 annually, each bi-weekly paycheck will decline by $87.46.

The increase in payroll taxes has now gone from being an abstraction in Washington policy debates that politicians prefer not to talk about to being something very real.

The big question for the economy as 2013 gets underway is how America will react to their smaller paychecks. It is uncharted waters in many way: For most of the last two decades, taxes have been steadily falling. There is not much evidence for just how much Americans will pare back in response to tighter times and a higher tax burden.

One place to look for evidence is what happened when the payroll tax cut was implemented at the start of 2011. In the first six months of the year, personal consumption spending rose 2.2 percent, though that coincided with a spike in fuel prices tied to unrest in the Middle East, so when adjusted for inflation consumption spending rose only 0.6 percent. (In a way, it turned out to be lucky timing; in effect, the payroll tax break offset the economic drag that came from what turned out to be a temporary bump in oil prices.)

Text Only
Nuts & Bolts
  • 130408_NT_BEA_good kids We're raising a generation of timid kids

    A week ago, a woman was charged with leaving her child in the car while she went into a store. Her 11-year-old child. This week, a woman was arrested for allowing her 9-year-old daughter to go to the park alone. Which raises just one question: America, what the heck is wrong with you?

    July 18, 2014 1 Photo

  • Your chocolate addiction is only going to get more expensive

    For nearly two years, cocoa prices have been on the rise. Finally, that's affecting the price you pay for a bar of chocolate - and there's reason to believe it's only the beginning.

    July 18, 2014

  • Afghanistan vet who ran to grenade gets Medal of Honor

    A former Marine Corps corporal who was severely wounded when he risked his life to shield a squad mate from a grenade blast in Afghanistan was awarded the nation's highest military decoration Thursday.

    June 20, 2014

  • May 2014 was the hottest may in recorded history

    According to new data released this week, May 2014 is officially the warmest May in recorded history.
    Both NASA and the Japan Meteorological Agency have tentatively ranked May at the top of historical measurements, though NASA's numbers are preliminary because crucial information is still missing from China.

    June 20, 2014

  • Nelly-elephant.jpg Bet the farm: 5 'psychic' animals predict soccer victories

    Need some guidance on whom to place your bets for this year's World Cup? Since Paul the Octopus achieved a prediction success rate of 85 percent in 2010, hosts of animal oracles around the world have sought attention as soccer sages. Here's a look at a few of them.

    June 20, 2014 1 Photo

  • Is the FDA waging a war on artisanal cheese?

    Is the Food and Drug Administration waging a war on artisanal cheese?
    The answer depends on your perspective. But this much is certain: The agency's answer to New York regulators about using wooden boards to age cheese has caused an uproar in the domestic industry and raised questions about the status of imported cheeses that use the same process.

    June 12, 2014

  • Texting while driving is latest teen risk as smoking declines

    While smoking among American teens has fallen to a 22-year low, most adolescents admit to engaging in a new type of risky behavior: texting while driving.

    June 12, 2014

  • No one is against devoted dads

    Father's Day is Sunday, which means that it's time for pundits and politicians to scold the American public - with special ire reserved for black members of the American public - for our supposed indifference to the wonder and awe of fatherhood.

    June 12, 2014

  • Lindley, Tom.jpg College World Series finally onto baseball-like scores

    College baseball deadened its aluminum bats three years ago, deflating the game's offense and dialing back runaway scores. Fans who watch this year's College World Series may actually catch a shutout, or even a pitchers' duel.

    June 12, 2014 1 Photo

  • Jeffrey Land mg.jpg Tough scrape: Inmate faces new charges after failed escape try

    An inmate at a Georgia detention center could spend more time behind bars after officials said he tried to use a piece of metal to cut through his cell wall in an apparent escape attempt.

    June 12, 2014 1 Photo

Featured Ads
Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide
The Land's Twitter Feed