Taxes Go Up, Consumption Goes Down

New Tax Rate Impact

Taxes are rising, but it could have been more painful – Economy Watch on

Congress enacted tax increases on the first day of the New Year that are not as severe as the expiration of the Bush tax cuts would have brought. The average household making somewhere between $75k to $100k would have paid about $3500 more in taxes per year, almost $300 per month. Now, this household will pay about one-third of that amount, $125o per year or $100 per month.

The most important change is the elimination of the three year old payroll tax holiday. People will notice an immediate drop in their take home pay. Consumption will decrease due to these increases. Will the decrease be enough to bring the U.S. into recession?



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