But when it hit their paychecks in January, they became believers.
“An increase in Social Security taxes is leaving Americans with less take-home pay – and a more negative outlook for the U.S. economy,” the Associated Press reported this week.
“The Conference Board said Tuesday that its Consumer Confidence Index dropped 8.1 points in January from December to a reading of 58.6, the lowest since November
“Conference Board economist Lynn Franco said the tax increase was the key reason confidence tumbled in January, making Americans less optimistic about the next six months.
“For a worker earning $50,000 a year, take-home pay will shrink this year by about $1,000.”
This shouldn’t have been any surprise.
For one thing, the national media could’ve done a better job warning people (as this page did). But perhaps they didn’t want to rain on President Obama’s fiscal cliff victory – although, didn’t he promise no tax increases on anyone making less than $200,000?
For another thing, the media have constantly attacked anyone preaching fiscal prudence in government. Think Tea Party. What the media should have been doing during the tax-and-spend debate of the past year is to stress to readers and viewers that the more money you take out of earners’ hands, the less money they have to spend.
That sounds simple enough. But if we’ve got that so down pat, why was the January tax increase implemented and why was it able to sneak up on so many people?
The reason that happened is also simple: The national media took Mr. Obama’s implicit message – that tax increases on the wealthy will improve the economy – and they ran with it. They let him snooker people into somehow believing that feeding the federal government behemoth is in some magical way going to improve things in the society at large. How does that work?
Instead, we’ve had another abject lesson in basic economics: If you want less of something, tax it. In this case, taxing workers means they are able to spend less, creating a drag on an already fragile economy.
A report out Wednesday indicated the economy actually shrank 0.1 percent in the fourth quarter of 2012. Again, that has now been followed by higher taxes on workers in January, which has led to a plunge in consumer confidence and, no doubt, spending.
“The surprise contraction,” says another AP article, “could raise fears about the economy’s ability to handle tax increases that took effect in January and looming spending cuts.”
Smooth move, Washington!
The payroll tax increase is supposed to go to your Social Security retirement fund. Theoretically, that’s a good thing. But in reality, there is no retirement fund: Washington has been looting Social Security for decades to pay for ongoing government spending (which your boss would be put in prison for if he or she tried that at work). So, it’s not really an investment in your future; it’s just another dollar for Washington.
And at a time when workers need every cent they can keep.
This just in: Higher taxes slow the economy.