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"Stocks soar on news of rapidly shrinking paychecks" is a headline you won't see today, but Nick...

"Stocks soar on news of rapidly shrinking paychecks" is a headline you won't see today, but Nick Colas points out 79% of households make under $100K/year and are subject to the full brunt of the higher payroll tax which kicked in on Jan. 1 - removing 4% of their annual spending power. He sees it as a 50 bp drag on GDP growth in 2013.
Comments (15)
  • 4%?
    3 Jan 2013, 09:35 AM Reply Like
  • Yes 4%. He referred to "households" assuming that there are two people in such household earning a paycheck the result is a 4% reduction in their spending power.
    3 Jan 2013, 09:43 AM Reply Like
  • Bear,

     

    I agree the math seems wrong somehow. Perhaps he is basing it on an after-tax income base.

     

    2% of $100k of income is $2000 and 1% of $50k is $1000.

     

    Honestly, I had the same reaction yesterday. The market was celebrating a tax increase of pretty sizable proportions on anyone earning a pay check. That's a sizable number of people and dollars.

     

    Interestingly our media is so clueless that somehow this got missed in the excitement of taxing the rich. The "rich" got off easy under this negotiation.

     

    Great editorial from the WSJ this morning:

     

    http://on.wsj.com/VxuesC
    "There's plenty to lament about the capital and income tax hikes, but the bill's seedier underside is the $40 billion or so in tax payoffs to every crony capitalist and special pleader with a lobbyist worth his million-dollar salary. Congress and the White House want everyone to ignore this corporate-welfare blowout, so allow us to shine a light on the merriment."
    3 Jan 2013, 09:51 AM Reply Like
  • Both parties are parties of the rich - its just a question of whose rich folks get to feed at the trough. Our government now exists for the benefit of the government!
    3 Jan 2013, 12:49 PM Reply Like
  • Tired of people complaining about this and making it out to be a tax increase, it is an end to the TEMPORARY tax decrease and goes to the Social Security trust fund, which people will be tapping into at some point.
    3 Jan 2013, 09:35 AM Reply Like
  • Is there really any point of continuing SS... phase it out.
    3 Jan 2013, 09:38 AM Reply Like
  • as long as i get mine when the time comes
    3 Jan 2013, 09:41 AM Reply Like
  • How many years until you start collecting? If it's more than 40 I wouldn't count on it
    3 Jan 2013, 09:41 AM Reply Like
  • 35 and counting!
    3 Jan 2013, 09:56 AM Reply Like
  • Larry, doesn't change the fact that this was $$$ that people had to spend the last couple of years and DON'T have to spend in 2013.
    The 4% I'm sure is based on the fact that your gross salary isn't a reflection of what you have to spend, it's more complicated than that.
    3 Jan 2013, 10:00 AM Reply Like
  • if they raise the level they collect above the max (around 109k now) and means test it, SS will be fine for awhile.
    3 Jan 2013, 09:50 AM Reply Like
  • So we have to put more in to get the same as we did 30 years ago out?
    3 Jan 2013, 10:01 AM Reply Like
  • Yes, but remember you get COLA for SS, which is very unique. On the payroll "tax" I agree on letting it expire, although I would have preferred to phase it, perhaps 1% this year, 1% next year. We clearly have economic momentum now, and we don't want to break that. The key (as Clinton knew) to deficit reduction is growth growth growth (which means more tax income for the Fed government).
    3 Jan 2013, 12:21 PM Reply Like
  • It is a security blanket not a retirement plan
    3 Jan 2013, 11:24 AM Reply Like
  • it should be optional... it isn't because then the incompetent wouldn't have a piggy bank they can plunge into when all their stupidity catches up with them... meanwhile the competent have to suffer less money in their paychecks all the while hoping the incompetent don't use it all before they can legally start withdrawing it.
    3 Jan 2013, 11:31 AM Reply Like
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