Does the Payroll Tax Threaten Consumer Spending?

The good news is that the tax uncertainty is over, so we saw money pour into Wall Street during the days following the fiscal cliff news. The bad news is that the first paychecks of the year are starting to trickle in, and many Americans will be surprised to see that their payout will be slightly lower than it was last pay period.

While Capitol Hill is patting itself on the back for saving most from higher taxes, the fiscal cliff did not stop Social Security withholdings from reverting back to the pre-2010 rate. This tax hike, affecting 77% of households, has Americans putting 6.2%—up from 4.2%—of their salaries into Social Security. This, coupled with the fact that consumers are still paying off their credit cards from the holiday shopping season, has many analysts expecting a drop-off in consumer spending.

Earlier today, I asked some of my Facebook followers if they were planning to change their spending habits due to higher taxes. While most said that they shouldn’t be affected, a good number were unsure about how this would impact their household budget. So it remains to be seen how Americans will react to their leaner paychecks, but I’ll keep close tabs on this trend.

In any event, I still think there are plenty of profit opportunities in retail—particularly those stocks that I recommend in my Blue Chip Growthnewsletter. If you’re not currently a member of Blue Chip Growth or are looking to supplement your retail strategy, I have the highest rated specialty retail and multiline retail stocks listed in Portfolio Grader.


Louis Navellier

Louis Navellier

More Louis Navellier



RSS Feed

Little Book

InvestorPlace Network