The Curious Case of the Payroll Tax Hike That Failed to Bark in the Night

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Brad Plumer points out today that nothing bad seems to have happened after the payroll tax holiday ended on January 1. Why not?

One possibility is that many workers aren’t even aware that their taxes have risen yet. A new survey from Bankrate.com finds that just 30 percent of Americans have cut back on spending as a result of the payroll tax hike. A full 48 percent of Americans didn’t notice the change at all.

I’m skeptical. If economics means anything at all, it shouldn’t really matter if consumers “notice” any specific aspect of their financial lives. All that should matter is the size and distribution of aggregate income. If that goes down, it should affect the economy.

At the same time, I don’t think a fall in income is necessarily supposed to affect the economy instantly. Maybe we just need to give this a few months to kick in. There might be no need to invent a mystery here.

Also, I’d point out that people are notoriously bad at answering survey questions like this. I’d really like to see this question asked in a non-leading way, such as: “Did anything happen, good or bad, to your finances at the beginning of the year? If yes, what?” Then see how many people fail to mention that their payroll taxes went up. I’ll bet it would be a lot higher than 48 percent.

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Which is also a pretty great way to describe Mother Jones' mission: People coming together around the truth to hold power accountable.

And right now, we need to raise about $400,000 from our online readers over the next two months to hit our annual goal and make good on that mission. Read more about the information war we find ourselves in and how people-powered, independent reporting can and must rise to the challenge—and please support our team's truth-telling journalism with a donation if you can right now.

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