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


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.

MORE HARD-HITTING JOURNALISM

In 2014, before Donald Trump announced his run for president, we knew we had to do something different to address the fundamental challenge facing journalism: how hard-hitting reporting that can hold the powerful accountable can survive as the bottom falls out of the news business.

Being a nonprofit, we started planning The Moment for Mother Jones, a special campaign to raise $25 million for key investments to make Mother Jones the strongest watchdog it can be. Five years later, readers have stepped up and contributed an astonishing $23 million in gifts and future pledges. This is an incredible statement from the Mother Jones community in the face of huge threats—both economic and political—against the free press.

Read more about The Moment and see what we've been able to accomplish thanks to readers' incredible generosity so far, and please join them today. Your gift will be matched dollar for dollar, up to $500,000 total, during this critical moment for journalism.

We Recommend

Latest

Sign up for our newsletters

Subscribe and we'll send Mother Jones straight to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate

We have a new comment system! We are now using Coral, from Vox Media, for comments on all new articles. We'd love your feedback.