From the WSJ today:
Less take-home pay is causing 45.7% of consumers to curtail spending, according to a survey released on Thursday by the National Retail Federation, a trade group. A quarter of consumers are delaying big-ticket purchases, a third are reducing restaurant visits, and about a fifth of shoppers are spending less on groceries, it said.
U.S. retail sales in January rose at their smallest rate in three months, estimates the U.S. Commerce Department, a result said analysts of the effect the higher payroll tax was having on consumer spending.
The Fiscal Cliff debate was focused on the rising income taxes, but it should have been framed around the expiration of the payroll tax. For some reason, Democrats and Republicans both generally agreed that the payroll tax cut was due to expire. The President’s first proposal included a year-long extension of it, but after that, he dropped it. There just wasn’t any interest in renewing it.
Outside of the capital, it wasn’t much better. The mainstream media mostly ignored the issue. After all, it’s a lot more fun to cover a major battle over income tax rates than to cover bipartisan agreement on a rising payroll tax. But we reap what we sow and now both consumers and businesses are feeling the pain.