A new survey indicated that consumers are not feeling as much of a pinch by the increased payroll tax rate as expected.
Bankrate found that more than half of working Americans either haven’t noticed (48%) or have been unaffected by (7%) the January 1 expiration of the payroll tax cut.
Thirty percent of working Americans have cut their spending as a result. Eight percent are putting less money into savings and 3% have scaled back retirement contributions.
“What is shocking is that the lowest-income households were the least likely to have cut back on spending and the most likely not to have noticed the change in the payroll tax,” said Greg McBride, CFA, Bankrate.com’s senior financial analyst. “These results contradict the widely held assumption that lower-income households would feel the biggest squeeze from the payroll tax cut expiring.”
Those most likely to have cut spending were households with income between $50,000 and $75,000 per year. The same surprising results were evident when evaluating on the basis of educational attainment: households headed by college graduates were the most likely to have cut spending, whereas households headed by those with less than a college degree were the most likely not to have noticed the higher payroll tax rate.
The survey was conducted by Princeton Survey Research Associates International (PSRAI) and can be seen in its entirety here.