This Year's Tax Bite Is Gnawing A Hole In Consumers' WalletsGene Koretz
Don't count on the "peace dividend" of lower oil prices to stimulate consumption, advises economist Richard B. Berner of Salomon Brothers Inc. It's being largely offset by tax bites that are already eating into consumer incomes. While tax cuts have boosted take-home pay in prior recessions, Berner calculates that tax hikes of close to $34 billion will trim disposable income by nearly 1% this year.
Berner's tally: Some $5.5 billion and $2.2 billion, respectively, will be added to federal and state income-tax takes, plus $1.5 billion at local levels. An additional $5.8 billion in stepped-up federal medicare contributions will hit later this year. And excise-tax increases at all levels of governments (including the federal gasoline tax) will siphon about $18.5 billion from consumers' pockets into government coffers. "With 28 states experiencing fiscal problems," adds Berner, "we're likely to see more state tax hikes later this year."