Taxes Take A Bigger Bite Out Of Consumer SpendingChristopher Farrell
To boost the economy, President George Bush fiddled with withholding rates to give taxpayers a bit more money before the election in exchange for smaller refunds after the election. As a consequence, economists had expected consumer spending to slow down around this time. What is taking them by surprise is how big the impact on consumer spending seems to be. Retail sales fell by 1% in March, far more than most forecasters anticipated despite the disruptions from that month's harsh blizzard. Equally troubling, the Commerce Dept. revised February's reported retail-sales increase of 0.3% to -0.3%.
Thus far, individual tax payments are running 30% higher in 1993 than in 1992, and individual tax refunds are down 7%, according to Edward S. Hyman, economist at International Strategy and Investment Group Inc. Tax payments are up $10 billion and refunds down $3 billion. Hyman also believes that some income shifting into 1992 and the economy's recovery contribute to the bigger tax bite.
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