Average Income in January Took Biggest Plunge in 20 Years – Payroll Tax Cut Partly to Blame
You weren’t alone if you thought January was a lean month.
Due to a variety of factors, Americans’ average income took its biggest drop in nearly 20 years falling over $505 billion or about 3.6 percent. That’s the largest drop since January 1993.
The Commerce Department is reporting a series of events led to the plunge, including major companies paying out dividends in December to avoid big tax hikes. The expiration of the payroll tax cut was also responsible, as all working Americans saw their payroll taxes rise at least 2 percent.
CNN Money reported Friday:
Spending increased $18.2 billion, or 0.2 percent, in January. Some economists, like Chris Christopher, Jr. of IHS Global Insight, called that “anemic” and pointed to weak retail sales at low-end and mid-tier retailers as proof that consumers are being squeezed.
The payroll tax cut “hurt many Americans where it counts — in their pocket books,” he said.
Americans also saved less of their income in January (put away in accounts for future use), only about 2.7 percent — the lowest such rate in five years.