Friday, March 4, 2011
Personal income surges in Jan as payroll tax cuts kick in
This is a stunning example of what payroll tax cuts can do. Even though the cut was minor--a 2% reduction--the effect was powerful. Personal income surged 1.0% in January and the biggest contributor...a huge drop in Contributions to Gov't Social Insurance (read: FICA, SS). This boosted personal income by $95 billion! Imagine if we had done a full payroll tax holiday as Warren Mosler and others (including me) have been suggesting? The economy would have been roaring!!!
Other important contributors
Private wages and salaries +$15 bln
Dividend income +$8 bln
Transfer payments (unemployment benefits, SS, health insurance, veterens benefits, etc) actully were down by $12 bln.
These payments are likely to be cut further in the coming months.