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.

2 comments:

Tom Hickey said...

Problem is distributional effects. Given the income distribution in the US, how much will be spent and how much saved?

Payroll said...

I am starting a business, and I would like to know how to get legal payroll for myself and employees! What do I have to do?