It’s apparently unpleasant:
American workers are opening their first paychecks of the year and finding an unpleasant surprise: The government’s take has gone up.
A temporary cut in Social Security withholdings gave Americans hundreds of extra dollars to spend over the past two years. But Congress allowed that break to expire during the wrangling over the fiscal cliff, meaning that Social Security taxes have reverted to 6.2% of salary from the temporary 4.2%.
The noticeable lightening of paychecks as consumers remain tentative threatens to put a drag on economic growth. The effect for companies is that the hit is likely to cement a frugal attitude that led consumers to cut back on eating out and shift to less-expensive store brands.
Now, I actually support a payroll tax increase. I think people who receive any form of government benefits should actually pay for them (yes, I know this is a crazy belief), and I think that the increase in tax rates is small enough and marginal enough that it will lead to increased revenues, thereby hypothetically reducing the deficit.
Of course, a higher tax burden means more economic malaise. But then, that’s simply the inevitable cost of the government living beyond its means. Bills must be paid, even by governments. If people don’t want higher taxes, they should vote for politicians who actually reduce spending. If people are unwilling to do vote for budget cuts, then they shouldn’t complain about higher taxes.