Households Facing a Squeeze due to Higher Taxes

Last updated on March 5, 2022

Regardless of income level, many American households are facing a financial squeeze because of an increase in payroll and other taxes. Spending had a slight increase of 0.2 percent, which was due to an increase in utility usage during due the severe weather this past winter.

A lighter monthly pay check has forced households to cut down on their spending, be it on luxuries or necessities. Due to an increase in taxes, incomes dropped to a record four percent in January, and low spending affects businesses adversely.

The ending of the payroll tax cut hit most American households. Along with that, the talk of the fiscal cliff, the gaping deficit, and impending sequester, has not helped consumer confidence.

President Obama’s strategy to bring the country out of the fiscal deficit is to increase revenue through taxes and introduce spending cuts. Even if increased taxes for the rich are carried out it, the increase will not only affect the rich, but also average taxpayers.

Savings rates have also fallen to 2.4 percent.  Though taxpayers may spend less and save more, middle and lower-income households might not be able to hold their savings for long due to unexpected expenditures.

A proposal for increasing taxes for the wealthy is on the table yet again, and while tackling the U.S. fiscal deficit is difficult, but wrong policies might make it even worse.