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January payroll tax hike has plenty feeling the pinch
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Many working Americans are already feeling the pinch from the boost in Social Security payroll taxes that kicked in Jan. 1, forcing them to pull back on spending, according to a survey by the accounting staff recruiter Accounting Principals.
The survey, conducted in mid-February, found that the two percentage point tax hike drained an average of $130 from monthly take home pay. As a result, three quarters of respondents said they had to cut back.
Nearly 40 percent said they cut back the most by eating out less often at bars and restaurants. Other top targets were clothing purchases (12 percent), trips and vacations (12 percent), and gasoline usage and other commuting costs (6 percent).
Five percent were contributing less to retirement accounts since the higher payroll tax, while 3 percent cut back most by drinking less coffee.
PG graphic: Payroll tax increase cutting into social life
(Click image for larger version)
The survey also looked at other spending and saving habits, finding that roughly one in four workers (28 percent) has prematurely pulled money from 401k retirement accounts.
The biggest reasons cited for tapping retirement funds early was for unexpected home or car repairs (27 percent), unexpected health care bills (25 percent) and covering expenses after losing a job (22 percent).
Other reasons were making a downpayment on a house or apartment (17 percent) and covering a mortgage or rent payment (17 percent).
A nearly equal number (16 percent) said they withdrew money from retirement accounts to pay for "nonessential" leisure expenses, such as for remodeling, vacationing or buying a boat or second home.
As might be expected in a survey from an accounting group, there also was a question about how people planned to prepare their annual tax returns this year.
The largest percentage, 48 percent, planned to handle the drudgery themselves, while a hefty 44 percent would pay an accountant or other professional tax preparer to do the work. The rest, 7 percent, were relying on a friend or family member.
The survey contained a warning of sorts for working parents concerned about annoying their colleagues.
Twenty-seven percent of respondents said they "hate" being asked to buy cookies, wrapping paper or other fundraising items that co-workers peddle for their children because they don't like feeling pressured or don't want the stuff.
Roughly half said they only considered buying if they needed the products.
Still, there was no shortage of softies, either.
Twenty-four percent surveyed said they would buy something, no matter what their colleagues were selling.
First Published March 22, 2013 12:06 am
