Americans feel austerity’s bite as payroll taxes rise
WASHINGTON (Reuters) – Americans are beginning to feel the pinch from Washington’s decision to embrace austerity measures aimed at bringing down the nation’s budget deficit.
Paychecks across the country have shrunk over the last week due to higher federal tax rates, and workers are already cutting back on spending, which will drag on the economy this year.
In Warren, Rhode Island, Ben DeCastro got his first paycheck on Friday in which taxes on his wages rose by 2 percentage points. That works out to about $30 a week.
“You sit back and do the calculation, and that’s $30 I’m not going to spend at a restaurant,” said DeCastro.
He said he worries that people hit by higher taxes will spend less at the chain of furniture stores where he works as a marketing manager.
Politicians in Washington made much hubbub last week about a bipartisan deal to soften or postpone some $600 billion in scheduled tax hikes and government spending cuts. President Barack Obama said the deal would shield 98 per cent of Americans from a middle-class tax hike.