Expired Payroll Tax-Cut Barely Noticed by Workers

In January, the payroll tax cut expired, meaning that paychecks are now 2% less than they were before. Many economists predicted that consumer confidence and spending would suffer as a result, but it turns out that retail sales actually rose higher than expected, and consumer confidence rebounded. In fact, Bankrate.com surveyed workers and found that 48% of respondents didn't even notice that they were being paid less. 7% said that the loss has not had an affect on their finances.

“It’s very encouraging. It means other things going on are helping,” said Mark Zandi, chief economist at Moody’s Analytics. "We are weathering the storm well, at least so far, better than I would have thought."

However, Zandi also cautioned that the impact could take longer to become evident and that the results of the survey may not be accurate since it is only based on consumer perceptions. He said that there is a "wealth effect" currently taking place because of record highs in the stock market and a rebounding real estate market. These two things themselves do not put more money into American's pockets, but people seem to be willing to save less and spend more.

“The job creation numbers were sufficient to make consumers believe that their economic situation was improving,” said Richard Curtin, director of Surveys of Consumers at the University of Michigan’s Survey Research Center, which publishes a monthly survey of consumer confidence. In February, consumer sentiment rose nearly  5% over January’s figure.  “Hours increased and employment increased, so more people had more money in their income even if taxes were higher,” Curtin said.   42 percent of the workers surveyed said that they cut their spending. These respondents were middle class with household incomes between $50,000 and $75,000.

It isn't really surprising that so many people did not notice the disappearance of the tax cut. It was created to give Americans a few more bucks on their checks in hopes that they would turn around and feed that money back into the economy without realizing it. It was a stealthy boost that consumers weren't meant to even notice.

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The American People Place High Value on Homeownership

According to a recent nationwide survey of American voters, We The People really value homeownership. After all, it is the American dream to own your own house, complete with a yard and a white picket fence! So it's not surprising, then, that Americans are overall opposed to any government efforts to weaken or eliminate the mortgage interest deduction. People expect the feds to have a role in helping qualified home buyers obtain 30 year mortgages at affordable rates.

If we want to maintain a somewhat thriving middle class economy, the government needs to realize how important homeownership really is to the American public. A good, healthy and stable market would do wonders for the country.

3 out of 4 voters find it appropriate for the government to promote homeownership by way of new tax incentives to keep stimulating the economy. And two-thirds of people feel as though the feds should actually help home buyers to afford long-term fixed-rate mortgages. So much so that 73 percent of voters are against the elimination of the mortgage interest deduction, (and 68% of people would be less likely to vote for a candidate who proposed to abolish it).

People are also against proposals to reduce the mortgage interest deduction, or to eliminate the deduction for interest paid for a second home. They don't want to see any limits either.

Homeownership is definitely a cornerstone of America. So much so that 96% of homeowners are happy with their decision to own a house. Even those who are "underwater", a whopping 84% of voters say that they too are happy to own, despite the mortgage costing more than their home is worth. In fact, owning a home is considered to be the best long-term investment that could possibly be made, despite the ups and downs of the market.

We hope that the government, and those running for office, will take all of these feelings of the American people into serious consideration.

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