Did the payroll tax cut pay off?
Following a long winded debate and myriad negotiations, Congress eventually passed the payroll tax cut, which would put an estimated $1,000 back in the pockets of households with a median income of $50,000, according to the Federal Reserve Bank of New York.
Supporters of the bill said it would boost spending and help the economy recover from the recession, but opponents believed it wouldn't work because the majority of recipients didn't actually plan on spending the bonuses, the source reports. Instead, more than half of surveyed consumers said they planned to save the money or use it to pay off debts and only 8.8 percent said they intended to use it to boost their disposable incomes.
To explore the effectiveness of the measure, the Federal Reserve Bank followed up with taxcut recipients to find out how they ended up using the funds. It found there was a high degree of inconsistency with the way people said they intended to use funds and the way they actually did. For example, 38.5 percent of those who said they were going to save and 21.5 percent of those who planned to pay off debts actually spent the money on goods.
Overall, the study revealed 41 percent used the extra money to boost their spending, while 59 percent used it to pay off debts or contribute to their savings.
Supporters of the bill said it would boost spending and help the economy recover from the recession, but opponents believed it wouldn't work because the majority of recipients didn't actually plan on spending the bonuses, the source reports. Instead, more than half of surveyed consumers said they planned to save the money or use it to pay off debts and only 8.8 percent said they intended to use it to boost their disposable incomes.
To explore the effectiveness of the measure, the Federal Reserve Bank followed up with taxcut recipients to find out how they ended up using the funds. It found there was a high degree of inconsistency with the way people said they intended to use funds and the way they actually did. For example, 38.5 percent of those who said they were going to save and 21.5 percent of those who planned to pay off debts actually spent the money on goods.
Overall, the study revealed 41 percent used the extra money to boost their spending, while 59 percent used it to pay off debts or contribute to their savings.
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