Americans In Jan. Paid Record Taxes On Fiscal Cliff Deal

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Americans paid out a record amount of taxes in January, eclipsing the early 2008 peak, as payroll-tax relief expired and tax rates rose on higher earners.

Personal and social insurance taxes totaled just over $2.6 trillion at a seasonally adjusted annual rate, Commerce Department data out Friday showed. Receipts jumped by $113 billion from December's total, which had been inflated by year-end bonuses and dividends awarded before the tax hikes.

January's tax take is more than $500 billion above the mid-2009 level. Rising revenues have helped trim budget deficits, but they remain high because spending has outpaced the economy over the past five years.

Pocketbook PainHigher taxes have acted as a steady head wind for disposable income. The fiscal-cliff tax hikes, projected to bring in close to $200 billion in the first year, appeared to take a toll in January.

Real personal spending rose an "anemic" 0.1%, noted IHS Global Insight economist Chris Christopher. The payroll tax hike "hurt many Americans where it counts — in their pocket books," he wrote.

After years of falling median household incomes, adjusted for inflation, the payroll tax hit "has hurt many mid- to lower-tier retail chain stores," he noted.

Personal income dived 3.6% in January, with disposable income down 4%.

Total wages remain 2.2% below December 2007 levels in real terms, meaning the wage recessionhttp://news.investors.com/economy/022813-646108-wage-recession-worse-than-jobs-slump.htm is 61 months, the worst slump by far since World War II.

Social insurance taxes, primarily for Social Security, Medicare and unemployment insurance, eclipsed $1 trillion for the first time, jumping $127 billion from December to nearly $1.1 trillion.

That reflected the end of the 2 percentage-point employee payroll tax cut along with Medicare payroll tax hikes that took effect this year under ObamaCare.

Now, instead of the 2.9% combined employee and employer tax on wages, households will face a 3.8% hospital insurance tax on income over $250,000 — including investment income.

Personal current taxes (primarily federal and state income taxes and not sales or most property taxes) were just above $1.5 trillion. That was down slightly from December despite the rise in the top federal rate to 39.6%. The decline reflected the come-down after a boost from the prior month's dividends and bonuses.

The Congressional Budget Office has projected that federal tax receipts, including corporate taxes, will rise from 15.8% of GDP in fiscal 2012 to 16.9% this year. But the run rate for taxes is a bit higher, since the fiscal cliff deal didn't take effect until the second quarter of FY 2013.

In 2014, CBO sees revenue returning to 18% of GDP, close to the historical average.

A tax-refund delay due to the last-minute fiscal cliff deal likely lifted net tax receipts in January, but payments likely would have reached a record in any case.

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