If your first check this year seems to be a little smaller than usual, it’s not an accounting error. In the fiscal cliff resolution that was reached just after the New Year, Congress let a temporary cut in Social Security withholdings expire.
Want More?Fiscal Cliff Resolution: What It Means for Your Wallet
Now, Social Security taxes are once again 6.2% of salary, rather than the 4.2% that workers had been enjoying for the last two years.
While two percentage points may not seem like a big deal, the average American household will see $18 to $20 less each week, which adds up to $900 to $1,000 each year.
As a result, many retailers are expressing concern that consumers will be more closely watching their wallets and looking for low-cost alternatives to the brand names they had previously purchased. One such consumer, Kari Barker, told The Wall Street Journal, “I used to be a diapers snob and would only buy Pampers or Huggies … Now I buy Target’s house brand, because it’s two-thirds the cost.”
While The Journal points out that the impact on the overall economy will be hard to predict, given that we don’t know whether that extra $20 was spent on consumer goods or put into savings, it’s very possible that retailers could see sales go down as consumers recalibrate their budgets.
Check out our helpful guide to the fiscal cliff resolution to find out more about how the deal will affect your bottom line.