Payroll Tax

Shoppers trod carefully in January, lured into stores by retailers dangling post-holiday clearance deals but spending sparingly to balance out higher payroll taxes and lingering economic uncertainty. Same-store sales at major retailers such as Nordstrom, Gap and Costco reported a 5.8% upswing last month from January 2012, handily beating earlier estimates of a 3.5% boost. The data, from Thomson Reuters, features a roundup of 18 retailers sans drug stores such as Walgreens and Rite Aid. Same-store sales account for revenue at retail locations operating for at least a year, stripping out the fluctuations of recent openings and closings.

Consumer confidence continued to slip in January, falling to its lowest level since November 2011, the Conference Board said Tuesday. The group's monthly Consumer Confidence Index fell to 58.6 in January, down 8.1 points from the month before. “Consumer confidence posted another sharp decline in January, erasing all of the gains made through 2012," said Lynn Franco, director of economic indicators, in a statement. "Consumers are more pessimistic about the economic outlook and, in particular, their financial situation.

Gov. Jerry Brown's budget proposal may be too optimistic, but California's finances still have shown dramatic improvement, the Legislature's top financial advisor said Monday. Legislative Analyst Mac Taylor said the state is likely to generate $2.1 billion less in revenue and savings than the governor is counting on. But after years of catastrophic deficits, that's a relatively small gap in an estimated $97.7-billion proposal, he said. "That's not a startling difference," said Taylor, who called the governor's plans "reasonable.

Two months ago, the state's legislative analyst delivered a familiar warning: The budget that the Legislature had approved in June, which was supposed to include a $948-million surplus, was actually heading toward a $1-billion shortfall because of lower-than-expected revenue and higher costs. It was the same kind of message the Legislative Analyst's Office has delivered midway through every fiscal year since the housing market collapsed in 2007 - a sure sign that budgets held together by chewing gum and baling wire were coming apart.

Robert Briones weathered the downturn in the economy well, working more than he needed, going on a vacation to Norway with his family and eating out at lunch from time to time. But even the 48-year-old psychologist can't escape the latest blow to consumers' finances: a tax increase that will affect an estimated 160 million workers. As part of the deal on the so-called fiscal cliff, Congress extended tax breaks for middle-income families but did not extend a payroll tax cut that was set to expire this year.

Americans may be breathing a deep sigh of relief that Congress resolved the so-called fiscal cliff crisis for the time being - until they see their next pay stubs. That's because payroll taxes will increase on most workers after Congress decided not to reverse an expiration of a payroll tax cut - a development that was largely expected. Payroll taxes rose to 6.2% under the deal, from 4.2% last year. The nonpartisan Tax Policy Center estimates that 77% of Americans will see higher taxes because of the elimination of the payroll tax cut, meaning $115 billion less in disposable income.

Whatever the ultimate shape of the "fiscal cliff" solution that has preoccupied all Washington, and a fair swath of the rest of country, in the final days of 2012 and into the new year, Americans of all walks of life should be asking themselves this question: How do we like being conned? The deal, passed by the Senate on New Year's morning, was made final late Tuesday when the House of Representatives signed on. Its essential elements include expiration of the President George W. Bush-era income and capital gains tax cuts on couples' incomes over $450,000, and a modest increase in the estate tax. Unemployment benefits and tax credits for lower-income families will be extended.

WASHINGTON -- Moody's Investors Service  warned Wednesday that the "fiscal cliff" tax deal was not enough to remove the risk of a downgrade of the U.S. credit rating. The company, one of three major credit rating firms, said the deal approved Tuesday night to raise about $620 billion in tax revenue over the next 10 years was "a further step in clarifying the medium-term deficit and debt trajectory of the federal government. " But the package, which averted income tax increases on most Americans, did not produce "meaningful improvement" in the ratio of the federal government's debt to its economic output.

The good news for the U.S. economy as we enter 2013 is that the election's over. The bad news is that the election's over. What's good about it is that both parties in Washington can shed their preoccupation with the campaign theatrics that dominated our long national voyage from pre-primary jockeying through election day. Yet the most dispiriting thing about the campaign's end is that the economic challenges facing the majority of Americans remain...