Higher Taxes and Higher Prices Are Coming in 2013
Regardless of the American economy’s checkered enthusiasm, it appears as if consumers are currently aboard the fast track to higher taxes and rising prices on things like health care and grocery items scheduled to come around at the turn of the new year.
Experts say that even with unemployment at 8 percent, along with consistently stagnant wages, consumer spending has been surprisingly resilient to the lingering effects of the downtrodden economy. However, most of them agree that higher costs put in place to test the strength of the consumer is likely to present some problems. “We think it’s going to be a difficult six to nine months,” said Scott Hoyt, senior director of consumer economics for Moody’s Analytics. “If anything, conditions are likely to get worse, particularly at the start of the year.”
Worse, indeed. American households have eliminated nearly $880 billion in debt since the bottom dropped out of the economy four years ago. Yet, at the beginning of the year, the temporary 2 percent payroll tax cut comes to an end, which has some economists predicting more than a $125 billion reduction in household spending that could ultimately be responsible for eliminating $600 billion from the economy next year.
And while American lawmakers try to come up with creative ways to lessen the initial effects of these imminent tax hikes, most fear they could result in the highest level of economic reclusiveness this country has seen since the 1969 tax to finance the Vietnam War.
Even with this foresight, prices on food, health care and education are predicted to go up significantly at the beginning of the year, putting more of a strain on consumer budgets as well as squashing any hope for those individuals still searching for the American dream.