I did my taxes this week … always ahead of the game. Usually I owe a little bit to the Feds and receive quite a bit back from the state which off-sets Federal taxes owed and the cost of heating oil in February and March. I did notice that very little federal taxes had been withheld from Becki’s lower pay.
As usual I received a goodly sum back from the state but was wacked by the Feds. Then I recalled that the Feds had reduced withholding requirements to encourage spending and employers automatically implimented this stimulus. For those out of work in the last year, reduced withholding was irrelevant. For those of us that received a slightly larger take-home pay as a result of this stimulus, this seemed inconsequential. But for the overall economy, lower withholding resulted in several billion dollars being put back into circulation.
Frankly I never considered the ramifications of lower withholding until I found out that I owed the Feds a little more than $2700 with a small fine added in. It would not surprise me if most of the employed did nothing about their withholding a year ago and are now in shock because of what they owe the Feds.
While reduction of withholding may have stimulated the economy last year, what impact will this measure have on our national economy this year?