The payroll tax numbers look bullish on the economy, but any conclusions have to be weighed against the quality of the data. The upcoming Jobs report will include data for the approximate monthly period ending January 12, 2013. That is, it includes data crossing over the year end. Normally that would not be a problem, but this most recent year-end includes tax law changes.

There was a significant amount of bonuses being paid out in December 2012 rather than in the first Quarter of 2013. That shows up in the data. Then of course the tax receipts would drop in 2013 to reflect the lack of bonuses paid in 2013. That also shows up in the data. But then you would see the receipts level off at a number higher than January 2012 because the Feds are taking about 2 percent more. That also shows up in the data. (see attached chart) So the tax receipts accurately reflect policies, the fact of which counters arguments suggesting that people and businesses do not pay attention to taxes.

If taxes reflect policies in this short-run, then their ultimate effects will also reflect those policies. That is, sooner or later the increased taxes will undoubtedly have bearish effects on the economy. Like, we didn't know that?

Is there a better metric of what is going on, considering that the changing rules have the payroll tax receipts jumping up and down? Yes there is, and it is the medicare taxes, officially known as "Hospital Insurance". I have previously commented on this space about medicare taxes, so forgive me for not repeating it. This report will be released at 2 PM EST on the 8th business day of February. The bad news is that it is only monthly data, but the good news is that it will reflect receipts through January 31, and as such should give us a clean look.


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