WASHINGTON — A tax cut that began last month gave consumers the biggest jump in their incomes in nearly two years. But Americans boosted their spending only slightly, a sign that many people are being cautious with their money even as the economy improves.

Good news about income starting to take hold

Consumers increased spending 0.2% in January, the smallest gain since June, the Commerce Department reported Monday. Personal incomes jumped 1%, reflecting the 2 percentage point reduction from the Social Security tax cut.

The small spending gain pushed total spending last month to an annual rate of $10.59 trillion, up 7.4% from the recession low hit in December 2008. Some economists said that poor weather may have played a role in slowing spending growth last month. They are counting on spending to increase throughout the year, which would help the economy grow.

Source – USA Today

Tax Cut Takeaways

The economy is recovering, and signs of stabilization are finally starting to show. The government’s push to get income flowing again is slowly making its way to main street. And as Americans continue this upward trend, it’s time to take stock of our own financial recoveries. Making a firm resolution to resolve your tax debt is a proactive strategy to help both decrease the needless amount spent on accumulating penalties and interest, as well as increasing your own peace of mind.