CNHI News Service

News

January 4, 2013

Payroll tax hike may deflate some household budgets

MANKATO, Minn. —  

The holidays are over, including the one on your paychecks. Chalk that up to the fiscal cliff deal.

About 160 million Americans will take a 2 percent payroll tax hit in 2013 after Congress declined to extend the “payroll tax holiday” in effect the past two years.

As a result, Americans this week are seeing a tax on their paychecks rise from 4.2 percent to 6.2 percent.

Although the increase will pump more money into a debt-wracked  government that was losing $120 billion a year with the lower tax rate, economists say the move could strip the economy of $115 billion in disposable income this year as people, particularly in the lower-income brackets, cut back on spending.

The tax increase figures to hit hardest those living check to check who can ill afford the 2 percent setback.

“Obviously, the less you make, the more it’s going to hurt,” said  Alex Swanson, an accountant in Minnesota.

He said the pinch will be sharper for those who haven’t received yearly cost-of-living raises that help mitigate effects of the higher tax.

The 2 percent hike means that a person earning $30,000 will receive nearly $600 less this year, someone making $50,000 will receive about  $1,000 less, and someone earning $113,000 will take a $2,200 hit.

The payroll tax funds Social Security. The pay-in percentage was lowered a couple of years ago as an economic stimulus measure aimed at freeing up more spending money for Americans.

Many employers have or will take steps to give employees a heads-up prior to the “surprise” in their first 2013 paychecks.

“We’ve talked to some employees, but not all of them. We’ve just been waiting to see what would happen,” said Lee Masters, accountant for Agristrand, a 48-employee building materials manufacturer in Mankato.

 “For people living on tight margins even a small $25-$50 change can have a big effect. It’s a serious concern for our community,” said Phil Claussen, director of Blue Earth County Human Services in Mankato.

 

---

Details for this story were provided by Brian Opanja, a reporter for The Free Press in Mankato, Minn.

 

1
Text Only
News
  • Almost half of America's obese youth don't know they're obese

    The good news is that after decades of furious growth, obesity rates finally seem to be leveling off in the U.S.. The bad news is that America's youth still appear to be dangerously unaware of the problem.

    July 23, 2014

  • 072214 Diamond Llama 1.jpg Llama on the loose corralled in Missouri town

    A llama on the lam cruised Main Street Tuesday before it mistook a resident’s fenced backyard for a place to grab a meal and freshen up.

    July 22, 2014 2 Photos

  • An oncologist uses scorpion venom to locate cancer cells

    Olson, a pediatric oncologist and research scientist in Seattle, has developed a compound he calls Tumor Paint. When injected into a cancer patient, it seems to light up all the malignant cells so surgeons can easily locate and excise them.

    July 22, 2014

  • Screen Shot 2014-07-22 at 2.00.42 PM.png VIDEO: Train collides with semi truck carrying lighter fluid

    A truck driver from Washington is fortunate to be alive after driving his semi onto a set of tracks near Somerset, Ky., and being struck by a locomotive, which ignited his load of charcoal lighter fluid.

    July 22, 2014 1 Photo

  • mama.jpg What we get wrong about millennials living at home

    If the media is to be believed, America is facing a major crisis. "Kids," some age 25, 26, or even 30 years old, are living out of their childhood bedrooms and basements at alarmingly high numbers. The hand-wringing overlooks one problem: It's all overblown.

    July 22, 2014 1 Photo

  • Wal-Mart to cut prices more aggressively in back-to-school push

    Wal-Mart Stores plans to cut prices more aggressively during this year's back-to-school season and will add inventory to its online store as the chain battles retailers for student spending.

    July 21, 2014

  • Starved Pennsylvania 7-year-old weighed only 25 pounds

    A 7-year-old Pennsylvania boy authorities described as being so underweight he looked like a human skeleton has been released from the hospital.

    July 21, 2014

  • PPR_bus_crash_triage0718.jpg One dead, 50 injured in upstate NY tour bus crash

    Beneath a cloudless summer day in New York's Adirondack Park region, a Canadian bus inexplicably left Interstate 87, ploughed through the median guard rail, and skidded down a grassy embankment Friday morning, killing a teenage girl and injuring 50 other passengers. State Police investigators said they did not know what caused the bus en route to New York City for a three-day tour to lose control.

    July 18, 2014 1 Photo

  • Malaysians wonder 'Why us?' after second loss of airline jet

    It was all too familiar. Grieving families rushing to airport. The flashing television graphics of a plane's last radar appearance. The uncomfortable officials before a heavy thicket of microphones.
    For many Malaysians, the disappearance of Flight 370 in March has been a long trauma from which the nation has not yet recovered.

    July 18, 2014

  • A quarter of the world's most educated people live in the 100 largest cities

    College graduates are increasingly sorting themselves into high-cost, high-amenity cities such as Washington, New York, Boston and San Francisco, a phenomenon that threatens to segregate us across the country by education.

    July 18, 2014

Sports

Features

Opinion