Effingham Daily News, Effingham, IL

Features

January 7, 2013

Payroll tax jump 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.

Brian Opanja is a reporter for The Free Press in Mankato, Minn. He can be reached at bojanpa@mankatofreepress.com

1
Text Only
Features
  • The top 12 government programs ever

    Which federal programs and policies succeed in being cost-effective and targeting those who need them most? These two tests are obvious: After all, why would we spend taxpayers' money on a program that isn't worth what it costs or helps those who do not need help?

    April 24, 2014

  • McCain 1 House Republicans are more active on Twitter than Democrats

    Your representative in the House is almost certainly on Twitter. Your senator definitely is. But how are they using the social network? Are Democrats more active than Republicans, or vice versa? Who has the most followers on the Hill?

    April 23, 2014 1 Photo

  • Do your genes make you procrastinate?

    Procrastinators, in my experience, like nothing better than explaining away their procrastination: General busyness, fear of failure, and simple laziness are just a handful of the excuses and theories often tossed around. Now researchers from the University of Colorado Boulder have added another option to the list: genetics.

    April 23, 2014

  • The waffle taco's biggest enemy isn't McDonald's. It's consumer habits.

    Gesturing to Taco Bell, Thompson said McDonald's had "not seen an impact relative to the most recent competitor that entered the [breakfast] space," and that new competition would only make McDonald's pursue breakfast more aggressively.

    April 23, 2014

  • Doctors to rate cost effectiveness of expensive cancer drugs

    The world's largest organization of cancer doctors plans to rate the cost effectiveness of expensive oncology drugs, and will urge physicians to use the ratings to discuss the costs with their patients.

    April 17, 2014

  • treadmill-very-fast.jpg Tax deduction for a gym membership?

    April marks another tax season when millions of Americans will deduct expenses related to home ownership, children and education from their annual tax bill. These deductions exist because of their perceived value to society; they encourage behaviors that keep the wheels of the economy turning. So why shouldn't the tax code be revised to reward preventive health?

    April 16, 2014 1 Photo

  • To sleep well, you may need to adjust what you eat and when

    Sleep.  Oh, to sleep.  A good night's sleep is often a struggle for more than half of American adults.  And for occasional insomnia, there are good reasons to avoid using medications, whether over-the-counter or prescription.

    April 16, 2014

  • Why Facebook is getting into the banking game

    Who would want to use Facebook as a bank? That's the question that immediately arises from news that the social network intends to get into the electronic money business.

    April 14, 2014

  • DayCareCosts.jpg Day care's cost can exceed college tuition in some states

    Most parents will deal with an even larger kid-related expense long before college, and it's a cost that very few of them are as prepared for: day care.

    April 11, 2014 1 Photo

  • Boston doctors can now prescribe you a bike

    The City of Boston this week is rolling out a new program that's whimsically known as "Prescribe-a-Bike." Part medicine, part welfare, the initiative allows doctors at Boston Medical Center to write "prescriptions" for low-income patients to get yearlong memberships to Hubway, the city's bike-share system, for only $5.

    April 10, 2014

AP Video
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.