Payroll tax hike shrinks take-home pay
If your most recent pay check felt a little lighter, you're not alone.
Most Americans are seeing their take-home pay shrink by 2 percent or more this year.
As part of the so-called "fiscal cliff" deal, Congress decided to let a temporary cut in payroll taxes for Social Security and Medicare expire.
Genoa resident Tyler Larson said he needs a second part-time job. Now that the tax cut has expired, a purchase he's been hoping to make will have to wait.
“I kind of wanted to buy new shoes for working, so I had shoes that weren't just skater shoes for work -- more professional-like shoes. I don't really have money for that right now," said Larson.
That's not what Merle Bries, the store manager for Tradehome Shoes in Valley View Mall, wants to hear.
“Obviously, if people don't have the disposable income to actually be using that money toward non-essential goods, that could impact our business a little bit. The one thing for us, shoes are always an essential -- just maybe not the most expensive items out there. They might be cutting back their budget to say, 'I can't afford a really expensive shoe,' and settle for a less-expensive shoe," said Bries.
Congress is allowing Social Security taxes to go back up from 4.2 percent to 6.2 percent.
That means someone who makes $50,000 a year can plan on taking home about $20 less each week.
That adds up to more $1,000 a year.
Also part of the fiscal cliff deal, Medicare taxes are going back up from 1.45 percent to 2.25 percent for higher wage earners. That starts at $200,000 in wages for individuals and $250,000 for couples filing joint returns.
Sparta resident Dexter Mazyck said it's bad timing.
"I believe that, yeah, it was a bad idea. For this point in time, it was a horrible idea for so many Americans who are hurting today because of the lack of jobs and, out there in the economy, the way it is today," said Mazyck.
Bries said he thinks the tax increase could impact the way many retailers do business this year. He said he wouldn't be surprised if there were more sales and promotions to convince people to spend more of the pay they do take home.
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