JONESBORO, AR(KAIT) – Congress may have struck a deal earlier this week to avert careeningoff the so-called fiscal cliff, but most Americans will still end up payinghigher taxes in 2013.
The AmericanTaxpayer Relief Act of 2012, passed on New Year's Day to avert the fiscal cliff,included measures to prevent income tax rates from increasing on the middleclass.
Most of the nation's160 million workers, however, will still take home smaller pay checks thisyear.
That's because thelegislation did nothing to stop a two-year temporary cut in the Social Securitypayroll tax from expiring this week.
"You're going tosee an additional two-percent Social Security tax withheld," said SherryStringer, an accounting partner at Jones & Company, Ltd., in Jonesboro, "soI think some people are going to be pretty surprised because they thought thiswas all fixed. It was maybe for most people on income taxes, but on SocialSecurity tax, you're going to see your check go down."
Stringer has gottena lot of calls recently from clients worried about the changing payroll taxes.
In 2011 the federalgovernment temporarily lowered the payroll tax, which funds Social Security.
The tax went from6.2 percent to 4.2 percent in hopes that this would help boost the economy bygiving workers a little extra money.
With the economyimproving, Congress decided to let the payroll tax revert to the pre-stimuluslevel of 6.2 percent, which means workers will pay two percent more in payrolltaxes.
The latest estimates show that workers making $50,000 willpay an extra $1,000 in payroll taxes this year. That equals about a $38reduction in pay on a bi-weekly pay check.
"[That pay cut] will be noticeable in people's pay checks,"Stringer added.
Some workers worry this tax cut has come at an inopportunetime and will negatively affect their spending habits in the months ahead.
The latter is certain, according to economics professor DanMarburger at Arkansas State University in Jonesboro.
"We will see in our pay checks a little less money,"Marburger said. "I think the average person is going to pay $1,000 more intaxes this year. That's obviously going to vary by income class, but it's goingto be a hit that you'll notice."
Marburger said the payroll tax increase was unavoidablebecause everyone knew it was temporary.
"We are going to be helping the senior citizens with theirSocial Security benefits," he said. "That's what the money was there for and soI don't expect the payroll tax increase – we may not like it as consumers andcitizens, but I don't think it's going to hurt the economy much."