The biggest difference for most wage earners is an expected change in employees’ payments to the Social Security program, also known as the FICA itemization, which saw the payment amount rise from 4.2 percent to 6.2 percent. That 2-percent change is estimated to amount to $500 less in the take-home pay or about $10/week of those earning a gross income of $25,000 annually or $1,000 less or about $20/week for those earning $50,000 annually. Combine those amounts in a dual-income, household and families could start to feel the squeeze, particularly for those living paycheck-to-paycheck.
Those families earning more than $450,000 annually or individuals earning more than $400,000 annually, also known as wealthy earners, will face an even deeper blow to their wallets because their tax bracket will change from 35 percent to 39.6 percent. The actual impact will depend on how much those wage earners bring home annually, though some would say these folks merely are getting into the appropriate bracket, rather than getting special treatment. Fewer than 300 taxpayers in Franklin County — little more than 1 percent of the county’s 25,000 residents — are estimated to be impacted by this provision.
One other local group that could be impacted by the change, however, is small businesses that are structured as S-Corp or partnerships and report their business’ profit as personal income. For those earning income from their business above the previously listed threshold, the financial hit could be significant.
Another change for those who might not earn a wage, but generate income from capital gains, is an increase from 15 percent to 20 percent for the capital gains and dividend tax rate. Though earnings have been low for most investments, this could further erode precious investment earnings.
Higher taxes for some will mean deficit reduction spending on the home front. The federal government needs to follow taxpayers’ lead and get its own spending on a dramatic downward trend to avoid the coming debt ceiling challenge, which is bound to have its own fiscal cliff element, too.
— Jeanny Sharp,
editor and publisher
editor and publisher