Fiscal Cliff Deal causes your pay check to shrink
(KATV) In addition to milk prices going up, there are quite a few other things you'll have to pay more for in 2013. From hamburgers to bacon, meat products are going up 3-4% due to the historic drought last summer.
Those of you watching us on Satellite TV, get ready. Prices will rise about 4% due to an increase in programming costs.
Stamps will increase by a penny and shipping costs will go up 4-9%. Sticker prices on new cars will go up by a thousand dollars or more.
On top of all that, taxes are going up. John Shrewsbury with GenWealth Financial Advisors in Bryant says, "It's causing people a lot of concern. A lot of upset folks will see their paycheck and say what happened?" The fiscal cliff was averted, but because the payroll tax was not extended, households will start paying more federal taxes this year.
New Year's Day the Bush era tax cuts were scheduled to expire. The senate and house extended most the tax cuts but let the payroll tax cut expire. It funds Social Security.
Shrewsbury says, "Unfortunately, everyone is going to feel the impact of the 2% increase back to the original Social Security Tax of 6.2-percent." He explains, "Back when we were going through the financial crisis, the government decided they wanted to try and stimulate the economy and so they cut the Social Security tax by 2-percent on the employee side. What happened was, everybody got used to it and now we see the increase back to where it was and it feels like a tax increase to us."
The money will restore funding to Social Security that has been getting less because of the tax cut. The 2% percent that is being taken out of your paycheck means someone making $50,000 will take home about $1,000 less a year.
Shrewsbury adds, "The Social Security program has been getting much less money than it was getting in the past. Which you can kind of debate whether that was a good idea in the first place, given the fact Social Security is on financial shaky footing anyway." Now they're trying to restore that funding and it's coming out of each of our pay checks like it was before.
The payroll tax cut was allowed to expire in exchange for higher income tax rates on the top income earners. On a positive note, Shrewsbury says the fiscal cliff deal prevented deep spending cuts and even bigger tax hikes from taking effect. "This is just a small tax increase. It really kind of gives you a taste of what would have happened, had they not reached a compromise."