We’ve said our peace in opposition to the NC General Assembly’s campaign to increase unemployment taxes for employers across the state. We’ve received SOME criticism over that position — even from alleged conservatives — sniffing that the increase is a mere “pittance” that will not be a big deal for folks to deal with.
Well, folks seem to forget that employers have to deal with rules, regulations and tax rates from THE FEDS as well. The New York Times has realized that the expiration of Bush-era tax rates is hurting family finances and damaging the economy in a ripple effect from coast to coast:
Jack Andrews and his wife no longer enjoy what they call date night, their once-a-month outing to the movies and a steak dinner at Logan’s Roadhouse in Augusta, Ga. In Harlem, Eddie Phillips’s life insurance payment will have to wait a few more weeks. And Jessica Price is buying cheaper food near her home in Orlando, Fla., even though she worries it may not be as healthy.
Jessica Price, 20, holds two jobs near her home in Orlando, Fla. She is buying cheaper food, though she worries it is less healthy.
Like millions of other Americans, they are feeling the bite from the sharp increase in payroll taxes that took effect at the beginning of January. There are growing signs that the broader economy is suffering, too.
Chain-store sales have weakened over the course of the month. And two surveys released last week suggested that consumer confidence was eroding, especially among lower-income Americans.
While these data points are preliminary — more detailed statistics on retail sales and other trends will not be available until later this month — at street level, the pain from the expiration of a two-percentage-point break in Social Security taxes in 2011 and 2012 is plain to see.
“You got to stretch what you got,” said Mr. Phillips, 51, a front-desk clerk and maintenance man for a nonprofit housing group who earned $22,000 last year. “That little $20 or $30 affects you, especially if you’re just making enough money to stay above water.” So he has taken to juggling bills, skipping a payment on one this month and another next month.
“I’m playing catch-up each month,” he said. “You go to the supermarket and you can’t spend what you used to.”
Jack Andrews has it slightly better than Mr. Phillips. He earns a bit more than $40,000 a year manufacturing ceramics in a local factory, but because his wife, Cindy, is disabled, he is the sole breadwinner. Something had to give now that he is earning about $800 less a year, or $66 a month, and it was the couple’s monthly night out.
“It’s just gotten out of reach,” Mr. Andrews said.
The tax break, which was pushed by the White House to stimulate spending in 2011 and extended in 2012, was always supposed to be temporary. But with pressure building in Washington to reduce the deficit and politicians fighting bitterly over whether to raise taxes on the very rich, the question of how the increase in Social Security taxes would affect the poorest workers did not seem to garner much debate on either side of the aisle.
“I don’t see any reason to consider supporting its extension,” said Timothy F. Geithner, the Treasury secretary, in testimony last year. Even Nancy Pelosi, a reliable liberal who leads the Democratic minority in the House of Representatives, was for letting it expire.
The higher rate applies to all earned income up to $113,700. For a household earning $100,000 a year, the two-percentage-point increase means an additional $2,000 a year in payroll deductions. Economists estimate that the payroll tax increase will reduce disposable income by about $120 billion and shave half a percentage point from economic growth in the first quarter — a significant blow given that the economy is expected to expand only 1 to 2 percent in the first half of 2013.
“If you wanted to design a policy to squeeze the spending of lower- and middle-income households, raising the payroll tax is the way to do it,” said Ian Shepherdson, chief economist at Pantheon Macroeconomic Advisors. “It’s very regressive.”
In Medford, Ore., Darchelle Skipwith had to scrap her monthly budget and start over when the law changed.
She is buying less meat; driving less often to see her sister, who lives 12 miles away in Eagle Point; and putting less away in savings. In August, Ms. Skipwith, 42, hopes to get a raise of 50 cents an hour at her job stacking shelves at Walmart, which should help make up the difference.
For now, she has no choice but to change her daily routine.
“I added it up — it’s about $75 a month,” Ms. Skipwith said. “That’s not a lot for some people, but mine is the only paycheck. I don’t have extra money coming in.”
Let’s put this together. Workers in North Carolina will now have a larger chunk taken out of their check for unemployment taxes AND federal withholding. So, people will have less disposable income and it will cost MORE to employ people. Explain to us AGAIN HOW this was supposed to turn the economy around and put people back to work?