SALISBURY, Md.- The fiscal cliff may be behind us after a last minute deal was reached in Congress. However, that does not mean the majority of us escaped higher taxes. If you have gotten your first paycheck of 2013, you will notice less net pay. This all stems from an increase in the payroll tax.
For the past two years, we have all enjoyed a bit of a break, thanks to the government temporarily lowering the payroll tax rate. But that break is over, and that means lower paychecks for people already struggling here on Delmarva.
Mark Figgs said every day is a financial struggle. The father of a 5-month-old baby girl, he must pay child support to his estranged girlfriend, on top of other expenses. He is currently putting college on hold and living at home with his parents, trying to save money and hoping for a better future.
He said he was shocked when he saw his first paycheck of the new year.
"It was crazy, because I get paid $190 and only had $90 on my check to spend and that ain't enough to do anything with."
Mark told WBOC the lower paychecks are going to make life even tougher.
"It will mean I'm going to have find another job, even though there's not another job out there, because no one's hiring," he said. "I've just got to save the little money that I get left."
So, what gives? Tylor Claggett, professor of finance at Salisbury University, said the answer is simple.
"In a sense, we really had a break for two years and now we're just getting back to normal again," he explained. "The normal Social Security tax is 6.2 percent, it was dropped to 4.2 percent in response to the financial crisis and now its just been put back to 6.2 percent. So there's been a 2 percent in the deduction, and that's what people are seeing."
The payroll tax is used to fund Social Security. The rate increase means those earning $30,000 a year can expect to see about $50 less every month.
The Tax Policy Center estimates that 77 percent of American households will face higher federal taxes this year.
According to the Federal Reserve Bank of New York, Americans reported spending between 28 and 43 percent of the savings from the payroll tax cut over the past two years. The group predicts the average household making $50,000 a year will reduce spending by about $710 this year to make up for the rise in payroll taxes.
Monday, May 20 2013 9:13 AM EDT2013-05-20 13:13:36 GMT
GREENWOOD, Del.- Investigators say a woman had to be taken to the hospital for treatment of smoke inhalation following a Sunday night house fire in Greenwood. The Delaware State Fire Marshal's OfficeMore
Investigators say one person had to be taken to the hospital for treatment of smoke inhalation following a weekend house fire in Salisbury.More
A group of homeless people living in the woods in Wicomico County have been forced to pack up their camp and leave. Police said the group was living in the woods in Fruitland near the Wal-Mart shopping center. WBOC's Bill Mich reports.More