Expert: 'Cliff' compromise means $80 less per month
Various denominations of money are displayed on a table. (File/FOX Carolina)
GREENVILLE, SC (FOX Carolina) -
Although the compromise on the "fiscal cliff" was achieved, averting massive tax hikes, paychecks will still be smaller this year, according to a local financial expert.
Furman business professor Tom Smythe said the bill succeeded at preventing income taxes from increasing for most people, but the Social Security payroll tax cut expired. He said that means rates will go from 4.2 percent back to 6.2 percent.
"For the average family here in South Carolina, it's going to amount to about $1,000 in 2013, or about $80 to $85 a month."
Smythe said he calculated the average income in the state to be about $50,000 per year. That means people who are paid bi-monthly can expect to see about $40 less per paycheck. He said the change will translate to less spending and budget tightening.
"People went out and bought cars or furniture or appliances on credit," Smythe said. "They were counting on having that $80 a month to pay for these things. Well, now they are going to have to find places to cut to be able to pay for these expenditures that they have made commitments on a year or two ago."
The compromise was an effort to keep the country from slipping back into a recession, Smythe said. He said income tax rates will increase on people making $400,000 or more and couples who make $450,000 or more.
Smythe said most people will see the changes in their first paychecks of the year. He said state workers have already seen smaller checks.
The professor said that with the cost of living going up and higher Social Security taxes, Smythe said the U.S. may very well slip over the "fiscal cliff" in time.
"It will prove to be a drag on the economy, which, of course, has an impact on jobs and things like that," Smythe said.
Now that the bill has passed Congress, it moves to President Barack Obama's desk to be signed into law.
Copyright 2013 FOX Carolina (Meredith Corporation). All rights reserved.
Wednesday, May 22 2013 9:38 PM EDT2013-05-23 01:38:14 GMT
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