Question: Who will be impacted by this bill and when?
Brett: Tax brackets increased only for high income Americans. Singles earning $400,000 and families earning over $450,000 went from paying an income tax of 35% to 39.6%.
But, payroll taxes will increase for everyone! Remember, we were never exactly entitled to low payroll taxes in the first place. Lower taxes were a gift Congress gave us with the goal of stimulating the economy. Now, as a result of the fiscal deal, payroll taxes will jump from 4.2% back up to 6.2% of your paycheck. This takes effect immediately.
Question: Do the math. How much does this really come out to?
Brett: I've taken a few salary averages in South Florida so everyone can figure out how they fit into the equation. Resort desk clerks who typically earn $23,000 a year will pay $460 more in payroll taxes. Electricians who earn $43,100 a year will pay $862 more annually. A property manager earning $64,020 a year will pay $1280 more in taxes. Finally, executives earning $200,360 a year will pay $2274 more. We have to add, for higher earners, the tax only affects the first $113,700 of our checks. Under the break it impacted the first $110,000 we earned.
Question: What can we expect over the next few months?
Brett: In February, we have to raise the debt ceiling to address the country's spending deficit. The truth is, Congress needs money. Economists in D.C. say leaders could be eying our deductions to make ends meet. If workers have fewer items to deduct, then they can all be taxed on more of their income.
Finally, while Congress left doctor payments in place, many seniors are not overjoyed because it's only for a year.
To read more about Brett, go to her website, thehomeeconomist.com.