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Payroll Tax Cut Expiration Takes Effect; Workers Feel Paycheck Shock

1:42 AM, Jan 12, 2013   |    comments
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Piedmont Triad, NC -- Millions of working Americans woke up to paycheck shock Friday, less than two weeks after lawmakers on Capitol Hill voted to avert the so-called "Fiscal Cliff".

The deal was touted as a tax increase only on individuals making more than $400,000 or households with incomes above $450,000.

But Congress also allowed the temporary Social Security payroll tax cut, which middle-class Americans enjoyed for two years, to expire.

The rate went from 4.2 percent to 6.2 percent.

Workers seeing their paychecks for the first time since the "Fiscal Cliff Deal" are seeing that first-hand.

"I was in shock!" said Jasmine Reyes. "I just can't believe it because that really does affect me. I mean, I live by myself, I pay my own bills, my rent, I go to school, I have loans and everything so I'm on a budget, so [every] little bit counts."

Another worker, Connie Turner, explains she was "freaking out" when she realized how much would be taken out of her and her husband's paychecks.

"We're guessing it's going to be about $200 less a month coming into our household. It's going to be huge,' she said.

In dollars and cents, the average worker could see $20, $30, $100 or more gone each payday.

Several people News 2 spoke with said they'd heard it was coming, but it didn't sink in until after they saw it reflected in their income.

"That could buy our groceries for more than a week or two," said Cindy Benedict.

But others, like Kevin Lamberson, said the two-percent increase is not the real issue.

"Twenty dollars a paycheck, we're right here at a gas station, that $20 doesn't even make a dent. People should be more concerned about the rising inflation with food costs," he explained.

"I knew it was going to happen so it is what it is," Jeff Kerrigan added.

The paycheck shock will affect millions of families across the country.

Individuals making $50,000 a year should expect to pay roughly$1,000 extra in taxes.

Lawmakers originally cut the tax rate two years ago as a stimulus for the economy.

Whether it worked or not, people are upset the payroll tax is going back up.

Some even refused to go on camera for fear they'd say something offensive.

Those who did speak on camera are taking a hard look at their budgets right now.

"It's going to make an impact on 'do we go out to dinner tonight?' - that impacts the restaurants, which, you know, is a trickle down," said Turner.

According to Steve Hutchinson, of Hutchinson Wealth Management, that's exactly what will happen and he expects it will impact the economy.

"It will have a shrinking effect on the economy. I mean, anytime the government comes in and takes more money - whether it's from higher income tax payers or all taxpayers - in this case, all taxpayers, it will have a shrinking effect on the economy. It's not going to go unnoticed," he said. 

Hutchinson added that in these situations, American resiliency kicks in.

Just like we do when gas prices go up, we complain.  However, after a while, we make changes and deal with it.

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