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Taxes to Rise Despite Fiscal Cliff Deal

Most Americans will take home 2 percent less money this year due to a Social Security payroll tax increase.

 

Despite a fiscal cliff deal being reached, working Americans will see less money in their paychecks this year.

A temporary reduction in the Social Security tax was not reinstated by the federal government, meaning our paychecks will shrink by 2 percent.

“When Illinois changed their tax by 2 percent, people really didn’t notice it because Social Security taxes were lowered at the same time,” said accountant David Robbins with Nieminski Robbins and Associates Certified Public Accountants in South Barrington and Chicago. “Now the temporary lowering of the 2 percent is gone so people are going to see less take home pay.”

Robbins explained that the first $113,000 of income is taxed under the Social Security payroll tax policy. This means that a person making $100,000 will see $2,000 less money in their pockets.

“Once you give someone relief and then you take it away, it really bothers people more. Every paycheck you’re going to see it,” Robbins said.

The Senate and House did extend most of the tax breaks enacted under President George W. Bush, but the wealthiest Americans will still take a hit.  

“For single filers above $400,000 or $450,000 for married couples, they’ve implemented the new tax rate of 39.6 percent, up from 35 percent,” Robbins said.

Those who make more than $450,000 in capital gains will also be taxed more. Dividends are now taxed at 20 percent instead of the previous rate of 15 percent. 

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Tom Walker January 03, 2013 at 12:34 PM
47.7% !! Increase in Social Security payments. 4.2% to 6.2%. 2 points disguises the huge increase on poorer people who the Democrats purportedly represent. The bottom 50% pays less than 5% of income taxes, the Bush tax cuts now praised by the Democrats. But they pay about 40% of Social Security and Medicare. Imagine the howling if the Republicans had proposed such a scheme! And don't forget older people who are now paying 33.3% more in dividend, stock, and interest. 15% to 20%. 5% understates it.
Charles Hahn January 03, 2013 at 01:03 PM
Not to mention peoples' savings account interest being taxed at those higher rates, as well. I've been saving for years for my children's college. The middle class needs separate representation.
Batchpatcher January 03, 2013 at 01:18 PM
This is terrible news. I hate playing more income taxes. What Obama doing....Expect stock market will drop back to reflect the high tax plan
Peter James January 03, 2013 at 01:18 PM
The social security change from 4.2% back to 6.2% was not really an increase. When the tax holiday was implemented for the 2011 tax year, everyone knew it was a temporary measure to help give a short term boost to the economy. All knew the social security funding could not sustain it for ever and only the most foolish and most disingenuous people would call the fact that it ended (as always planned) to be a tax increase. It is not. And of course, as always, poorer people - and all of us - get this back when they retire or become disabled. We all want social security to stay strong and solvent. Also, the dividend tax increase from 15% to 20%, according to all I have read, only applies to individuals earning more than $400,000 and joint filers with income greater than $450,000. There is so much misinformation and deliberate mis-characterizations being spread on talk radio and on these blogs it is no wonder this country is becoming so difficult to govern.
Peter James January 03, 2013 at 01:23 PM
And people's savings accounts, unless you earn more than $400,000 (individual) or $450,000 (filing jointly), will not be taxed any more. College savings plans are unaffected by the legislation. Where is this misinformation coming from?

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