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MailTribune.com
  • 'Holiday' ends, tax increase will greet new year

  • Anyone who earns a paycheck in Jackson County better brace for a bigger tax bite starting in January, even if we don't topple over the so-called fiscal cliff.
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  • Anyone who earns a paycheck in Jackson County better brace for a bigger tax bite starting in January, even if we don't topple over the so-called fiscal cliff.
    A wage-earner in this county who receives an average salary of $35,152 will see a $700 drop in take-home pay next year when a temporary two-year Social Security withholding "holiday" expires.
    "Anybody living paycheck to paycheck is going to feel it," said Dan Kosmatka, a partner in the accounting firm of Kosmatka Donnelly & Co. LLP in Medford. "It will take spendable dollars out of circulation and will have some kind of impact on our consumer society."
    Kosmatka said residents can figure their own tax hit by taking their wage and figuring that another 2 percent will be taken out throughout the year starting in January.
    Many workers in Jackson County haven't had raises in years, so the cut in take-home pay will hurt.
    "There is not a working American or an American who pays taxes who will not be impacted one way or another," Kosmatka said.
    If Congress and President Barack Obama don't resolve automatic tax hikes under the fiscal cliff, the tax bite could go even deeper.
    According to the nonpartisan Tax Policy Center, the total tax hit could amount to $3,400 under the fiscal cliff scenario for the average U.S. household earning $80,800.
    Even low-income taxpayers earning just over $11,000 a year would see a tax hike of an estimated $412, according to the tax policy center.
    Those in the top 1 percent, with an average income of $1.3 million, would pay about $120,000 more in taxes annually.
    The biggest change for most people would come from the expiration of the 2001 and 2003 tax cuts, which would raise income-tax rates for everybody by 3 to 5 percentage points, depending on the tax bracket.
    Many employers have sent notices to their employees about the upcoming changes in their paychecks, focusing on the 2 percent Social Security tax that starts in January.
    Kosmatka has encouraged many employers to send out paychecks before the last day of the year so workers won't feel the 2 percent reduction, which is listed on a paycheck stub as FICA, or Federal Insurance Contributions Act tax.
    If an employer pays a worker on Jan. 2 for work done in 2012, the paycheck has to reflect the 2 percent increase, he said.
    For many workers, the tax hit will come at a time when employers are not able to offer wage increases.
    "Our workers are in the same boat," said Ron Fox, executive director of Southern Oregon Regional Economic Development Inc.
    He said it has been about five years since SOREDI workers have received an increase in base wages.
    Fox said he hasn't heard any concerns from local companies about the impact the tax changes might have on hiring.
    Some companies have expressed concern about tax credits expiring, particularly for wind energy, Fox said.
    Bill Thorndike, owner of Medford Fabrication, said he's leaving it up to his accountants to sort out the changes for his employees.
    "The lowering of FICA has been an advantage for employer and employee," Thorndike said. "But we have to be realistic. Those benefits have to be paid for."
    Thorndike said he's not sure what the impact will be from fewer dollars circulating in the local economy.
    "We still remain mildly optimistic," Thorndike said.
    One of his main customers is the wood products industry, which has undertaken a lot of capital expenditures recently to keep up with demand.
    "We're sitting in a pretty good place as the economy comes back," he said.
    Reach reporter Damian Mann at 541-776-4476 or dmann@mailtribune.com.
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