The late-night agreement to avoid the fiscal cliff will not prevent tax increases for the majority of Americans, and some in the business community feel it won’t help Indiana businesses either.
The plan maintains the Bush-era tax cuts for individuals earning less than $400,000 and couples earning less than $450,000, essentially raising tax rates people over those levels for the first time in two decades.
“This is largely a spending problem, not a revenue problem,” said Indiana Chamber president Kevin Brinegar. “I hesitate to even call it a solution. It’s woefully inadequate, because it doesn’t even begin to address the magnitude of the difference we have between federal spending and federal revenues.”
And despite the last-minute deal, most Americans will still have more taxes to pay in 2013.
“The big thing most people are going to experience is on their first paycheck this year, it’s going to down probably by two percent,” said John Striewe, president of the Fiscal Tax Company in Indianapolis.
As it turns out, payroll taxes are to blame. The government temporarily lowered the payroll tax rate in 2011 to 4.2 percent from 6.2 percent to put more money in the pockets of Americans — but has cost about $120 billion each year. That tax cut expired Monday.
Americans earning $30,000 a year will take home $50 less per month. Those earning $113,700 will lose $189.50 a month.
“I’ve been in the tax business 46 years,” Striewe said. “And there’s always change going on.”
If Congress hadn’t acted, it could have meant rate increases across the board, which would have also triggered huge cuts to government programs, including unemployment benefits.
“They put it off to the last minute, maybe just to make everybody nervous,” said Dolores Suesz, who is currently collecting employment. “I think it should have been done a long time ago.”
Suesz admits she was nervous her benefits would be cut off if Congress had gone further off the cliff.
“I’d have probably felt pretty broke,” said Suesz.
Instead, she feels relieved, but she is still looking for a job.
And local business leaders, like Brinegar, feel it’s the uncertainty that is keeping companies from hiring.
“They believe this problem needs to be addressed on the spending side, and the action Congress took this week did nothing to address that,” Brinegar said.
“I’ve even had employers tell me, ‘I shut down a plant, now I’ve got the customer demand to open it back up, but not until I know what my tax rates are going to be.'”