2 percent tax hike has workers finding less in their paychecks
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By Robin Schwartz & Murray Feldman Fox 2 News
ROYAL OAK, Mich. (WJBK) -- "I found out my check was about $20 bucks shorter than it usually is," said forklift driver Donnovan Kennedy.
Welcome to 2013. An estimated 160 million workers found less in their paychecks Friday, and it will stay that way thanks to one federal tax that's back in full force.
"The payroll tax's that's always been there. It's been 6.2 percent and it goes into Social Security and Medicare. It's what you see on your paycheck as FICA," said LJPR Chief Investment Officer Brad Reynolds.
Two years ago, that tax was cut by two percent, but the so-called holiday has now expired. Lawmakers let it happen when they worked out the fiscal cliff deal.
"In a sense they did raise taxes on the middle class, even though it's only two percent," Reynolds said. "Who do you blame? Blame government, I mean honestly both sides. They came to the agreement."
Economists estimate this two percent tax hike could strip $115 million in disposable income from the economy this year, and that could hurt small businesses as people shop less.
"Go to work everyday, work hard. I need all the money I can get," said Kennedy. "There's always stuff you can cut back on. I just have to decide what I want to cut back on."
Workers who make $20,000 to $30,000 a year will take home about $300 less this year. Those who make $100,000 will fell a $2,000 tax crunch.
"You know, $10, $5 here after a year it adds up. It could be somebody's rent, somebody's car payment, somebody's insurance, something to help the kids. It's just not right," said Lauren Greenfield.
She works at a local restaurant and said every dollar counts in her budget. The new, smaller paychecks will have many families rethinking their spending to start the year.
So how can you save $20 a week or more depending on your income?
Experts say you need a budget. Carry a pencil and paper with you for a week and jot down everything you spend. You'll probably be surprised. Then create a budget.
If you buy lunch everyday, brown bag it. You'll save up to $15 a week.
Call your cable company and ask for a better deal. They may have one.
You can also sell some of the gift cards that are laying around the house. The website GiftCardGranny.com may be helpful.
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