Fiscal cliff avoided, but will it cost you cash?

January 2, 2013 4:58:59 PM PST
It looks like we've avoided the fiscal cliff. But it's still going to cost you cash. Your taxes are likely going up, and the increases could show up as soon as your next paycheck.

It all revolves around changes in the payroll tax. For the last few years, anyone who works has gotten a break. But now lawmakers have let that break expire. So every worker will take home less cash.

Wall Street celebrated the return from the brink by closing up 2 percent on the day. The owner of Kahn's Deli in Rice Village hopes it will reverse the fortune of small businesses like his. But he's cautious.

"Until I have a proven uptick in sales from this deal, I'm not doing any extra spending," said Jeremy Pakalka, Kahn's Deli owner.

The fiscal cliff has paralyzed a lot of business and investment for months. The uncertainty over whose taxes would be going up and how much put hiring and expansion on hold. The wealthiest one percent will be paying more, and while the rest of us will stay at the same tax rate, there'll be less in the paychecks because the Social Security payroll tax has been restored.

What that means to a $30,000 a year salary is $50 less a month; $83 less take home on a $50,000 salary; and on about $114,000 that would be roughly $190 less a month.

For Julie Almogabar, any hit to her paycheck has consequence.

"That's groceries, gas to get to work, repairs on the cars; we can't afford new ones," Almogabar said.

The resolution to the cliff is a relief to CPAs like Michael Parmet, who can now tell clients what they owe for 2012. But there is still more economic upheaval to come.

"There's a train on the tracks and hyperinflation down the road and that's what I'm concerned about. That's how we'll pay off our debt is through hyperinflation," said Parmet.

And there may be even more changes in the cards for 2014.
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