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Smart Benefits: More Taxes, Less Pay

Monday, January 21, 2013

 

Rhode Island employees may be shocked this month to see their paychecks go down. Here's why, and why more reductions may be in store.

Congress may want us to believe that only the rich will pay more in taxes this year, but that’s not necessarily true. For many employees, January was not only the beginning of a new year, but also the start of an unpleasant surprise in their paychecks: less pay!

2% Payroll Tax Adds Up

Employees and small business owners are feeling the effects of the 2 percent increase in the payroll tax. On an income of 100,000, that's $2,000 more in taxes.

The payroll tax was temporarily reduced from 6.2 to 4.2 percent in 2011. For those workers who got used to having the extra money to cover increases in food, gas and everything else, the reduction in take-home pay is sure to be felt.

Income-Dependent Taxes

More tax hikes will be felt in some workers’ wallets as well:

  • Income Tax Rate: While the income tax rates for many individuals remain the same for 2013, the rates for those with taxable income over $400,000 ($450,000 for a married couple on a joint return) will increase to 39 percent.

  • Medicare Tax: The Medicare tax will increase by .9 percent for the self-employed and individuals making 200,000 (250,000 for married filing jointly)

Rising Health Insurance Costs Add to Employee Burden

The timing of the tax changes couldn’t be worse. Most employees also started the New Year with new benefit packages – and that likely means higher premiums and deductibles and/or lesser coverage.

Previously, when employees faced higher out-of-pocket costs, they could contribute more to a flexible spending account to pay for those benefits on a pre-tax basis. But the IRS capped FSA contributions to $2,500 for 2013.

While we may have avoided the fiscal cliff, many employees and small business owners feel they are at the bottom of a canyon with the walls closing in around them. And most aren’t “rich.”

Amy Gallagher has over 19 years of healthcare industry experience. As Vice President at Cornerstone Group, she advises large employers on long-term cost-containment strategies, consumer-driven solutions and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, is a member of local organizations like the Rhode Island Business Group on Health, HRM-RI, SHRM, WELCOA, and the Rhode Island Business Healthcare Advisory Council, and participates in the Lieutenant Governor’s Health Benefits Exchange work group of the Health Care Reform Commission.

 

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Comments:

It was no so much Congress as Obama and the Obamanista Democrats who have made patently false statements about how taxes were not going to rise.

And let us also be clear about the "payroll tax"... that was a pretty sick pretense at a "tax" reduction.

And why? Because what was lowered and then allowed to rise to previous levels was the Social Security contribution made toward the workers' retirement or disability.

Think of how sick and deceitful it is to pretend that this was some literal "tax" decrease. This means the craven liars who passed this "tax reduction" simply rigged it so the workers paid less into their retirement saving accounts thus making Social Security even less solvent than it already is.

It was and is a despicable misrepresentation.

Comment #1 by Caroline Evans on 2013 01 21

It should be clear to all but densest or ideological among us that Obama is out to transform the country to a socialist country. He and his friends will attempt to do this incrementally, raising taxes a little here, adding a few regulations there over the course of four years -- and using deception at every step. Notice that the payroll tax increase magically reappeared AFTER the election?

The "middle class" is in fact Obama's big target -- that's where the real money is, and the middle class can't escape like rich people can. It will not surprise me when Obama and allies propose new taxes on people's 401ks and other retirement savings -- there's BIG money there to grab and redistribute.

Comment #2 by Art West on 2013 01 21

Remember when, in defense of raising taxes on the wealthy one percent, Obama said: "No one earning less than $250,000 will pay one dime more in taxes"? 'nuf said!

Just wait until the rest of the taxes, penalties, fines, license fees, health care fees, etc. kick in. Those who bought into his deceptions deserve exactly what they are going to get.

Comment #3 by Harry Staleyu on 2013 01 21

Sorry to say, American Voters are too dense to understand the overall implications of this President's policies.

When their life savings and home are worth a pittance of what they thought they were, perhaps they will awaken from the"dream".

Until tat day, RI Voters will keep reelecting people like Reed, Whitehouse, Langevin and Ciccilline.

"We get the Government We Deserve!"

It's over folks. RI is a disaster!

Comment #4 by Fabiano Terrenni on 2013 01 21




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