Thursday, November 27, 2014

First Check Reality Check…

January 12, 2013 5:38 pm by  
Filed under Life, News, Politics

By now, almost everyone who earns one has received their first paycheck of 2013. Depending on your income bracket and your budget the reality of what the expired Payroll Tax Cut means to you is starting to hit home. 2% more out of your paycheck probably didn’t sound like much in the abstract when you hear it on the news, but now that the actual numbers are staring you in the face, the reality is something else entirely.

One night this week, just after dark, our doorbell rang, not a common occurrence for this empty nest. It was the young man who does handy work for us. Bob, not his real name, is sincere, hardworking, and trustworthy. He holds down a full-time blue collar job managing a small warehouse, helping his “moonlighting” customers at night and on weekends. He’s single, has his own apartment, and drives a beautiful extended cab truck that is his pride and joy. We’ve come to know him well enough to know he’s not a party boy; he keeps a schedule and a budget.

When Bob stepped inside I could see how upset he was. Pam, he said, I’ve stopped by to see if you have any extra work for me. I got my paycheck today and the new taxes are going to cost me over $100 a month. I’m not sure what to do.

What I didn’t have the heart to tell Bob is that our fist paycheck came, too, and the amount our budget will have to be adjusted is a bit more than $100 a month. We do know what we have to do: We have to cut back on discretionary spending like how much we give to charity, how often we go out to dinner, and how much we use services such as a handyman.

This story is playing out across the country at every income level. Yes, there is a segment of the population that will be much less effected than others. The $1200 a year loss that has Bob in a panic is pocket change to some, but for most of us the impact of this change in income has consequences.

The ripple effects are already a topic of conversation across the blogosphere and social media: The hash tag, #YourPaycheckIsLowerThisWeek has been one of the top trends on Twitter, and no less than liberal bastion MSNBC posted an article titled “Americans Feel Austerity’s Bite As Payroll Taxes Rise”

I’m no economist but if I read the situation in Washington correctly, better buckle your financial seatbelts because unlike Thelma & Louse, we may not have gone over the fiscal cliff, but this is just the first mile on a very bumpy road ahead.

What does the Payroll Tax Increase mean to you?

Comments

4 Responses to “First Check Reality Check…”
  1. renee says:

    Yes, the first check for me is down more than $100, and you’re exactly correct: what translates into changes to discretionary spending for some could be the difference between being financially solvent or not for others. Thanks for pointing out the real life reality – in the pragmatic and thoughtful way you always do – of what’s to come.

  2. Pamela says:

    Renee,

    One of the scariest aspects to this new reality is that it’s a temporary reality. I think this is just the beginning. My crystal ball tells me there will be more tax increases and almost certainly cutbacks in Social Security and Medicare. A lot of people are likely to find their lives and futures, altered.

    Thanks so much for posting a comment. Always a pleasure to hear from you.

  3. Rolf Oeler says:

    Changes in my discretionary spending will translate into less money for tickets to IronPigs baseball games and, the NIZ Cheerleaders might like to note, less money for tickets to Phantoms hockey games at the $ 177.1 million dollar Pawlowski Palace of Sport.

    :-)

  4. Pamela says:

    Rolf,

    I think we’ve only begun to see the changes the lie ahead for many of us. Your example identifies exactly the type of spending that most people will be forced to change and eventually those decisions affect all the other people whose livelihoods depend on discretionary spending. As for Mr. Pawlowski’s Palace of Sport and the tax scheme that is helping to finance it, I have made conscious decision to not comment publicly. Thanks so much for your comment.

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