Your paycheck could shrink even more in 2013

10:23 AM, Oct 28, 2012   |    comments
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Your paycheck could shrink after the start of the year. It's something most workers don't even realize is happening, but the payroll tax cut is set to expire at the start of 2013.

"The 2 percent payroll tax cut was never meant to be a permanent fix," says financial planner Elizabeth Verner, with NCA Financial.

When the economy was down in the dumps, the federal government gave workers a pick me up.

In 2011 and 2012, employees got a 2 percent break on payroll tax. Traditionally, employers and employees split the payroll tax. Employers would pay 6.2 percent and employees would pay the same.

With the cut, employers still paid 6.2 percent and employees dropped to 4.2 percent. Which means, if you make an average of $50,000 a year, you got an extra $100 a month in savings, totaling an extra $1,000 a year.

"Although people have received 2 percent more in their paycheck, the cost of other goods also went up, so people were putting it in their gas tank or their groceries. It wasn't really used to help increase consumer spending and push the economy along."

Verner says this is not part of the Bush tax cuts, but would expire at the same time, adding to the "fiscal cliff."

"It would be a significant impact. I mean, if the tax rates go up and this 2 percent disappears from our paycheck, it's really going to be an impact on the consumer."

Fiscal Cliff coverage: http://www.wkyc.com/money/economy/fiscalcliff/default.aspx

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