published Wednesday, January 23rd, 2013

Surprise Chattanoogans! Your paycheck shrank

Chattanoogans are starting to see the effects of the so-called fiscal cliff negotiations when they examine their first paychecks of the year. Checks are slimmer, if only slightly.

For those who didn't follow the ins and outs of every element of the negotiations, here's a basic explanation:

In each paycheck, Americans earning up to $106,800 used to lose 6.2 percent of their wage as a Social Security tax. Then, in 2010, Congress passed an act that lowered that tax rate to 4.2 percent. Those who are self-employed also saw a drop in their Social Security tax, going from 12.4 percent to 10.4 percent.

The tax cut was designed to last two years, and Congress decided during the fiscal cliff negotiations not to renew the tax cuts. So the Social Security tax jumped back up to its previous rate, and paychecks dropped.

Even a local Internal Revenue Service employee who knew the increase was coming was surprised by the hit to her paycheck this month.

"I knew it was coming. I just didn't know what it was going to be," said Frances Clark, a 58-yar-old tax examiner with the IRS. "I didn't realize how much of a break we got before."

Nora Rockwell, 58, sales clerk at Earthbound Trading Co., said she had to check with her boss about why her check was less than expected.

At first, I was like, 'Uh-oh. Paycheck!" Then I looked it up on the computer. I said, 'OK. That's fine.'" she said.

Most workers said they weren't happy about paying more to Uncle Sam.

"I don't like that," said Maria Phillips, 27, optometric assistant. "My first question was whether we would get that money back when we did taxes. I asked my boss and found out we wouldn't. And I don't understand that."

"I'm not happy about how the government is spending money on programs that I don't think are going to work," added Xavier Cabezas, 42, software engineer.

Although taxes this year returned to where they were in 2010 before the two-year tax cut, many blamed President Obama for what they see as a tax hike in 2013.

"What can you do? There's nothing. [Barack Obama is] running everything else into the ground," said Charles Clayton, 73, retired.

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