A taxing question - Coeur d'Alene Press: Local News

A taxing question

Employers look at how to pass cost on to employees

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Posted: Thursday, January 3, 2013 12:00 am

Tom Power has a lot to discuss with his accounting group these days.

Topping the list: The payroll tax hike under the federal government's new arrangement to avoid fiscal calamity.

The chief concern, Power said, is how employers like him will pass on that cost to employees.

"It's something the employers pay, that we'll have to incorporate into our budgets," said Power, who owns multiple businesses like the Wine Cellar. "We have to ask, 'How does this impact the cost of benefits? The total compensation package we offer?'"

While big pocketbooks are the primary target under the New Year's fiscal cliff deal, there are complaints that the little guys are getting pinched too, with the return of a higher payroll tax.

As of this month, the rate of workers' payroll taxes rise back to 6.2 percent on wages up to $113,700, after a two-year tax break at 4.2 percent.

The taxes are key to funding Social Security.

According to CNNMoney, workers earning the national average salary of $41,000 will receive $32 less on biweekly paychecks.

Steve Griffitts, president of Jobs Plus economic development agency, said he hasn't heard any local businesses complaining about the bite out of employees' paychecks.

But the news is only just sinking in, he noted.

"Nobody knew what was going to happen," Griffitts said of the Capitol Hill negotiations that toed the line of national disaster.

He at least doesn't expect the uptick in payroll taxes to impair his recruitment of new businesses to the area, he said.

"Since it's a federal thing, it won't make a difference," Griffitts said of competing with other states. "It won't make it more difficult for me to do my job."

Power is still trying to pin down how his employees will be affected, he said.

It seems like everything is up in the air, he said, with the tax change on top of pending health care reforms.

"All of a sudden this is a new, additional expense we'll have to factor in," he said. "There's just such a high degree of uncertainty with how all of these changes are going to impact how employers compensate employees."

Allen Worst, vice president at R.C. Worst and Company in Coeur d'Alene, said he doesn't expect the higher tax to knock the business' 18 employees off their feet.

"We've been paying that rate for a long time, until recently," said Worst, whose company distributes pumping systems and water treatment equipment. "I appreciated the discount myself, as an employee, as I'm sure they all did."

Worst and Company likely won't raise employees' salaries to make up for the loss, he said.

The recession hit the company too hard to boost salaries now, he said.

"We're directly dependent on the construction side of our business, so it had a pretty big impact," Worst said, pointing to how a couple positions were eliminated.

Kootenai County's total wage and salary disbursements amounted to $1.86 billion in 2011, according to Alivia Metts, regional economist with the Idaho Department of Labor.

Under the payroll tax "holiday," workers paid an estimated $77.97 million in taxes, Metts stated.

Still looking at 2011 numbers, Metts estimated that after the tax break's expiration workers would pay $37.1 million more in payroll taxes, due to the $115.1 million taxed on total wages.

That averages at "an extra $675 per worker," Metts reported.

Much still needs to be discussed.

Spokespeople of several local companies declined to comment on Wednesday, because they didn't know enough about the payroll taxes to predict impacts on their employees.

Even with his company's struggles, Worst is glad to see the tax restored, he said.

"It seems like we constantly hear that Social Security is under fire, and then they lower the rate for Social Security," he said. "For a program suffering so bad, that seemed like it was probably a bad place to make a cut."

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  • concernedcitizen posted at 9:12 am on Sun, Jan 6, 2013.

    concernedcitizen Posts: 2530

    CDA Analyst

    GREAT observation. This is the problem in America. The poor poor rich guy with large or multiple business's, multiple mansions, taking multiple exotic vacations twist the actual numbers put out to make it look like they are the ones being inconvenienced to justify low wages and no benefits.

  • CDA Analyst posted at 9:54 pm on Sat, Jan 5, 2013.

    CDA Analyst Posts: 1

    Are you kidding me? I can't decide which is worse: The reporter baiting the interview by describing the Social Security tax holiday expiration as a "Federal Tax Hike" or Tom Power's knee jerk reaction of wondering "how employers like him will pass on that cost to employees." Did Mr. Power's HR or accounting team fall asleep on this one? The Social Security tax holiday was a 2% reduction for EMPLOYEES ONLY! The company was always taxed at their normal 6.2% even during the tax holiday. Be upset all you want about what Obamacare is going to do to companies but this one has no impact to the company. What it will do to every employee is reduce their discretionary income, so the retail and food service guys are in real trouble for THAT result.

  • JoeIdaho posted at 4:16 pm on Fri, Jan 4, 2013.

    JoeIdaho Posts: 2841

    Not many things as funny as watching someone think that "a few bucks per paycheck" is enough to "slow down the national debt".

    Here you go, Brainiac.
    On Black Friday, the day after Thanksgiving, the federal Governmetn BORROWED $221.00 for EVERY man, woman & child in America.
    That's one DAY.
    As it stands now, they are giving Bansk 85 BILLLION DOLLARS a month; or the equivalent of 1.5 MILLION jobs at $50,000 each, paid for a year.
    And you think "a few bucks per paycheck" has an effect?

  • hayden_guy posted at 10:54 pm on Thu, Jan 3, 2013.

    hayden_guy Posts: 400

    A few bucks per paycheck to help close the deficit? To help slow down the national debt so the country our children have is not as bad off? Seems like a no brainer to me... take a couple more each check to help even more.

  • mister d posted at 10:43 am on Thu, Jan 3, 2013.

    mister d Posts: 1531

    Like any decrease in take home pay, the average CDA worker will just have less discretionary dollars to spend at local establishments. It might only be $60 or so a month per worker, but how many dinners out will that buy.

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