Traverse City Record-Eagle

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December 28, 2012

Traverse City area workers feel helpless about looming tax increases

TRAVERSE CITY — When the economy gets tough, people don't come to the laundromat as often. They let their clothes pile up or hand wash them at home.

So said Jim Legato, owner of Eastfield Laundry, who saw a drop in customers during the worst years of the recent recession.

"And now things are getting back up again, and we have the tax thing hitting us in the face," he said.

The tax thing is the Social Security payroll tax hike that's set to increase 2 percent on January 1. It ends a payroll tax holiday that shrank workers' share of Social Security taxes from 6.2 percent to 4.2 percent.

"For the working man, it's two cents on a dollar, 10 bucks a week. It keeps adding, adding. Gas goes up, groceries go up, and the next thing I know employees are going to say, 'I need more money'," Legato said.

More money to employees means higher prices at the laundromat, and then his customers feel even more of a pinch.

The 2 percent could be just a small beginning. If Congress and President Obama fail to strike a deal, workers at every income level will face a hefty jump in taxes. Experts are calling it the biggest tax increase for poor and middle income people in history.

Automatic tax hikes include a marriage tax penalty, child tax credits cut from $1,000 to $500, and higher income tax rates at all levels.

The Congressional Budget Office warns that the economy could contract by .5 percent in 2013 if Congress doesn't take action by year-end.

Local residents seemed resigned to the fact that their paychecks are casualties of partisan paralysis.

"It is upsetting, but what can I do?" said Justin Bellows, 29, who works at Williams and Bay Pumping. "I live paycheck to paycheck, so it's going to affect me."

Bellows on Thursday stopped for a quick lunch at Burger King on U.S. 31 North.

"The way I look at it is they're going to do what they're going to do, and I have no power to affect it."

Carol Sattler, 65, joked with a friend at the Grawn Post Office that they'd like to throw all the politicians over a fiscal cliff.

Sattler said she's retired, so the payroll tax increase won't affect her. But it will hurt her adult children.

"They work hard and take home less and less and less," she said. "The 2 percent sound scary, but not nearly as scary as what the rest of it will be."

Eric Fischer, owner of Sleeping Bear Motor Sports in Interlochen, said the payroll tax means a $1,500 cut in his wife's annual take home pay, which the couple can take in stride.

Fischer said he isn't a "bit surprised" at the stalled budget negotiations.

"I don't believe our Congress will get anything accomplished in the next two years with a Democratic president and a Republican-controlled house. Too many differences of opinion," he said.

Meanwhile, benefits from the federally funded emergency unemployment compensation are set to expire today. The benefit is granted to workers who have exhausted their regular state unemployment benefits in states with chronic high unemployment.

Chris James, who was at the Michigan Works unemployment office on Garfield Avenue, said he doesn't know what he's going to do.

"This will be my last week, and there really is no work," said James before he disappeared into an office to discuss his options.

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