It’s a New Year, and we escaped falling off the fiscal cliff, thanks to the very last-minute, drama-laden efforts of Congress to pass a bill to avert a much-portended catastrophe. In fact, if you went to bed too early on New Year’s Eve, which I apparently did, you fell asleep thinking we were going over the edge. It wasn’t until the next morning when I fired up my computer that I learned about the bill passing the Senate and awaiting House approval.
The bill covers a lot of ground, and yesterday’s “Fabricating Update” e-newsletter attempted to cover a few highlights that affect fabricators, both personally and from a business standpoint. And then, as we always do, we asked readers to share their thoughts about the topic.
As noted in the newsletter, good news for business is that the deduction for capital expenditures was reinstated at $500,000 for both 2012 and 2013. The 50 percent bonus depreciation on the purchase of new fixed assets also was extended through 2013, and the research tax credit, which expired at the end of 2011, was extended through 2013, making it available for both 2012 and 2013.
Individuals didn’t fare as well, as you will notice when you receive your first paycheck for 2013. The payroll tax holiday was not extended, and your portion of FICA tax increased 2 percent, from 4.2 to 6.2.
This 2-percent increase in FICA also is a business concern for the small businesses that sell goods and services to consumers. Less disposable income means less discretionary spending. We asked readers if their businesses fell into this category and whether they anticipated minimal, significant, or no decline in
First to weigh in was a reader from Michigan who said, “My thoughts on less spendable income will mean decreasing business in the end user market, a market I offer my products in. Less spendable income equates to less money spent on luxury items, of which motorcycle accessories fall under as motorcycles are considered (at least in this country) as a luxury.
“Less take home pay will also impact other discretionary purchases, such as automobiles, even though automobiles are a necessity in our society for transportation; IMO they are still predominately a discretionary purchase.
“I don’t believe it will affect my offshore business, the devalued Euro has already done that.
“Going to be some tough sledding in the months ahead.
“Larger companies will feel the pinch of Obamacare as it impacts their bottom line. I expect to see some companies cease doing business if they are marginally profitable and other companies looking for ways to offset the expense either through reduced benefit packages or cost-sharing through employee contribution, or both.
“I’m not impressed at all with our Federal Government’s attitude toward industry in this country. They appear to be counterproductive toward free enterprise.”
A reader from Illinois, who works for a large, international corporation, has a different viewpoint. He wrote, “I—and many others—support the FICA payroll "increase"—from 4.2 to 6.2 percent. (Not actually an increase, but a return to what is was several years ago.)
“I believe the 6.2 % is needed to keep Social Security as a viable option thru the next 50 years.
“For someone earning $50,000 a year, this increase amounts to less than $20 a week.
“Ask anyone retired about their SS benefit.
“Ask your parents (I hope they are still part of your life!).”
“Retirement Planning Analogy: Taking away SSA is like removing the foundation
from the house.
“Thank you for hearing me out!”
Oh, I hear you, and I relate. I’m almost at retirement age myself, and Social Security definitely figures into my retirement plan. I also want my children to receive the benefits from their contributions to Social Security. But the $50,000-a-year wage earner likely isn’t rolling in excess income, and that extra $1,000 he'll be paying in FICA will be missed, as will the $600 a $30,000-a-year earner will have to forego. Less income is hard to swallow when food and healthcare costs keep rising and the average median income declines.
Having said that, I understand why the increase—or whatever you want to call it—is necessary. However, I can’t help but think how much better it would be to have more people employed and paying taxes rather than trying to squeeze more money out of current wage earners, many of whom receive raises that barely keep up with rising healthcare premiums or no increases at all.
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