After the bruising "fiscal cliff" negotiations wrapped up earlier this week, Idahoans will take home less from their first paycheck in 2013.
The "fiscal cliff" negotiations failed to extend a temporary payroll tax holiday that took effect in 2010, raising the rate by 2 percent. For an Idaho worker making $30,000 annually, this change means they will pay an additional $600 to the federal government.
With 722,000 workers in Idaho, this part of the fiscal cliff deal could make a difference at the state level. According to Michael Chakarun of the Idaho State Tax Commission, the end of the payroll tax holiday could affect Idaho’s revenue in the long-run.
“To me, that’s the biggest hit," says Chakarun. "People are going to see a reduction in their paychecks because of that. There’s the infamous trickle-down effects; the less money they spend in the economy the less money we collect in sales tax.”
He says that with a 2 percent decrease in income, Idaho consumers could pull back on spending. If this happens, less money will be collected by the state's 6 percent sales tax.
Along with the payroll tax for all workers, the "fiscal cliff" deal also raises tax rates for high-income earners. Individuals earning $400,000 and couples earning $450,000 will see their income taxes increase to 39.6 percent. Chakarun says that in 2010 about 2,300 Idaho tax returns were in this high-income range.
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