Federal taxes are going up on Napa County workers after Congress passed a last-minute deal Tuesday night to avoid the brunt of the “fiscal cliff,” but the increases aren’t as sharp as they could have been.
After weeks of wrangling between Congressional leaders and the White House, the House of Representatives approved a compromise that permanently extends the income tax rates for all but the richest Americans at the levels set by former President George W. Bush, and delays for two months the federal spending cuts put in place during the 2011 debt-ceiling negotiations.
Absent from the final bill, though, was an extension of a 2-percent Social Security payroll tax cut approved in 2011 and continued in 2012, meaning that many Napa County workers’ paychecks will be a little lighter in 2013.
For households earning $30,000 to $40,000 annually, the deal means they’ll pay $445 more in federal taxes this year, according to analysis done by the independent Tax Policy Center. At an income level between $50,000 to $75,000 the new federal tax burden will be $822 higher; at $75,000 to $100,000 it’s $1,206 higher, according to the analysis.
But workers can take some consolation that this burden of higher taxes is less of a blow than it could have been. Had Congress failed to enact the deal, and had the full tax hikes of the fiscal cliff stayed in effect, they’d be paying a lot more.
Indeed, according to the Tax Policy Center’s analysis, the deal saves $891 in federal taxes this year for workers earning $30,000 to $40,000 each year; the savings are $1,428 for $50,000 to $75,000 in income; and $2,253 for $75,000 to $100,000 in income.
The deal did little to lessen the ire some Napa County residents hold toward their political leaders in Washington D.C., and expressed on Wednesday.
“They need a huge wake-up call,” said Napa resident Carolyn Dozler. “What they’re doing is not helping the general public.”
Yountville resident Jackie Thomas expressed frustration that the deal took as long as it did to forge.
“It took so long to strike a deal,” Thomas said. “I really am tired of the political jockeying.”
Napa County’s representative in the House, Rep. Mike Thompson, D-St. Helena, voted to approve the deal, and called it necessary to avoid the economic damage associated with going over the fiscal cliff.
“This legislation is far from perfect but it’s better than falling off the fiscal cliff,” Thompson said in a statement. “Doing nothing would have sent our economy into a tailspin and triggered another recession.”
Napa-based tax adviser Mark Richmond said he’s been preparing clients to accept that their federal taxes will be higher in 2013, which is something they have no control over.
“There’s no tax relief on the horizon,” Richmond said. “We’re all going to have to figure out, ‘What does that mean for to me?’ ”
He said many people had accepted that the fiscal cliff would be negative for workers if a deal had not be struck in Washington.
He said his main message is to plan family budgets that take account of higher federal taxes, take advantage of legal means of reducing the amount of taxes owed and ensure that estate plans are as current as possible.
“We’ve kind of seen a renewed interest in something that’s very traditional, which is the family budget,” Richmond said. “Be fiscally responsible. You’ll be able to weather whatever comes out of Washington.”
Thomas said she followed the negotiations over the fiscal cliff closely, and was ambivalent about the resulting deal.
“I’m not completely happy with it,” Thomas said. “I’m not completely unhappy with it.”
She did acknowledge that it likely saved her thousands of dollars in federal taxes she would have owed.
“No deal would have been much worse,” Thomas said.
Stephen Fait, visiting Napa Wednesday from Henderson, Nev., said he disliked how the deal didn’t address the federal deficit.
“I think it stinks,” Fait said. “We’ve got to take care of the debt and they’re not doing it. The president isn’t even talking about it.”
Fait said he’s retired and won’t face the tax increases workers, including his children, will face, but added that addressing the deficit means cutting spending, not just raising taxes.
“If we can’t it’s just going to get worse and worse,” Fait said. “We’ve got to cut this spending. You can’t pay your bills with a credit card.”
Dozler expressed frustration at the political gridlock that caused Congress to move toward the fiscal cliff.
“It just frustrates me — all of it frustrates me,” Dozler said. “We’re not getting anymore out of debt than we were.”