Congress may have kept the nation from going over the fiscal cliff, but it failed to avert a multi-billion dollar hit to Florida’s struggling economy.
The decision to let the 2010 deduction in the Social Security payroll tax expire will cost Floridians an estimated $6.5 billion, said Sean Snaith, director for Institute Economic Competitiveness at the University of Central Florida.
With 7.1 million Florida households seeing a tax increase, the result will be a contraction in the state economy, Snaith said.
“It’s going to provide a headwind in terms of our recovery that’s less money spent on child care, groceries or clothing,’’ Snaith told the Herald/Times. “The net effect is it’s going to be a drag on growth.’’
The payroll tax was temporarily reduced in 2010 from 6.2 percent to 4.2 percent at an annual cost of $120 billion, but it expired Dec. 31, 2012, when neither side in Congress moved to extend it.
That means that every paycheck will see a slight increase starting this month. The median Florida household, which earns $45,000 a year, will pay $900 more in taxes in 2013.
Although opponents said the compromise fell short because it did not do enough to resolve the nation’s debt crisis or reduce spending cuts, supporters said it was necessary to avoid a fiscal calamity.
“The American people cannot afford, nor do they deserve, this massive New Year’s tax hangover,’’ said Rep. Mario Diaz-Balart, R-Miami, one of five Florida Republicans who joined with eight Democrats in the congressional delegation to vote for the compromise. “While this bill has its flaws, it immediately and permanently cuts taxes on 98 percent of the American people and 97 percent of small businesses.” More here.