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Murrysville residents react to increase in Social Security payroll tax

| Wednesday, Jan. 9, 2013, 8:58 p.m.

Workers across the region are bringing home less money in their paychecks after a deal to keep the country from “going over the fiscal cliff” ended a tax holiday.

The federal Social Security payroll tax increased by 2 percent this year, ending a two-year tax break meant to give Americans more money to invest in the economy. Workers now pay 6.2 percent Social Security tax, an increase reflected in the first paychecks of the year. For someone who earns $50,000, that's $1,000 less in take-home pay this year.

“Everyone is going to feel this,” said Bobbi Watt-Geer of Murrysville, president and CEO of the United Way of Westmoreland County. “You can't buy as many groceries, you can't fill the prescriptions you need, maybe there's not enough money to put gas in the car to do what we need to do.”

According to the United States Census Bureau, the median income is $87,745 in Murrysville, $56,349 in Delmont and $31,438 in Export.

Watt-Geer said she is concerned about people who receive services from the 50 organizations the United Way works with in Westmoreland County. She said the number of people needing help has gone up since the recession began in 2008. The decrease in take-home pay is going to hurt a lot of those families, she said.

“You don't sacrifice that much income without there being a downside to it,” said Watt-Geer, 47. “It doesn't give you a lot of space to save money for a rainy day, or to fix a car.”

It does if you're Larry Nicolette. A certified public accountant, Nicolette passed around free advice when the Social Security tax was decreased in 2010 — take that 2 percent and put it in a 401(k) retirement fund. He took his own advice.

“I didn't stimulate the economy. I saved my money,” said Nicolette, 44, of Murrysville.

That was a smart idea, said Mary Hecht, a financial planner and owner of Lighthouse Investment Planning in Murrysville. While the income tax levied on most Americans won't increase — the deal struck last week only increased income tax on those who earn more than $400,000 annually — moving money into an IRA account will help offset some of the increased payroll tax, she said.

For those who are feeling the effects of the lower paychecks, Hecht said, adjustments need to be made.

“You want to try and reduce your personal expenditures,” Hecht said. “Try to keep them low as much as possible. Pay off a credit card with high interest. Everybody should try to live within their budget.”

The idea behind lifting the tax holiday will make it possible for Social Security recipients to continue to receive benefits without putting a strain on the federal government. The additional 2-percent tax will raise more than $100 billion annually — money the Social Security system had been receiving from Congress for the past two years.

Maury Fey, a retired program manager from Westinghouse Electric, won't be affected by the change in tax rate, but said he worries about the future of the Social Security system. Fey, 76, of Murrysville said people will make the changes necessary to get through the rate change because they have no other choice.

“Frankly, people will have to batten down their hatches a little bit,” he said. “When gasoline shot up 40 years ago, did we go broke as a country? No, we didn't. People tightened their belts. You grin and pay the extra money.”

Daveen Rae Kurutz is a staff writer for Trib Total Media. She can be reached at 412-856-7400, ext. 8627, or dkurutz@tribweb.com.

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