Residents: Fiscal cliff deal beats alternative
Becky Fenoglietto has heard so much griping about the Washington deal to avoid the federal “fiscal cliff” that she figures it must be a pretty good compromise.
For now, the self-employed Penn Hills attorney said she will wait to see how much the agreement affects her family budget. The legislation belts top earners hardest, but an expiring 2-percent Social Security payroll tax break hits middle-income folks too: A worker making $50,000 will lose about $1,000 a year.
“I once clerked for a wise judge who told me that ‘if everyone's equally miserable, then you know you reached a good settlement,'” said Fenoglietto, 48.
“There is much wailing and gnashing of teeth on both sides. It must be one heck of a deal.”
Victor Son, 58, of Hampton, has been a certified public accountant for 36 years and said the deal made sense.
“In addition to the federal income tax issues caused by the pending fiscal cliff, President Obama, in an effort to spur a depressed economy, reduced the Social Security tax contribution of the employee from 6.2 to 4.2 percent (employer contribution remained at 6.2),” said Son.
“This temporary reduction in contributions at a time when the Social Security fund is projected to have huge impending shortfalls going forward was a nice piece of candy for the worker but clearly unsustainable. The reduction was not part of the Bush tax cuts, so as a result, was not included in the extensions passed in the fiscal cliff legislation. While the elimination of the 2-percent Social Security reduction results in an immediate 2 percent decrease in the average net paycheck, this was not a tax increase but merely restores what employees have been contributing to Social Security for many, many years.”
Larry Vasko, 58, also a CPA, echoed those statements.
“This was a temporary decrease for just the last two years,” said Vasko, of Hampton.
“Obviously, although it was temporary, people get used to having the extra money in their paychecks. Since my wife and I are nearing retirement age within the next 10 years, you realize the viability of Social Security is already questionable in the future with the ever increasing number of baby boomers retiring and the ever increasing fact people are living longer.
“Extending the Social Security tax decrease would only compound the under-funding problem, much like the current Pennsylvania pension problem. Personally, I will lower my retirement savings to offset the tax increase.”
Main Street reactions to the Washington agreement appeared similar to those on Wall Street, where markets rallied following the announcement of the agreement.
Although the deal's not perfect, many said, it beats widespread tax increases and deep spending cuts that might have triggered a recession.
“There are some big questions out there, and we'll have to see how that plays out, but certainly this is much better than the alternative,” said Gus Faucher, senior economist at PNC Financial Services Group in downtown Pittsburgh.
Like many Americans, Pam Miller, 53, of Cranberry, said her family would continue to watch its spending and focus on basic needs.
“It's kind of a continuation of what we‘ve been doing,” said Miller, a customer-service representative at the Cranberry Township Municipal Center. “You tighten your belt a little more. What else can you do?”
Still, higher-income Americans — those with household incomes of more than $1 million — will shoulder more than 37 percent of the increased taxes, according to the Tax Policy Center.
“These are the people over the last decade who have received the lion's share of the tax benefits,” said Joseph Rosenberg, a researcher with the Washington-based group.
“If you accept that you have to raise taxes on somebody, it's not unreasonable to look to them first.”
It‘s a fair deal if everyone contributes, said Philip Harris, 53, of Sewickley.
“The payroll tax cut was always meant to be temporary,” said Harris, a former bookstore owner and onetime president of the Sewickley Valley Chamber of Commerce. “It was nice while it lasted.”
Staff writers Bethany Hofstetter, Bobby Cherry, Dona Dreeland, Deborah Deasy, Tom Fontaine, Brad Pedersen and Patrick Varine contributed to this story. Andrew Conte is a staff writer for Trib Total Media. He can be reached at 412-320-7835 or firstname.lastname@example.org.