Fiscal Cliff

Wow! Everyone in my game studio received their first paycheck of the New Year and to my surprise, payday, which is generally a quiet and sort of personal event had turned into ongoing conversations around the water cooler, coffee pot and anywhere else there were 2 or more people.

FICA And Medicare

As most people did not know or fully understand when it was initially announced, the end of December 2012 marked the final day of the "federal tax holiday" that was in effect since 2010 I believe. What this meant for all of us was that even though we may have received a merit increase coming into the new year or had some breaks on insurances through company programs and related, we would actually be taking home less money.

Prior to January 1st the FICA (Federal Insurance Contributions Act) tax rate was set at 4.2% for employees and 6.2% for employers. Because the bill was not extended into 2013 as many had hoped that it would the rate for employees goes up to 6.2%. Medicare will also go up to 1.45% which will mean that anyone that received a raise of less than 7.65% will see no changes in a positive direction, in their first paycheck of 2013. If you did get a raise, it will help to take the sting out of it a little bit, but not much.

There is plenty of information on this topic and much better explained, all over the internet so I will not attempt to cover it all here as there are a lot of changes involving other types of income as well, such as: rent, annuities, capital gains and so on. If you are in the 6 figure earnings club you will still see some benefits toward the end of the year because of the way the maximums work, but the middle class earners are the ones feeling the sting a bunch this year.

I read on Forbes and a few other sites that these tax hikes are not fully inked yet and many employers may not start taking out the additional taxes immediately. I am not sure if that is a good idea, I would hate to be in that situation and then get double dinged paying it back in a month or so once it is inked. All I know is that my employer has started to take out the additional tax, so I can imagine if it gets thrown out then there will be a delta added back into an upcoming paycheck. Although from what I have been reading later in the day, the FICA and Medicare increases are final, shxt!

I realize it's not a huge amount of money, maybe $16 - $20 per pay period for most bi-weekly employees under the 113k income level. Although, when raises are non-existent for many employees or very small if they are lucky enough to get something, then $16 - $20 becomes a lot more than you might imagine. On top of this, I think most "raises" generally equate to a 2% to 3% increase which is not even a COLA (cost of living adjustment) especially as far as 2013 is concerned, it simply lessens the sting, or is "pie in your face" depending on how you decide to look at it, "big-picture".

Let's not forget that this is in addition to healthcare insurance premiums that seem to be perpetually on the rise, as well as gas prices, food and everything in-between. No wonder people just give-up when it comes to paying their bills responsibly. I don't agree with that mind-set in the least, and strongly believe that you should not be able to simply walk away from obligations. Especially the way many Americans have the past few years. With little to no penalty just because paying for all of those bills they created became overwhelming. You signed an agreement and you need to live up to it unless you have a pretty dam good reason. Sorry, should be a topic for another day.

Back to the 2013 tax increase, I am sure there are those that will say that its ok, and that we have to pay for the people that are currently retired so we have money when we are ready to retire. Yea, keep telling yourself that because I have a pretty good hunch that there will be little to nothing left in the system by then. It's being depleted far to quickly as it is and with young adults starting their careers much later in life there is that much less money added to the pool every year. Again, a topic that is better left for another day.

Death And Taxes

I guess as they say, nothing is certain except death and taxes. For me, I am certain that this is the end of today's entry. I could not help but touch on the taxation topic today at least a little bit. It's a pretty deep subject that most, myself included, could go on and on about for hours as well as a tough pill to swallow when receiving your pay for the first time in a New Year. I will spare you any additional rambling and leave you to your own findings as there is plenty out there. Who knows, maybe we will get lucky and the government will reinstate the lower percentages? Yea I know, laugh all you want but I think that sounds like a great idea,but I cant help but chuckle as well! It would be great though, so long as it does not come back to haunt us later on as most "tax breaks" seem too.

Photo: Taxes Going Up