NACOGDOCHES, TX (KTRE) - The plunge off the fiscal cliff was softened a bit when Congress finally reached an agreement. Even so, most wage earners will feel a hurt when they open up their next paycheck.
The blow has everyone scrambling, even those who oversee the paychecks.
City of Nacogdoches financial director Jack Sparks is drafting a letter to employees. He needs to explain why paychecks will be smaller even though the budget is allowing for a 2 percent cost of living raise. The best way - blame it on the federal government.
"In 2011, they enacted a 2 percent reduction in Social Security tax for the stimulus, and it expired," Sparks said. "They did not choose to extend it."
The two percent pay raise remains on the books, but probably won't be reflected in personal checkbooks.
"So, it washed it out, basically," Sparks said.
Texas Workforce Solutions got a three percent raise. They'll see more than half eaten up when payroll taxes revert to the 6.2 percent rate.
A payroll deduction couldn't come at a worse time for some households. All that credit spent on the mall and the stores before and after Christmas will be a bit more difficult to pay back in the coming months.
"It makes it tough with the prices going up," Sparks said.
Consequently, consumers are expected to spend less on unnecessary items such as eating out or going to the movies. The standard financial advice is avoid short-term loan companies and monitor your spending until you can adjust to the new take-home pay.
Wage earners will face change - the unemployed not so much. Their benefits won't be cut off this week. Instead, benefits will be extended through all of 2013.