Payroll Tax Increase Pushes Working Families Over The Fiscal Cliff
Turner to Governor Christie: Provide Safety Net; Time to Increase Minimum Wage and Fully Fund EITC
TRENTON – Senator Shirley K. Turner (D-Mercer/Hunterdon) today urged Governor Christie to sign the minimum wage bill (S3/A2162) and fully fund the Earned Income Tax Credit (EITC) after workers were dealt a crushing blow of a fifty percent payroll tax increase as part of the federal “fiscal cliff” deal. Effective January 1, nearly all workers will be bringing home less money in their paychecks, as the Federal Insurance Contributions Act (FICA) tax imposed on employees increases from 4.2 percent to 6.2 percent.
“The fiscal cliff drama was nothing but a political shell game,” said Senator Turner, who expressed grave concern that the payroll tax increase will hurt working poor families and further delay New Jersey’s economic recovery. “Using political wrangling over the income tax as a distraction, fiscal cliff dealmakers blindsided low and middle income workers by not renewing the payroll tax holiday.”
“This is a real hardship on most workers, but New Jersey’s working poor, who are already struggling to make ends meet, will be hit hardest; the two percent payroll tax increase means a significant loss of income from every paycheck,” continued Senator Turner.
Senator Turner, a prime sponsor of bills that would increase the minimum wage and restore the Earned Income Tax Credit (EITC) to full funding said that the payroll tax increase, “only underscores and reinforces the need to provide families earning poverty level wages with the income increases that they need to offset the 2 percent loss of income and the cost of living increase.”
The payroll tax holiday expired on December 31, 2012, and was not renewed as part of the federal “fiscal cliff” deal. The FICA tax, which is deducted from workers’ paychecks, will cause take home pay to decrease by $600 per year for workers with an annual income of $30,000. Workers with an annual income of $50,000 will bring home $1,000 less per year, while workers with an annual income of $100,000 will bring home $2,000 less per year. The New Jersey EITC, which was cut from 25 percent of the federal level to 20 percent in 2010, is a refundable income tax credit program that lessens the burden of payroll taxes that disproportionately affect lower income workers.
“The payroll tax increase is a one-two punch for New Jersey’s lowest wage earners who have already seen their taxes increase when funding for the EITC program was cut more than two years ago,” said Senator Turner. “Many of New Jersey’s working poor families, whose budgets are already stretched to the limit, will have to make more difficult choices about which of their basic necessities are to be cut even further. No one wants to choose whether to cut back on food, heat, shelter, or medicine, but these are the critical decisions that New Jersey’s working poor families must make.”
“Working poor families who are making minimum wage don’t have money to invest, nor do they have savings accounts or rainy day funds. They spend their paychecks, pumping the money back into the economy, which helps to create more jobs,” said Senator Turner. “The payroll tax increase and EITC cut mean that these workers have less money to pay their bills and no discretionary income to help stimulate our economy.
“New Jersey’s high cost of living and high unemployment rates have slowed down our state’s recovery from the recession,” said Senator Turner. “Adding the devastation of Superstorm Sandy and the expensive recovery to the mix, New Jersey could be facing another economic downturn. It makes good economic sense to raise the minimum wage and restore the EITC to increase consumer spending to prevent further economic distress for our working poor and our state.”