Taxpayers worried about pocketbooks as fiscal cliff talks fail

Taxpayers worried about pocketbooks as fiscal cliff talks fail

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"I'm kind of frustrated at the whole thing, a little ticked off that it's such a big deal when it could have been settled so much easier," said financial planner David Lewis. "I'm kind of frustrated at the whole thing, a little ticked off that it's such a big deal when it could have been settled so much easier," said financial planner David Lewis.
Single mother of two Ashley Reed is on a fixed income. She budgets every dollar and the uncertain tax rate for the new year has her concerned. Single mother of two Ashley Reed is on a fixed income. She budgets every dollar and the uncertain tax rate for the new year has her concerned.

By STEPHANIE BEECKEN
6 News Reporter

KNOXVILLE (WATE) - As House Republicans announced Monday evening that they will not vote on a bill to avoid going over the fiscal cliff, residents in Knoxville are worried it could hurt their pocketbooks.

The lack of a deal means automatic tax increases and spending cuts will go into effect Jan. 1.

As talks continue between members of Congress and the President to reach a deal to retroactively block the tax hikes and spending cuts, small business owners and many in the Knoxville community are wondering what will happen with their tax rate in the new year.

One Knoxville financial planner says the increased taxes could devastate working class Americans and cause the country to enter another recession.

Single mother of two Ashley Reed is on a fixed income. She budgets every dollar and the uncertain tax rate for the new year has her concerned.

"I feel bad about it. It's awful. I don't want our taxes to go up," said Reed.

David Lewis, a financial planner and small business owner, is also anxious about whether Congress and President Obama can strike a deal.

"I'm kind of frustrated at the whole thing, a little ticked off that it's such a big deal when it could have been settled so much easier," said Lewis.

Lewis owns Resource Advisory Services, a financial planning business he founded 27 years ago. He now has five employees. The uncertain tax rate for 2013 has him behind on his work.

"Should of had my budget done two months ago, but this has kind of brought it down to the very end of the year. It's not complete," said Lewis.

He also hasn't been able to budget his employees' 2013 compensation. If lawmakers don't reach a deal to undo the automatic cuts and tax increases, employees will see money taken out of their paycheck immediately.

"The next pay check, the paycheck that's dated in 2013, will be reduced," said Lewis.

The two percent payroll tax holiday is expiring, meaning workers will once again have 6.2 percent of their wages withheld to pay for Social Security, up from 4.2 percent. Lewis says a person making $30,000 a year will have $50 less a month.

"Since a lot of people spend most of what they earn, that means for millions of people that means there's going to be $50 less per month going to the grocery store," said Lewis.

The Bush-era tax cuts will also come to an end, meaning an income tax increase for working Americans. Lewis says going over the fiscal cliff will be bad for the economy.

"The government is going to get more money than it needs and the population is going to have almost none, which means everything grinds to a halt, a recession," said Lewis.

Automatic spending cuts will reduce the budgets of most federal agencies and programs by eight to ten percent.

A federal extension of unemployment benefits will expire. Workers who lost their jobs after July of 2012 will receive 26 weeks in state unemployment benefits, down from 73 weeks.

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