A taxing question

Tom Power has a lot to discuss with his accounting group these days.

Topping the list: The payroll tax hike under the federal government's new arrangement to avoid fiscal calamity.

The chief concern, Power said, is how employers like him will pass on that cost to employees.

"It's something the employers pay, that we'll have to incorporate into our budgets," said Power, who owns multiple businesses like the Wine Cellar. "We have to ask, 'How does this impact the cost of benefits? The total compensation package we offer?'"

While big pocketbooks are the primary target under the New Year's fiscal cliff deal, there are complaints that the little guys are getting pinched too, with the return of a higher payroll tax.

As of this month, the rate of workers' payroll taxes rise back to 6.2 percent on wages up to $113,700, after a two-year tax break at 4.2 percent.

The taxes are key to funding Social Security.

According to CNNMoney, workers earning the national average salary of $41,000 will receive $32 less on biweekly paychecks.

Steve Griffitts, president of Jobs Plus economic development agency, said he hasn't heard any local businesses complaining about the bite out of employees' paychecks.

But the news is only just sinking in, he noted.

"Nobody knew what was going to happen," Griffitts said of the Capitol Hill negotiations that toed the line of national disaster.

He at least doesn't expect the uptick in payroll taxes to impair his recruitment of new businesses to the area, he said.

"Since it's a federal thing, it won't make a difference," Griffitts said of competing with other states. "It won't make it more difficult for me to do my job."

Power is still trying to pin down how his employees will be affected, he said.

It seems like everything is up in the air, he said, with the tax change on top of pending health care reforms.

"All of a sudden this is a new, additional expense we'll have to factor in," he said. "There's just such a high degree of uncertainty with how all of these changes are going to impact how employers compensate employees."

Allen Worst, vice president at R.C. Worst and Company in Coeur d'Alene, said he doesn't expect the higher tax to knock the business' 18 employees off their feet.

"We've been paying that rate for a long time, until recently," said Worst, whose company distributes pumping systems and water treatment equipment. "I appreciated the discount myself, as an employee, as I'm sure they all did."

Worst and Company likely won't raise employees' salaries to make up for the loss, he said.

The recession hit the company too hard to boost salaries now, he said.

"We're directly dependent on the construction side of our business, so it had a pretty big impact," Worst said, pointing to how a couple positions were eliminated.

Kootenai County's total wage and salary disbursements amounted to $1.86 billion in 2011, according to Alivia Metts, regional economist with the Idaho Department of Labor.

Under the payroll tax "holiday," workers paid an estimated $77.97 million in taxes, Metts stated.

Still looking at 2011 numbers, Metts estimated that after the tax break's expiration workers would pay $37.1 million more in payroll taxes, due to the $115.1 million taxed on total wages.

That averages at "an extra $675 per worker," Metts reported.

Much still needs to be discussed.

Spokespeople of several local companies declined to comment on Wednesday, because they didn't know enough about the payroll taxes to predict impacts on their employees.

Even with his company's struggles, Worst is glad to see the tax restored, he said.

"It seems like we constantly hear that Social Security is under fire, and then they lower the rate for Social Security," he said. "For a program suffering so bad, that seemed like it was probably a bad place to make a cut."