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Fiscal cliff negotiations hit home for local businesses, student workers

January 7, 2013

Small businesses were saved from most automatic tax increases from the fiscal cliff thanks to a last minute deal from Congress, but some local stores and working students still might face higher taxes.

If no deal had been made by the midnight deadline on Jan. 1, 97 percent of small businesses would have been hit with the tax increases. MSU economics professor Charles Ballard said most economists believe that without the deal, the economy would have plummeted further into a recession.

Steve Sawvel, one of the co-owners of GrandRiver Coffee Cafe, 515 W. Grand River Ave., said he wasn’t too worried about a fiscal cliff deal being passed and doubted its possible effects.

Although he was saved from a potential tax increase, businesses, such as Sawvel’s, now face a higher payroll tax because of an expired tax cut.

This means employees for small businesses will have more money taken out of their pay, now at 6.2 percent from 4.2 percent.

Zoology junior Kelsey Vandewetering said she works two jobs and was not aware of the new payroll tax increase.

“It’s a little unfair,” she said. “(I) can’t really do anything about it.”

The average wage earner makes about $41,000 a year, meaning $820 would be taxed, Ballard said.

The total tax increase will be smaller for students working part-time, but it might mean a smaller paycheck after graduation.

The payroll tax increase only applies to businesses making less than $113,000 a year.

“That’s almost everybody,” he said. “(The tax increase is) probably more noticeable for middle income folks … not enormous but not small either for an awful lot of people.”

Tony Lagalo, owner of Tony’s, 350 Albert Ave., said he followed negotiations everyday.

Lagalo said he expects another fiscal cliff battle when Congress begins discussing automatic spending cuts scheduled to take place in late February or early March, but for now he’s happy that a deal has been made.

“Anytime you don’t screw over 99 percent of the public, then you’re doing your job,” he said.

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