Lynn is on the front lines of the economic bust, and the fiscal cliff compromise is only prolonging the situation, according to Taso Nickolakopoulos, owner of John’s Roast Beef & Seafood.
“I’m pessimistic,” he said. “This is just kicking the can further down the road. It’s not solving anything.”
Federal lawmakers passed a deal this week that will stave off the worst consequences of the fiscal cliff, and President Barack Obama said he will sign the law. The deal preserves income tax rates but not payroll taxes, which will jump from 4.2 percent to 6.2 percent, this month and cost taxpayers who make $50,000 about $1,000 per year.
That will hurt the region’s already fragile economy, said Nickolakopoulos, who said he saw a significant drop in business at his Western Avenue eatery three years ago, and things are not getting any easier.
This year, he said he’s seen credit and debit card usage soar from 12 percent to nearly 40 percent, signaling to him that people have less cash in their pockets.
It’s true the payroll tax cut disproportionately affects lower-income people who live paycheck to paycheck, said Chuck Marr, the director of federal policy at the Center on Budget and Policy Priorities, a non-partisan policy institute in Washington, D.C.
“A cashier making $20,000 loses $400. That’s real money. A high-end plumber making $50,000 – that person would lose $1,000. Again, that’s real money,” he said.
But as painful as this might be for taxpayers, Congress has put itself in a situation where there’s no choice but to start raising taxes during a recession, said Lynn financial planner and retirement-planning author Mark Singer.
“We are in a historically low-tax-rate and a historically high-deficit situation,” he said. “We’re going to have to pay more.”
Sixth District U.S. Rep. John Tierney, a Democrat from Salem whose district includes the majority of Greater Lynn, called the compromise “imperfect” in a statement released Wednesday.
Tierney praised the bill for extending unemployment benefits, not raising income taxes on the middle class and extending key tax cuts for businesses and low-income individuals.
“This bipartisan agreement stopped the country from truly going over the cliff and allows us to continue to invest in education, clean energy and manufacturing that creates jobs and strengthens the middle class as we address our ongoing fiscal challenges,” Tierney said.
In two months, when Congress is slated to re-address those “ongoing fiscal challenges,” is when the economy could really be thrown for a loop, said financial planner Singer.
“They dealt with tax issues and kicked the can down the road with regard to spending cuts and deficits, which is where they markets are going to see tremendous volatility,” he said.
But Lorraine Jenks, who opened Zinga Frozen Yogurt in Saugus in May, said she’s optimistic there won’t be a drastic effect on her business.
“I was a single mom for 10 years raising two kids having to watch every penny so I understand what 30 bucks or so may mean every week,” Jenks said.
But since customers at Zinga pay for yogurt by weight, Jenks said customers can still buy yogurt; they just may not buy as much.
“They might not get a $5 yogurt but they might get a $4 instead or a $3,” she said. Jenks said She said it may be too soon to tell if a hit in people’s paychecks will affect her business bottom line. But she’s not losing sleep over it.
“I feel relatively confident.”
And Nickolakopoulos said he suspects the average consumer is more conservative and spending smarter: Lynners have adjusted to the bad economy, he said.
“We’re still not hitting home runs but we’re maintaining,” he said.
Paolina Lepore, owner of Caffe Paolina in Swampscott, said she doesn’t think $20 will make a difference in her business, and alternatively, that this year will be the best for business since the recession in 2008.
“I think this year everybody’s more comfortable,” said Lepore. “I think people are more confident because the cliff didn’t happen. I think people will get scared if gasoline goes up.”
Lepore went on to say that a good attitude and a little perspective are the key to getting through tough economic times.
“Other countries are in bad shape. We are the top,” said the Italian immigrant who has lived in the United States for 10 years. “Yes, the problems are there everyday. If you look back in history, they had a bad time, but they survived and left nice things for the younger generation ”¦ I see more bright for this year.”
This story was reported by Amber Parcher, Chris Stevens, Kait Taylor and Matt Tempesta of The Daily Item staff. They can all be reached at [email protected]
