Fiscal cliff deal comes with good and bad news for Floridians

TALLAHASSEE — Congress may have kept the nation from going over the fiscal cliff, but it failed to avert a multibillion dollar hit to Florida's struggling economy.

The decision to let the 2010 deduction in the Social Security payroll tax expire will cost Floridians an estimated $6.5 billion, said Sean Snaith, director for Institute Economic Competitiveness at the University of Central Florida.

With 7.1 million Florida households seeing a tax increase, the result will be a contraction in the state economy, Snaith said.

"It's going to provide a headwind in terms of our recovery that's less money spent on child care, groceries or clothing,'' Snaith told the Times/Herald. "The net effect is it's going to be a drag on growth.''

The payroll tax was temporarily reduced in 2010 from 6.2 percent to 4.2 percent at an annual cost of $120 billion, but it expired Dec. 31, 2012, when neither side in Congress moved to extend it.

That means that Floridians will take home less with every paycheck starting this month. The median Florida household, which earns $45,000 a year, will pay $900 more in taxes in 2013.

Although opponents said the compromise fell short because it did not do enough to resolve the nation's debt crisis or cut spending, supporters said it was necessary to avoid a fiscal calamity.

"The American people cannot afford, nor do they deserve, this massive New Year's tax hangover,'' said Rep. Mario Diaz-Balart, R-Miami, one of five Florida Republicans who joined with eight Democrats in the congressional delegation to vote for the compromise. "While this bill has its flaws, it immediately and permanently cuts taxes on 98 percent of the American people and 97 percent of small businesses."

Other Republicans voting for the bill: U.S. Reps. C.W. Bill Young of Indian Shores, Ileana Ros-Lehtinen of Miami, Ander Crenshaw of Jacksonville and Vern Buchanan of Sarasota.

Fourteen Republican congressmen and U.S. Sen. Marco Rubio voted against it.

The payroll tax is just one of the hits Florida will feel. Another will be a slow but steady impact on hospitals. Under the bill, Congress voted to halt a $30 billion cut in payments to physicians who treat Medicare patients that was scheduled to take effect this week. The solution calls for hospitals that treat those patients to pick up half the tab over the next 10 years.

That worries Florida's public and teaching hospitals, which serve a larger percentage of Medicare patients than hospitals in other states.

One group to benefit: Florida's unemployed. Congress extended the federal emergency unemployment compensation program, which was due to expire Jan. 1, for another year.

That means about $1.4 billion will be injected into the Florida economy, where long-term unemployment has been particularly problematic. Nationwide, the long-term jobless rate is about 40 percent; in Florida, it's 50.6 percent.

In Florida, nearly 119,000 people are eligible for emergency unemployment assistance, which offers weekly benefits of up to $275 beyond the 19 weeks provided by state unemployment compensation.

Gov. Rick Scott had no response to the tax cut deal, but said Wednesday he would like to see Congress focus its efforts on cutting spending.

Times/Herald staff writers Toluse Olorunnipa and Alex Leary contributed to this report.