How much will the fiscal cliff cost you?

If we go over the fiscal cliff, your taxes will increase significantly. Photo: Republican Speaker John Boehner and President Obama both appear glum about the fiscal cliff AP

WASHINGTON, December 4, 2012 — Call it a fiscal cliff, slope or curb, but going off of it will be very painful to taxpayers. Yet that is exactly where we are headed. Think not?

Then just listen to what Grover Norquist had to say about calling the Democrats’ bluff: “…the most disastrous thing lawmakers in the GOP could do is put their ‘fingerprints’ on a tax increase. It would be better for the [Republican] party to get no deal than to sign on to tax hikes.”

Republican Speaker of the House John Boehner told Chris Wallace on “Fox News Sunday” that he was “flabbergasted” at Obama’s proposal, which he labeled “nonsense,” adding, “I would say — we’re nowhere, period. We’re nowhere.”

On the other side of the equation, Treasury Secretary Tim Geithner seemed more sanguine and understanding of the GOP’s dilemma, even as he pushed hard to end the Bush tax cuts for the 2% while extending them for the rest of us: “You know, Chris, they [Republicans] are in a kind of tough position now and it’s going to be — it’s obviously a little hard for them now and they are trying to figure out where they go next and we might need to give them time to figure out where they go next.” 

What Does It Mean for the Average Jane and Joe?

But what does it mean for taxpayers, if there is no compromise and we plunge over the fiscal cliff? Most financial analysts predict a second recession as the stock market on January 1, 2013 reacts and stock prices plummet with the ripple effect hitting the shores of Europe and Japan and beyond, making it a global event. In fact, the Congressional Budget Office warns that our unemployment rate could hit 9.1%.

“It would pretty much wipe out the recovery,” explains Stephen Fuller, an economist at George Mason University. “You can’t absorb that reduction in spending and increase in taxes so quickly. The universal consensus is it would take about 5 points out of GDP.”

The shudder felt round the world would then mean American businesses, large and small, would contract, and American consumers would snap their wallets closed while their retirement plans and 401Ks would give them whiplash.

Effect of fiscal cliff on taxes Tax Policy Center

But even more devastating would be the direct hit on the American taxpayer. Without a deal brokered by the Republicans and Democrats, there would be a serious dollar drain from the average American’s bank account.

A typical, middle-income family married couple with two children earning between about $50,000 and $85,000 would see a tax increase of:

* $1,000 because of a Child Tax Credit reduction;

* a tax increase of $890 due to the merging of the 10 percent tax bracket into the 15 percent tax bracket; and

* a tax increase of $310 because of the expiration of the marriage penalty relief that provides a larger standard deduction for married couples.

In total, that comes to $2,200 out of your pocket.

Almost no one could escape the tax increase as 88 percent of all households watch their taxes spike. Low-income households would see an average increase of $412, and upper-income people would pay an additional $14,173 on average.

Taking the impact on the middle class household alone, here is what that $2,200 buys:

* Two months of mortgage payments on your home

* Over three months of food and groceries.

* Nearly four semesters of college textbooks and supplies.

* A year and half of electric bill payments.

* Four months of car payments.

For millionaires, $14,000 more in taxes may be chump change, but to the average American households that $2,200 is their bread and butter. To see what your tax bite would be, go to Fiscal Cliff Calculator, but be sitting down when you do.

Payroll Tax Holiday Will Soon Be Over

Yet it gets worse for the middle class and working poor because the Social Security, or payroll tax, holiday will also be over at the end of this year, meaning that workers will once again have their take-home salaries reduced by 6% and not at the current 4%. Translation: During the “holiday,” a worker making $50,000 saved $1,000 a year during the  “holiday,” or a little more than $19 a week. A worker making $100,000 saved $2,000 a year.

Now add that $1,000 to the tax increase of $2,000 if we zoom over the cliff and Joe and Jane American just saw their taxes increase by $3,000. That means a whole lot of belt-tightening. Even more worrisome, most lawmakers don’t seem inclined to extend the payroll tax holiday, even if they do avert the fiscal cliff.

Congress has less than 30 days to avert the abyss. That fiscal cliff is as real as the one James Dean faced in the 1955 movie classic, “Rebel Without A Cause.” Challenged by a bully to race to an abyss and whoever jumps first is chicken, Dean accepts the dare, but he jumps  out in time. The other teen gets trapped in his car and goes over the cliff to his death.

Our fiscal cliff could be just as deadly for the American economy and the average American family. Will Congress avert the cliff or take us all over with them?

For a quick look at just how taxpayers will be affected, watch the brief video by Tax Policy Center below, Fiscal Cliff: How Much Would Taxes Rise in 2013?: 


 

To contact Catherine Poe, see above. Her work appears in Ad Lib at the Communities @ WashingtonTimes.com. She can also be heard on Democrats for America’s Future. She is also a contributor to broadcast, print and online media.


This article is the copyrighted property of the writer and Communities @ WashingtonTimes.com. Written permission must be obtained before reprint in online or print media. REPRINTING TWTC CONTENT WITHOUT PERMISSION AND/OR PAYMENT IS THEFT AND PUNISHABLE BY LAW.

More from Ad Lib
 
blog comments powered by Disqus
Catherine Poe

Catherine was named one of the top Progressives in Maryland along with Senator Barbara Mikulski and Congresswoman Donna Edwards. She has been a guest of President Obama in the Rose Garden.

As past president of Long Island NOW, she worked to reform women's prisons in New York, open the construction trades to women, change laws to safeguard battered women, and protect the rights of rape victims. 

Long active in Democratic politics, she served as the presidentof the Talbot Democrats in Maryland for six years and fought to getthe Health Care Reform bill passed.

Catherine has been published in a diverse range of newspapers and magazines, including Newsday, Star Democrat, Rocky Mountain News, Yellowstone News, and the Massachusetts Review.

If Catherine has learned anything over the years it is that progressive change does not come easily, but in baby steps. 

Contact Catherine Poe

Error

Please enable pop-ups to use this feature, don't worry you can always turn them off later.

Question of the Day
Featured
Photo Galleries
Popular Threads
Powered by Disqus