Last Updated:December 22 @ 09:29 pm

Huge tax increase looms at year-end 'fiscal cliff'

By Andrew Taylor

WASHINGTON (AP) - A typical middle-income family making $40,000 to $64,000 a year could see its taxes go up by $2,000 next year if lawmakers fail to renew a lengthy roster of tax cuts set to expire in December, according to a new report Monday

Taxpayers across the income spectrum would be hit with large tax hikes, the Tax Policy Center said in its study, with households in the top 1 percent income range seeing an average tax increase of more than $120,000, while a family making between $110,000 to $140,000 could see a tax hike in the $6,000 range.

All told, the government would reap more than $500 billion in new revenue if a full menu of tax cutswere allowed to expire. The expiring provisions include Bush-era cuts on wage and investment incomeand cuts for married couples and families with children, among others. Also expiring is a 2 percentage point temporary payroll tax cut championed by President Barack Obama.

"It's just a huge, huge number," said Eric Toder, one of the authors of the study.

Economists warn that the looming tax hikes, combined with $109 billion in automatic spending cuts scheduled to take effect in January, could throw the fragile economy back into recession if Washington doesn't act. The automatic spending cuts are coming due because of the failure of last year's deficit "supercommittee" to strike a bargain. The combination of the sharp tax hikes and spending cuts has been dubbed a "fiscal cliff."

"The fiscal cliff threatens an unprecedented tax increase at year end," says the Tax Policy center report. "Taxes would rise by more than $500 billion in 2013 — an average of almost $3,500 per household — as almost every tax cuts enacted since 2001 would expire."

It's likely that Washington policymakers will allow the payroll tax cut first enacted for 2011 to expire, and Obama is calling for permitting rates on individual income exceeding $200,000 and family incoming over $250,000 to go back to Clinton-era rates of as much as 39.6 percent.

But all sides are calling for the renewal of Bush-era tax rates for everyone else. Without a renewal of those rates, a married couple would pay a 28 percent rate on taxable income exceeding $72,300 instead of the 25 percent rate they now pay. And the 10 percent rate paid on the first $8,900 of income would jump to 15 percent.

The Tax Policy Center is a joint project of the Urban Institute and the Brookings Institution.

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5 Comments

  1. Bruce A. FrankComment by Bruce A.
    October 1, 2012 @ 4:31 pm

    “Economists warn that the looming tax hikes, combined with $109 billion in automatic spending cuts scheduled to take effect in January, could throw the fragile economy back into recession”

    BACK into recession! I find it extremely irritating that Right has fallen for and adopted the language of the Left. Looking at unaltered statistics on unemployment, wages, under employment, and the ignored price increases on food and fuel, WE HAVE NEVER EVEN STARTED A CLIMB OUT OF OBAMA’S RECESSION. And, we will not.

    Every policy move, when there is a hint of economic recovery, because Capitalism is resilient, is specifically and exactly the opposite of what history has shown us is the proper move. Obama is just giggling about these these upcoming economy collapsing tax increases. That will put the lock on full fledged top down socialist government!

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    • lokiswifeComment by lokiswife
      October 1, 2012 @ 7:53 pm

      The Heritage Foundation (heritage.org) has a list of all the new taxes due on January 1, 2013 called taxamegedon and charts to show state by state and district by district how it will affect the average wage earner. It’s nasty, when so many good people are just hanging in there, trying to survive and keep a roof over their heads and food on the table. Fire the playboy-in-chief and get a real businessman running the country before it’s too late.

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  2. BobinmsComment by Bobinms
    October 1, 2012 @ 6:03 pm

    When you cut payroll TAXES, you are not cutting taxes, you are cutting your retirement. How stupid can you get?? Why do we keep calling retirement contributions a tax and why doesn’t somebody challenge it.

    Doesn’t the Republicans have a mouth or better still a brain??

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  3. bna42Comment by bna42
    October 1, 2012 @ 7:45 pm

    “A typical middle-income family making $40,000 to $64,000 a year could see its taxes go up by $2,000 next year”

    Obama knew this when he agreed to the one-year extension of the Bush tax cuts. He wanted to postpone this announcement until after the election so it wouldn’t hurt his chances. This is the same reason he is insisting that federal contractors violate federal law and not send out notification of possible mass layoffs when these spending cuts take place. He is actually promising to pay their legal expenses when sued over this violation of law.

    “The notices are required under the Worker Adjustment and Retraining Notification Act and generally require employers with more than 100 employees to provide 60-day notices of “mass layoffs if they are reasonably foreseeable.”

    Why isn’t the main stream media yelling about this? Obama does not have the authority to insist that contractors violate federal law. Why isn’t Congress demanding that he stop it?

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  4. noveldogComment by noveldog
    October 2, 2012 @ 10:26 am

    BHO is saving his biggest tax increase for the end of the year figuring that by then he will have won and no one can stop him from gouging us once again. Only fools, traitors and unsaved ignorant folks could consider voting for him. Did I miss anything?

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