One tax that’s likely to increase whether or not an agreement is reached on the fiscal cliff is the payroll levy for Social Security.
It’s scheduled to increase to 6.2 percent from 4.2 percent currently. While the expected increase hasn’t received much attention in the media, many experts are worried about its negative impact on the economy, The New York Times reports.
It means that most workers will have to fork over another 2 percent of their wages to Uncle Sam.
Editor's Note: How to Pay Zero Taxes . . . Legally
So analysts such as Nigel Gault, chief U.S. economist at IHS Global Insight, are slicing their economic forecasts for next year.
Thanks largely to the payroll tax increase, he has reduced his growth projection for the first quarter by half, to 1 percent, according to The Times. And if an accord isn’t eventually reached on the fiscal cliff, the economy may contract 0.5 percent next year, Gault says.
The economy expanded 3.1 percent in the third quarter.
If the government dives off the fiscal cliff, household tax burdens will rise an average of $3,446 next year, according to the non-partisan Tax Policy Center.
The political chaos represents another obstacle for the vulnerable economy, says Pimco CEO Mohamed El-Erian.
“The new normal is a stagnant economy with an overlay of political polarization and dysfunction," he tells CNBC. "The new normal is sluggish growth and persistently high unemployment and concerns about debt and deficits."
Editor's Note: How to Pay Zero Taxes . . . Legally
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