US Households Face $3,446 Tax Increase From Fiscal Cliff

Monday, 01 Oct 2012 01:16 PM

 

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
U.S. households are facing an average tax increase of $3,446 in 2013 if Congress doesn’t avert the so- called fiscal cliff, the nonpartisan Tax Policy Center said in a study released today.

The top 1 percent of households face some of the largest tax increases in 2013 and would see their after-tax incomes fall by 10.5 percent if Congress does nothing. That would translate to an average tax increase of $120,537 for that group.

A typical middle-income household earning between about $40,000 and $60,000 would face a tax increase of about $2,000.

After the Nov. 6 election, Congress is scheduled to return to Washington to debate the automatic spending cuts and tax increases starting in January unless lawmakers act. For calendar year 2013, taxes would increase by $536 billion, or about 20 percent.

“This is a very large tax increase,” Donald Marron, the center’s director, told reporters in Washington today.

If Congress does nothing, tax rates on income, capital gains, dividends and estates would increase, and the alternative minimum tax would spread to 21.7 million households, up from 4 million this year.

The top statutory tax rate on ordinary income would reach 39.6 percent, up from 35 percent, and the top rate on capital gains would be 23.8 percent, up from 15 percent. A 2 percentage point payroll tax cut is set to expire at the end of 2012.

Expired Provisions

The estimated $536 billion tax increase doesn’t include provisions that expired at the end of 2011, including miscellaneous corporate tax breaks. The provision that prevents the alternative minimum tax from expanding also expired last year.

Lawmakers agree they should continue the income tax cuts for most households. Republicans want to keep all of the income and estate tax cuts for 2013 and begin overhauling the tax code. Democrats, including President Barack Obama, want to let most of the tax cuts lapse for the top 2 percent of households, or income exceeding $200,000 for individuals and income above $250,000 for married couples.

The political stalemate over what to do about those top rates has prevented agreement on everything else.

Each piece of the fiscal cliff has varying effects on people at different income levels. Low-income households have the most at stake in expiring expansions of the child tax credit and earned income tax credit. Middle-income households are affected most by the payroll tax and income tax.

Top Income

According to the report, households at the top income level are most affected by the income tax and tax increases on unearned income such as capital gains that were enacted in the 2010 health care law and take effect in January.

“If investors really believe that the tax rate they face on capital gains is about to go up significantly, some of them will choose to realize accumulated gains this year rather than next year,” Marron said.

The tax changes would take effect at different times throughout 2013. The payroll tax change would reduce paychecks immediately in January. The administration could delay the higher withholding because of the income tax changes, especially if an agreement in Congress seemed likely to occur in January, said Eric Toder, a co-director of the center.

Some of the expanded tax burden wouldn’t be apparent until early 2014, when taxpayers file their returns for 2013.

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


© Copyright 2014 Bloomberg News. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
You May Also Like

Ted Cruz, Jeff Sessions: Obama Must be Stopped on Amnesty

Friday, 25 Jul 2014 09:08 AM

GOP Sens. Ted Cruz of Texas and Jeff Sessions of Alabama Thursday criticized President Barack Obama's reported plans to  . . .

US Says Russia Firing Artillery at Ukraine Military

Thursday, 24 Jul 2014 18:51 PM

The United States said on Thursday that Russia was firing artillery across its border with Ukraine to target Ukrainian m . . .

Texas National Guard Could Get Powers to Arrest

Friday, 25 Jul 2014 07:59 AM

The Texas National Guard could acquire the power to make arrests after Gov. Rick Perry announced plans to deploy 1,000 t . . .

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved