Fiscal Cliff’s Tax Burden
Sarah Vanderbilt | Oct. 2, 2:02 p.m.
Launch Interactive
Keywords
Economic AffairsTaxes
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Tax cuts originally enacted in 2001, 2003, 2009 and 2010 are all set to expire on Jan. 1, at the same time that new taxes enacted in the health care law of 2010 take effect. If Congress does not act to avert any of these scheduled changes, the nonpartisan Tax Policy Center estimates that households in the middle income quintile, making between about $40,000 and $65,000, would see their federal taxes increase by nearly $2,000 in 2013. The average increase for all households would be about $3,500, and those in the top income percentile could face a take hike of over $120,000.
The Tax Policy Center report, released Oct. 1, breaks down each income bracket’s added tax burden by component, ordered by likelihood of occurance. For example, Congress is unlikely to further extend the payroll tax cut, while the patch that keeps middle-income households out of the alternative minimum tax is very likely to be extended, as are the Bush-era tax cuts for middle- and lower-income households.
Under a full “fiscal cliff” scenario, in which none of the expiring tax cuts are extended, the makeup of the added tax burden would vary significantly by income. Lower-income households would be most impacted by the expiration of tax cuts enacted in the 2009 stimulus law and extended in 2010, while middle-income households would be hurt most by higher payroll taxes and the end of the Bush-era tax cuts. Only the wealthiest households would be significantly impacted by higher taxes on capital gains, dividends and health care.
Read more at CQ.com: Expiring Tax Cuts Would Add $2,000 to Middle-Class Bill, Report Says