If President Obama and lawmakers fail to reach a deal to avert the fiscal cliff, how much more will you need to pay in taxes?
It depends, of course, on how much you earn. But the nonpartisan Tax Policy Center estimates that the average American would see tax bills rise by $3,446 next year. Taxpayers earning more than a $1 million will endure a $254,000 tax hike, on average, or about 11 percent of their income. Those earning $40,000 to $50,000 will see a $1,700 tax jump, or about 4.4 percent of their income.
The lowest earners would see about a $412 drop on average (a 3.7 percent cut in after-tax income), while the top 1 percent of earners would need to shell out an additional $120,000 (a 10.5 percent bite in after-tax income). Middle-class families earning between $40,000 and $65,000 annually would see taxes increase by about $2,000, leaving them with 4.4 percent less money to spend.
Why would Americans need to pay more in taxes? Because a series of tax cuts and tax credits are set to expire Jan. 1. They are the tax cuts put in place during George W. Bush's administration; a payroll tax holiday signed by Obama; and measures enacted as part of the 2009 economic stimulus that expanded the earned income tax credit and the child tax credit for working families.
Finally, million more mostly middle-class households for the first time may face the alternative minimum tax, or AMT, which could add about $3,700, on average, to tax bills. Congress has thus far failed to approve an inflation "patch" that expired last year and prevents millions of people from having to pay the tax. But congressional tax aides said the Internal Revenue Service has advised Congress that trying to fix the AMT after the filing season begins in January would lead to processing delays of more than two months for nearly half of all returns -- significantly postponing the delivery of refunds.
Hovering in the background of the debate is the prospect of 2 million people losing their unemployment benefits four days after Christmas.
"This is the real cliff," said Sen. Jack Reed, D-R.I. He's been leading the effort to include another extension of benefits for the long-term unemployed in any deal to avert looming tax increases and massive spending cuts in January. "Many of these people are struggling to pay mortgages, to provide education for their children."
Emergency jobless benefits for about 2.1 million people out of work more than six months will cease Dec. 29, and 1 million more will lose them over the next three months if Congress doesn't extend the assistance again. States provide the first 20 weeks to 26 weeks of unemployment benefits for eligible workers who are seeking jobs. When those are exhausted, federal benefits kick in for up to 47 more weeks, depending on the state's unemployment rate. Since the collapse of the economy in 2008, the government has poured $520 billion -- an amount equal to about half its annual deficit in recent years -- into unemployment benefit extensions. White House officials said Obama is committed to extending them another year, at a cost of about $30 billion, as part of an agreement for sidestepping the fiscal cliff. Republicans have been quiet on the issue.
Prince offered samples of a funky new solo album during an intimate late-night preview. He didn’t mention the album’s title or release date, but he did express frustration with the slow-grinding wheels of the record business.