Wednesday, November 21, 2012

Tax Increases Loom after ‘Fiscal Cliff’

Taken from:

Almost all American households would take a financial blow next year—and low-income families would be among the hardest hit—if the White House and Congress fail to solve the “fiscal cliff” of big tax increases and spending cuts set to start Jan 2.

A married couple making between $20,000 and $30,000 a year would go from receiving, on average, a $15 tax credit to owing $1,408, according to research by the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute.

These taxpayers would be part of the roughly 90% of American households that the Tax Policy Center estimates would face higher tax bills for 2013 if Washington cannot craft a deficit-reduction plan to replace the fiscal cliff—the $400 billion in tax increases and $100 billion in spending cuts slated to take effect next year.

The tax increases stem from the fact that various tax cuts and other tax measures all were passed on a temporary basis and are set to expire. Most of the increases would result from the expiration of Bush-era tax cuts, which would cause marginal rates to rise. Simultaneously, several temporary tax breaks pushed by President Barack Obama after the financial crisis also would end. The Wall Street Journal’s John McKinnon joined WSJTM’s Andrew Colton to discuss the impact the pending ‘Fiscal Cliff’ could have on the American household.

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