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
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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.
Via: Newsmax
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