Going over the "Fiscal Cliff" Means Significantly Higher Tax Bills for Americans of All Incomes
Document date: October 01, 2012
Released online: October 01, 2012
The fiscal cliff would increase Americans’ taxes by more than $500 billion in 2013, or almost $3,500 per household. A typical middle-income household would see its taxes go up roughly $2,000. Using the Tax Policy Center’s microsimulation model of the U.S. tax system, the authors examine in detail how the tax changes in the fiscal cliff would affect taxpayers at different income levels.
WASHINGTON, D.C., October 1, 2012 -- The Tax Policy Center (TPC), a joint venture between the Urban Institute and the Brookings Institution, released an analysis of the looming “fiscal cliff.” The report documents how, barring legislative action, taxes will jump for nearly 90 percent of Americans on January 1.
The charts below illustrate the impacts by income level.
Among the tax components analyzed in the report are the Bush-era tax cuts, the alternative minimum tax patch, the payroll tax cut, new taxes enacted in the 2010 health care law, tax credits included in the 2009 stimulus law, and dozens of short-term tax breaks that Congress regularly extends. The separate provisions and different combinations of provisions would have very different effects in total and across income groups. In all, tax revenues would increase by about $535 billion under a fiscal cliff scenario. Of course, Congress and the White House could choose to delay, repeal, or offset some of the scheduled tax increases and allow others to happen.
“No matter who wins in November, the country has to face the issue of looming tax increases,” noted Roberton Williams, a senior fellow at the Urban Institute. “Our analysis is intended to help policymakers and ordinary citizens understand how these tax increases will hit at the taxpayer level. In the short term, we need to discuss how to reduce the deficit without harming our still-weak economy; in the longer term, we need a permanent tax code that is simpler, fairer, and less intrusive on economic activity.”
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