We will be hearing and reading a lot about the Fiscal Cliff between now and the end of the year. Much of the reporting alarms more than informs. For a better understanding of how household taxes will increase starting Jan. 1, I recommend going to the Tax Policy Centers web address: www.taxpolicycenter.org and reading Toppling off the fiscal cliff: Whose taxes rise and how much? by Roberton Williams, Eric Toder, Donald Marron and Hang Nguyen of the Urban Institute and Urban-Brookings Tax Policy Center.
This report may be the source of the claim that taxes would rise an average of almost $3,500 per household. Their analysis considers not only that almost all of the temporary tax-code changes since 2001 would expire, but adds in ending the payroll tax holiday and the high-income tax increase of the Affordable Care Act.
But what happens if the administration, the House and the Senate cannot come to some agreement on the controversial 2001 and 2003 (Bush) temporary tax cuts and only they expire? If my reading is accurate and my math is correct, the Tax Policy Centers analysis indicates that those households with income less than $20,133 would see an average tax increase of $255; those households with incomes between $20,133 and $39,790, an average increase of $746; between $39,790 and $64,484 $961; between $64,484 and $108,266 $1,479; between $108,266 and $143,373 $2,934; between $143,373 and $204,296 $4,852; between $204,296 and $506,210 $9,207; and finally, the top 1 percent of households with income up to $2,655,675 would pay an average of $87,134 more in taxes in 2013.
It would be painful to those us in the 80 percent of households with incomes of $108,266 or less, but tax burdens for all income groups would seem a little more fair.
Charles Lee Kirby