We’ve all heard about the “fiscal cliff” that is heading our way in January 2013. If President Obama and Congress don’t act before then, a combination of tax increases and government spending cuts will automatically take effect.
The Tax Policy Center has now attempted to quantify the impact of the “fiscal cliff” on American taxpayers. It finds that almost 90 percent of households would experience a tax increase. The top 20 percent of taxpayers will bear 60 percent of the tax increases, but the tax increases will have an impact across the economic spectrum. A middle-income family earning between $40,000 and $64,000 would pay an additional $2,000 a year, and families making between $110,000 and $140,000 a year would see a $6,000 tax increase. In all, the government is forecast to reap an additional $500 billion in tax revenues. Some people believe that the economy is already slowing to a zombie state because of fears of the new, bigger tax bite that will take effect in January. Other economists fear that the combination of half a trillion dollars in tax increases and $109 billion in automatic government spending cuts that were implemented because the “debt supercommittee” couldn’t reach agreement on a deficit reduction will hurl the struggling economy into a full-fledged recession.
As I noted earlier, of course, this all will happen only if President Obama and Congress don’t act. The President has been spending virtually every waking hour campaigning for re-election, and Congress has been inert for months. So what do we have to worry about?