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What Will The Fiscal Cliff Cost You?

American consumers and businesses will pay much higher taxes next year if a package of tax increases and spending cuts known as the “fiscal cliff” takes effect as scheduled Jan. 1.

U.S. Capital Building
Architect of the Capitol

The nonpartisan Congressional Budget Office says the measures would push the economy into recession and drive the unemployment rate to 9.1 percent next year.

The rate is now 7.9 percent.

Below are the main elements. The estimated dollar figures are for calendar year 2013:

  Amount, in billions
Higher taxes on income below $250,000, higher estate taxes, alternative minimum tax. $279
Higher taxes on income above $250,000. 52
Expiration of Social Security tax cut. 115
Expiration of temporary tax breaks for businesses and individuals. 110
Expiration of extended unemployment benefits. 30
Defense spending cuts. 32
Across-the-board cuts to education, health, law enforcement, other programs. 53
 
Total 671
Source: CBO, Tax Policy Center

The tax increases wouldn’t affect everyone equally, though all taxpayers would pay more. Here are the average increases for people at different income levels:

Income level Tax increase
Lowest 20% ($20,113 or less) $412
Low-middle 20% ($20,114 – $39,790) 1,231
Middle 20% ($39,791 – $64,484) 1,984
Upper-middle 20% ($64,485 – $108,266) 3,540
Highest 20% ($108,267 and above) 14,173
Top 1% ($506,210 and above) 120,537
Source: Tax Policy Center

(Copyright 2012 by The Associated Press. All Rights Reserved.)

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