Without legislative action, most of the tax cuts enacted since 2001 will expire on Jan. 1, when new taxes also take effect. Result: the government would take in more than $535 billion in increased revenue and the average family’s tax bill would go up $3,500.

 

Source: NYT

 

Breakdown of the increases, ranked by the Tax Policy Center in order of likelihood.

Category: Politics, Taxes and Policy

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19 Responses to “This Is Your Tax ‘Fiscal Cliff’”

  1. DrungoHazewood says:

    This reminds me that I need to ask my accountant why I’m in the dreaded 47%, but afraid he’ll say “you are?”. That k-1 hocus pocus is a total mystery.

  2. ilsm says:

    Bright side: sequestration next year will trim about $100B (from $650B) from the war profiteering machine which has been a millstone around the US economy for 63 years.

  3. denim says:

    “…the average family’s tax bill would go up $3,500.”

    That might do more than just kill consumer spending. It may put some retail outlets, even web based, out of business. But that would be enough. Any way, one would think that our “leaders” would have enough sense to tax those companies and people who have an abundance of money far greater than the average family has. But dare one think?

  4. DeDude says:

    Interestingly the tax-cut most likely to be allowed to expire is the one that helps regular working people. A temporary cut in social security tax is allowed to be temporary by the time it runs out. Temporary tax-cuts for the rich are not allowed to run out without a huge fight from the right. I guess the pledge to not raise taxes by letting previous tax-cuts run out, does not apply to taxes that preferentially hits working people.

    Personally I hope we get a total break down in negotiations, and then a proposal to give everybody a big break by increasing personal exemptions and child tax credits, permanently. That would be the right mix of stimulation and revenue increases. The accompanying cuts in our absurdly large military would provide spending cuts the one place they are desperately needed.

  5. overanout says:

    what is the average family?

  6. zot23 says:

    LOLZ!

    You said “Cut the Military”!

  7. Bernie X says:

    Will the “average” family really have that increase ?

    Or is that just a median figure that would apply to a non-existent demographic ?

    Will the result be that the 47% still pay very little, but the top 30% shoulder almost all of the increased revenue ?

  8. jmay says:

    Yeah, it sucks when you actually have to, you know… pay for things.

    I’m thankful that at the electorate is eschewing the magical “we’ll cut taxes and balance the budget” unicorn pony promises of yore.

  9. ByteMe says:

    Barry, if tax changes take about 4-5 quarters to work their way through the economy… why not just let them go through all at once and take the recession for a year or two and then emerge on the other side stronger for it?

    I still want the cuts to spending as well, I’m just tired of the revenue tricks that add to the debt.

  10. Futuredome says:

    Sorry, but that 3500 only applies to rough 10 percent of the total tax base. For the rest, it would be “far” lower.

    Denim, your post is lol bad.

    The inability to understand how these “tax cuts” are useless is amazing. They don’t do anything, especially the Bush variety.

  11. Iamthe50percent says:

    So my income tax bill will go up about $1300 from the 10% rate going back to 15%. The sky is falling!

    I can afford it, so if your tax bill goes up more, I’m sure you can to.

    That $3500 figure must include SS tax which was on “holiday” not permanent cut. I fear that cut becoming permanent because it will be the death of SS.

    I’d be real happy to go back to Bill Clinton tax rates with a Bill Clinton economy. That trickle down thing just resulted in my being trickled on, not extra money.

  12. ezrasfund says:

    If the “average family” number is derived by taking the total tax increase and dividing it by the number of families, then it is a meaningless statistic. We all know that if nine guys are in a bar and Bill Gates walks in, then their “average” net worth is north of $5 billion, but it doesn’t mean too much. Because of the extreme income inequality in our country the “median” tax increase would be a bit more meaningful but still a very coarse measure. Which is not to deny that there are some very draconian tax increases in the mix which should be avoided.

  13. Syd says:

    I know that Federal tax increases and spending cuts (i.e., austerity) would really hurt the economy right now – almost certainly trigger a recession, and make the deficit worse to boot, but from a bargaining standpoint I think the Dems have to let the Bush tax cuts and the payroll tax cut expire at the end of the year.

    That will be the easy part; the Bush tax cuts, which blew a huge hole in the budget from the get-go, will finally be history. The hard part will be negotiating a a deal with Repubs on taxes and spending that will bring the deficit down gradually to a manageable level over the medium to long term.

    I’d like to see that deal contain:

    1. steep cuts in military spending
    2. equal dollar amounts in tax increases and spending cuts
    3. a tax on carbon (not cap and trade; that’s just a way to give Wall Street a cut)
    4. higher taxes on high income households and capital gains

    Higher taxes on the rich are well justified; almost all of the income gains in recent decades have gone (and continue to go) to them, while poor and middle class household incomes have stagnated.

  14. Frwip says:

    Without legislative action, most of the tax cuts enacted since 2001 will expire on Jan. 1.

    Good !

    (and for me, the bill would be 5 figures, but still a bloody good thing).

  15. leveut says:

    “Result: the government would take in more than $535 billion in increased revenue ”

    1. Doesn’t this assume that “all other things are equal”, which is to say that the increased taxes have no effect on economic activity and financial decisions? How realistic is that assumption?

    2. Isn’t the effect of this increase…”austerian”, something railed against here in Ritholtzia on a regular basis?

  16. mathman says:

    One thing’s for sure – we won’t be better off 4 years from now, no matter how they re-jigger the tax code or which corporate clown is in the White House. The bottleneck will influence all plans.

  17. Robert M says:

    I want the fiscal cliff. The nonsense about rates misses the point. The point is the structure of the tax code to produce either “social” or “business” good, while often the same thing is out of whack, period. Much of it has a historical perspective; e.g. we don’t give railroads free land to build anymore.We need to go through the consequences to see what good policy is for the 2010′s going forward.

  18. S Brennan says:

    While the “average family” may see a tax increase of 3,500.00 dollars, the vast majority of American families won’t see anything near to that inflated number.

  19. Joe Friday says:

    The White House and Congressional Dems are likely to avoid being blackmailed into acquiescing to bad RightWing policy again by allowing everything to go over the cliff.

    The Treasury Department has the authority to not withhold taxes, as they have all year to collect them, and the spending cuts would normally be spread out over the year, so one month will have little impact.

    Then the Senate Dems can pass a bill that extends the tax cuts ONLY for the Middle-class and send it over to the House for them to choke on.