POSTED: Friday, November 16, 2012 - 5:13pm
UPDATED: Friday, November 16, 2012 - 5:38pm
We hear a lot about the so-called Fiscal Cliff and what it will mean to the economy. But what will it mean to your personal economy, and more to the point, your taxes?
Here’s why they call it a fiscal cliff. Because it is a virtual perfect storm of bad economic moves in the waning months of the worst recession since the 30’s.
First, there are across the board budget cuts triggered by the Budget Control Act of 2011. Unless the so-called “super Committee came up with a deal, they were to kick in on January first. The committee didn’t, and the cuts will unless Congress acts, and they total $109-billion a year for 9 years.
But it’s taxes that has everyone worried. The temporary cut in payroll taxes, social security and medicare, will expire. Someone making $50,000 a year saved about a grand.
The Bush tax cuts set marginal income tax rates at 10, 15, 25, 28 and 35%. They will return to Clinton era levels of 15,28,31,36 and 39.6%. The president wants to keep the cuts for those below $250,000 a year, and Republicans want it all to stay.
If nothing happens, the average tax increase will be $3500 for the year. Middle income earners will average $2000. Capital gains taxes would go from 15% back up to 20%. The child tax credit will go from $1000 back to $500.
Republicans don’t want to continue the President’s higher earned income tax credit. And the estate tax will rise from 35% backup to 55%.
The good news, most of this won’t happen. But they’ll get us good and scared in the meantime.
Texas, by the way, will lose more than $650 million in federal grants. The biggest hit would be the Texas Women, Infants and Children program.