The fiscal cliff could cost you thousands

The countdown towards the fiscal cliff is on and an answer doesn’t appear to be anywhere in sight.  The cliff is a series of tax increases and spending cuts that could cost you a lot of cash.

Thirty-two days and counting until America hits the fiscal cliff.  Treasury Secretary Tim Geithner discussed the December 31 deadline with key members of the House and Senate Thursday.  The meetings are not going very well.  The Republicans want to cut spending.  The President and Democratic leaders are looking to raise taxes on people making more than $250,000.

fiscal cliffPresident Barack Obama is scheduled to make an appearance in suburban Philadelphia today to discuss the pending cliff.

The situation could be catastrophic for American families if the country falls off of the cliff.  It’s estimated that an average family of four could face an increase of over $2,000 a year in their tax bill if no agreement is reached.  The combination of tax increases and spending cuts could possibly driving the economy into another recession.

The big fight centers around taxes.  The Democrats want to raise taxes on people who make $250,000 or more a year.  The Republicans refuse to entertain a tax hike on the wealthy.  For those of us not in that tax bracket, no agreement means huge tax increases.

An average family of four will pay between $2,200 and $3,500 more per year and here is how.  First and foremost, everyone’s income tax rate will rise in some cases by as much as three to five percent.

Second, people with families will lose $500 out of the $1,000 tax credit now applied for each child.  Finally, the Social Security Tax will rise by two percent, costing an average American another $1,000 a year.  Despite these drastic increases, negotiations in D.C. are not going well.

“We are waiting for some specifics, somewhere, from our Republican colleagues to show they are serious about negotiations,” said Senator Charles Schumer, (D) New York.

“And I’m here seriously trying to resolve it, and I would hope the White House would get serious as well,” said Senator John Boehner, Speaker of the House.

Besides the tax increases, automatic spending cuts will go into effect.  A total of $500 billion is expected to be cut from the economy including a 10 percent reduction in defense spending and another 8 percent reduction in things like education and air travel safety.

The numbers are astounding.  For a person or family who earns $80,000, the tax bracket will change from 25% to 28%.  That would mean a difference of $1,450 a year more taken at tax time.  Combine the increased income tax rates with the reduction of the child tax credit and the increase in the Social Security Tax from 4.2% to 6.2% and you will have $3,540 less in your pocket.

Negotiations are not going well.  Both sides are not budging at this point.  Many analysts believe if no agreement is reached, it could sink the economy into another recession or even a depression.

10 comments

  • Carl

    Bring it on. This is what four more years of a divided Congress is going to look like. If people are dumb enough to send people like Michelle Bachman back to Congress, then let then reap what they sow.

    • Drake Jones

      It’s true: Middle class Republicans tend to vote against their own best interests. I don’t understand why they would reject affordable health care and want to give millionaire boss and Big Oil tax breaks. Go figure.

      • Rodney67

        As a Middle class Republican I vote based on the fact that if you raise the taxes of the rich they'll pass on that expense to us by cutting jobs and raising prices. You can blame Republicans for everything it doesn't matter but we've already fallen off the fiscal cliff and your great grandchildren will still be trying to fix this mess. Tax payers are paying 400 – 500 BILLION in interest and even with this so called fiscal cliff coming they estimate it will lower the deficit by 100 Billion a year or around 1.2 Trillion over ten years. If by chance today we stop borrowing money and live within our means we can pay off the deficit within about 150 years that is only by going over this fiscal cliff. DEMICRATS TAKE NOTE think of all the goodies your government could give away if they could spend that interest money on you!

  • Chester V. Joines

    Did you ever get a job from a poor man? What will happen when there are no more rich men?. Is the "new Obama care" affordable?

  • Jan

    I don't think most people understand the tremendous amount of money this is that the government is in debt. People that make $250,000 being taxed extra that are going to pay to fix this deficit is minimal, if this even happens is a drop in the bucket. And believe me if this starts, it will happen to the rest of us down the line. The government is so in debt. There are so many more people on disability in one year the percentage is staggering, I know some are on it that are getting away with it. The government is in itself spending too much. I don't like to see it but I think it has to happen all the cuts. All the union workers all the pensions all the perks that are given and how spoiled people are. What they expect and think they should be given. It has to start with cutting all the government spending like bridges to nowhere,president Obama's many Czars, Polosi's jet would be a good place to start, …toooooo many to mention. All the big dollar amounts that are wasted and go down from there. You know I think this is really pathetic what the government has done in bailing out GM and the banks etc. And we're all going to pay for it. Businesses and people need to be responsable for themselves. We don't need all these entities taking care of people, businesses, other countries.

  • Steve

    Dysfunctional, resulting from one-upmanships in US Congress will tip the US economy over the cliff.
    This does not only affect the US but also other nations throughout the world.

    The politicians seem to be toying with each other with little or no sign of "compromise" to come up with any kind of solution to the problem at hand. Some time I was wondering if the US brand of Democracy should be adopted by the World's number one nation.

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