A study by the Tax Policy Center in Washington, D.C., warned that the typical middle-income family making between $40,000 to $64,000 a year — a spread that encompasses Cobb’s median income — would see its taxes rise by up to $2,000 next year if congressional lawmakers fail to renew the many tax cuts that are now set to expire at year’s end.
Heading that list are the so-called “Bush tax cuts.” Unless they are renewed, a married couple would pay a 28 percent rate on taxable income that exceeds $72,300. At present they pay a 25 percent rate. And what is now a 10 percent tax rate paid on the first $8,900 of income would rise to 15 percent.
All together, if the various tax cuts are not renewed, the country would see a 5 point rise in its average tax rate, meaning a 4 percentage point tax jump for most of those earning less than $100,000 per year. And as for those in the $40,000 to $64,000 range referred to above, they would see their average federal tax rate soar to 17.8 percent from 14 percent. That would translate to an overall increase of 27 percent in their federal tax bill.
Nearly 90 percent of households across the country would see their taxes go up.
Also slated to expire is the 2 percent temporary cut in payroll taxes that was pushed by Obama.
“The fiscal cliff threatens an unprecedented tax increase at year end,” wrote the authors of the Tax Policy Center report. “Taxes would rise by more than $500 billion in 2013 — an average of almost $3,500 percent household — as almost every tax cut enacted since 2001 would expire.”
If the cuts do expire, that would mean an estimated $500 billion in additional revenue to the federal government. And if there was any guarantee that that ocean of new money would be used to help balance the budget and reduce the size of the national debt, it might almost be worth letting them expire.
But sad experience tells us that Congress — no matter which party controls Capitol Hill — will find a way to spend every last dollar we send its way.
As President Ronald Reagan was fond of saying, “Washington doesn’t have a revenue problem, it has a spending problem.”
That is as true now as it was then. And the best way of ensuring that as much of your hard-earned dollars stay in your pocket rather than being siphoned off toward Washington is for Congress to ensure the tax cuts in question stay in place and are made permanent.