What would the ‘fiscal cliff’ cost you?

If President Barack Obama and lawmakers fail to reach a deal this month to avert a series of automatic spending cuts and tax increases, how much more will you need to pay in taxes?

It depends, of course, on how much you earn. But the nonpartisan Tax Policy Center estimates that the average American would see tax bills rise by $3,446 next year.

Taxpayers earning more than a $1 million will endure a $254,000 tax increase, on average, or about 11 percent of their income. Those earning between $40,000 and $50,000 will see a $1,700 tax jump, or about 4.4 percent of their income.

After-tax income would decline across all income levels, according to the Tax Policy Center.

The nation’s lowest earners would see about a $412 drop on average (a 3.7 percent cut in after-tax income), while the top 1 percent of earners would need to shell out an additional $120,000 (a 10.5 percent bite in after-tax income). Middle-class families earning between $40,000 and $65,000 annually would see taxes increase by about $2,000, leaving them with 4.4 percent less money to spend.

Why would Americans need to pay more in taxes? Because a series of tax cuts and tax credits enacted in recent years are set to expire Jan. 1. They are the tax cuts put in place during George W. Bush’s administration; a payroll tax holiday signed by Obama; and measures enacted as part of the 2009 economic stimulus that expanded the earned income tax credit and the child tax credit for working families.

Finally, more than 26 million mostly middle-class households for the first time may face the alternative minimum tax, or AMT, which could add about $3,700, on average, to tax bills. Congress has thus far failed to approve an inflation “patch” that expired last year and prevents millions of people from having to pay the tax.

But congressional tax aides said the Internal Revenue Service has advised Congress that trying to fix the AMT after the filing season begins in January would lead to processing delays of more than two months for nearly half of all returns — significantly postponing the delivery of refunds.

Bottom line: If Congress doesn’t act, most Americans are likely to pay more next year in federal income taxes.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Local News

Trader Joe’s customers walk in and out of the store on Monday, Nov. 20, 2023 in Everett, Washington. (Olivia Vanni / The Herald)
New Trader Joe’s opens this week at Everett Mall

It’s a short move from a longtime location, essentially across the street, where parking was often an adventure.

Ian Bramel-Allen enters a guilty plea to second-degree murder during a plea and sentencing hearing on Wednesday, March 6, 2024, at Snohomish County Superior Court in Everett, Washington. (Ryan Berry / The Herald)
‘Deep remorse’: Man gets 17 years for friend’s fatal stabbing in Edmonds

Ian Bramel-Allen, 44, pleaded guilty Wednesday to second-degree murder for killing Bret Northcutt last year at a WinCo.

Firefighters respond to a small RV and a motorhome fire on Tuesday afternoon in Marysville. (Provided by Snohomish County Fire Distrct 22)
1 injured after RV fire, explosion near Marysville

The cause of the fire in the 11600 block of 81st Avenue NE had not been determined, fire officials said.

Ashton Dedmon appears in court during his sentencing hearing on Tuesday, March 5, 2024, at Snohomish County Superior Court in Everett, Washington. (Ryan Berry / The Herald)
Everett Navy sailor sentenced to 90 days for fatal hit and run

Ashton Dedmon crashed into Joshua Kollman and drove away. Dedmon, a petty officer on the USS Kidd, reported he had a panic attack.

A kindergarten student works on a computer at Emerson Elementary School on Wednesday, Feb. 28, 2024, in Everett, Washington. (Ryan Berry / The Herald)
‘¡Una erupción!’: Dual language programs expanding to 10 local schools

A new bill aims to support 10 new programs each year statewide. In Snohomish County, most follow a 90-10 model of Spanish and English.

Cassie Franklin, Mayor of Everett, delivers the annual state of the city address Thursday morning in the Edward D. Hansen Conference Center in Everett, Washington on March 31, 2022.  (Kevin Clark / The Herald)
At Everett mayor’s keynote speech: $35 entry, Boeing sponsorship

The city won’t make any money from the event, city spokesperson Simone Tarver said. Still, it’s part of a trend making open government advocates wary.

Logo for news use featuring the Tulalip Indian Reservation in Snohomish County, Washington. 220118
Woman drives off cliff, dies on Tulalip Reservation

The woman fell 70 to 80 feet after driving off Priest Point Drive NW on Sunday afternoon.

Everett
Boy, 4, survives fall from Everett fourth-story apartment window

The child was being treated at Seattle Children’s. The city has a limited supply of window stops for low-income residents.

People head out to the water at low tide during an unseasonably warm day on Saturday, March 16, 2024, at Lighthouse Park in Mukilteo, Washington. (Ryan Berry / The Herald)
Everett shatters record high temperature by 11 degrees

On Saturday, it hit 73 degrees, breaking the previous record of 62 set in 2007.

Snohomish County Fire District #4 and Snohomish Regional Fire & Rescue respond to a motor vehicle collision for a car and pole. The driver was pronounced dead at the scene, near Triangle Bait & Tackle in Snohomish. (Snohomish County Sheriff’s Office)
Police: Troopers tried to stop driver before deadly crash in Snohomish

The man, 31, was driving at “a high rate of speed” when he crashed into a traffic light pole and died, investigators said.

Alan Dean, who is accused of the 1993 strangulation murder of 15-year-old Bothell girl Melissa Lee, appears in court during opening statements of his trial on Monday, March 18, 2024, at Snohomish County Superior Court in Everett, Washington. (Ryan Berry / The Herald)
31 years later, trial opens in Bothell teen’s brutal killing

In April 1993, Melissa Lee’s body was found below Edgewater Creek Bridge. It would take 27 years to arrest Alan Dean in her death.

Logo for news use featuring the municipality of Snohomish in Snohomish County, Washington. 220118
Man dies after crashing into pole in Snohomish

Just before 1 a.m., the driver crashed into a traffic light pole at the intersection of 2nd Street and Maple Avenue.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.