Fiscal Cliff's First Impact - Immediate Tax Hikes
BOSTON (CBS) - Much has been made about the automatic government spending cuts that would take effect if we do go over the fiscal cliff and for good reason.
WBZ NewsRadio 1030's Joe Mathieu reports
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But the real impact on spending would be gradual, spread out over ten years, if Congress does nothing.
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The part that would hit you in the wallet immediately is tax hikes.
It's a case of really bad timing, as the January 1, 2013 deadline for spending cuts would coincide with the expiration of the Bush tax cuts and the payroll tax cut.
The result?
Tax hikes for every working American.
If the Bush tax cuts expire for everyone, we would each be hit with an average marginal tax rate increase of five percent, according to the Tax Policy Center.
If payroll tax cuts expire, your taxes go up by two percent of your gross annual income, up to a maximum of $2,200.
But these are big "ifs," according to Michael Widmer of the Massachusetts Taxpayers Association.
"In the end I don't think they will expire for the vast, vast majority of taxpayers. I think they will ultimately reach an agreement on marginal increased taxes for those earning, let's say $500,000 or more. So I think in the end, the vast majority of taxpayers will not see a tax increase," Widmer told WBZ NewsRadio 1030.
To his point, it could be political suicide to let that happen.
But the less tangible problem here is the impression or expectation, the fear that higher taxes are coming. It makes people spend less and that drags on the economy.
Widmer says that goes for companies too.
"The corporate tax rate does not change for the vast majority of corporations. On the other hand, the fact that there is no agreement, corporations are sitting on money and hesitant to invest."
And that could mean no new jobs anytime soon.
CBSBoston.com will have an expert on call for a live Q&A Monday through Friday from 5:30 – 6:30 p.m. to answer your questions about the fiscal cliff.
The series "Inside the Fiscal Cliff" airs all week at 5 and 11 p.m. on WBZ-TV and at 5:55 a.m., 8:55 a.m., 12:21 p.m., and 4:55 p.m. on WBZ NewsRadio 1030.
