Families of all tax brackets could be hit with an overnight tax increase that would devour 8 percent of their total income if the pending "fiscal cliff" becomes a reality, according to an analysis by the Tax Foundation.
Although all families would be affected, those in the high- and low-income groups would see the largest increases — not those in the middle.
This means that cities with major proportions of people in the high and low categories will be impacted the most. For example, Bryan, Texas, has a median income of $38,292 while Washington, D.C.'s is $115,519. The fiscal cliff would have a major affect on both of them.
In all, the federal-income tax rate would jump from 19 to 24 percent, which is about $2,000 in taxes for middle-income families.
The cliff is the result of several tax bills expiring. One of the largest is the George W. Bush tax cuts, which were enacted in 2001 and 2003, according to an article by the U.S. Chamber of Commerce. Originally, the policies were to expire in 2008 and 2010, but were renewed in December 2010 to carry over until December 2012.
The American Opportunity Tax Credit, which was a 2009 stimulus bill for college students, will also expire, as will the payroll tax cut. Other expiring tax provisions haven't been renewed by Congress, and new taxes from the Affordable Care Act, or "Obamacare," will start.
Finally, an expiration of the alternative minimum tax "patch," which was created to make high-income individuals pay a fair share of taxes, will now subject 32.4 million taxpayers to an increased liability when filing 2012 returns.
EMAIL: [email protected]