What could going over the fiscal cliff mean for your income?
Updated On: Dec 28 2012 06:18:25 PM CST
If no agreement is reached by lawmakers on the fiscal cliff before Jan 1, automatic tax increases and spending cuts will take effect.
The first thing all workers will notice is a two percent decrease in their paychecks beginning in January because Social Security tax is going back up.
Bush-era tax cuts that expire will bring the tax system back to 2001 levels and that means less money in almost everyone's pocket. In fact, going off the fiscal cliff would affect 88 percent of U.S. taxpayers raising their taxes by an average of $3,500 a year.
"If you walk up to an average family today and say, ‘you're going to have $300 less in money every month next year. What are you going to do?’ They don't have any place to cut," said Certified Public Accountant Jerry Love.
A worker making $50,000 a year could pay an additional $200 every month in taxes. And it isn’t the top one percent who will be hit the hardest.
"From the middle down are the ones that will have the highest percentage increase," said Love.
Love said the scary part is that many people won't see the increases until they file their 2013 taxes.
"You’re accustomed to getting a refund, but all of a sudden you didn't have enough taken out of your paycheck. This time next year you’ve got to write a check to the IRS," Love said.
People in Abilene said they are worried about the possible changes to their income.
"I think everybody's worried about it. There’s not a whole lot we can do which is the frustrating part," said taxpayer Greta Holzberlein.
"Right now I’m in a good position, a week from now that might not be the case, but the country needs help financially big time," taxpayer Tim Prosser said.
There is also a threat that unemployment insurance benefits may expire for about 2 million people if lawmakers can't agree on an extension. Without the extension, Americans unemployed more than six months will lose their benefits at the end of the year.
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