Congress Needs to Get Their Act Together Quickly
If Congress drives the country off the fiscal cliff, Americans will face an unprecedented tax increase in 2013. It totals $500 billion and includes the majority of tax breaks enacted since 2001, as well as some of the most popular in the tax code. A middle-income family would see a tax increase of about $2,000, according to report from the Tax Policy Center.
Among the taxes in play:
The child tax credit: Under President George W. Bush’s Tax Relief Reconciliation Act, the maximum value of the credit was doubled to $1,000 per child, said attorney Adi Rappoport of the Gunster firm in West Palm Beach. Two years ago, Congress extended the credit until the end of 2012 and allowed families whose income tax is lower than the credit’s value to receive more of the credit in a cash refund.
The alternative minimum tax: This tax seeks to ensure that people who have access to certain deductions and credits — usually the wealthy — pay at least a minimum amount of tax. Congress has repeatedly patched this tax, which does not take inflation into account, to ensure that it does not apply increasingly to middle-class families. If Congress does not address this tax, 26 million households will face an average tax increase of $3,700, according to the Chicago Sun-Times.
Estate taxes: In 2012, a couple can give a gift or the estate of a couple can bequeath up $10 million tax free. If the estate tax break expires, that limit will drop to $2 million and 10 times as many estates would be hit by the estate tax.
Bush tax cuts: They benefited virtually anyone who filed a tax return but were most generous dollar-for-dollar to higher-income earners. The top income tax rate was reduced to 35 percent from 39.6 and the bottom rate to 10 percent from 15.
Payroll tax cuts: About 120 million households would be subject to a 2 percentage point increase in the payroll tax .