On November 7th, while cleaning crews are still tidying up from election night parties, America’s political class will be hurling themselves into another essential battle over government spending, taxes and debt. On January 2nd, 2013, absent some kind of budget deal, America will fall off the “fiscal cliff” and face a massive tax increase and across the board cuts in government spending. Like most crisis these days, it’s a creation of politicians.
A new study from the Brookings Institution’s Tax Policy Center finds that the expiration of the Bush-era tax cuts at the end of the year will hit Americans with a $500 billion tax hike. While liberal talking points suggest that only the wealthy received a tax cut under Bush, in fact every income group saw their taxes reduced. The rich got “more” tax cuts for the simple reason that they pay more in taxes. The expiration of the Bush tax cuts will hit everybody.
An average middle-class household — making between around $40,000 to $65,000 — would see an almost $2,000 tax hike next year, while those making under $20,000 a year would see their bill rise by an average of just over $400. Both groups would see their after-tax income drop by around four percent.