WASHINGTON (Reuters) – Higher federal taxes for millions of businesses and individuals will become law on Tuesday unless Congress acts to stop them. These taxes, worth $ 500 billion, comprise the bulk of what is known as the “fiscal cliff” problem.
The following shows the probable impact on taxpayers if Congress does not act on Monday, or does not come back later and undo these tax increases, based on data from the nonpartisan Tax Policy Center.
INDIVIDUAL TAXES
If midnight passes with no deal, lower individual tax rates enacted in 2001 on a temporary basis under former President George W. Bush will expire on December 31.
The income tax brackets will rise to 15, 28, 31, 36, and 39.6 percent from the current 10, 15, 25, 28, 33 and 35 percent for nearly 160 million taxpayers.
The poorest fifth of taxpayers, about 40 million households, will see an average tax increase of about $ 412.
The most affluent fifth, about 23 million taxpayers, will typically pay about $ 14,173 more in income tax.
The wealthiest 1 percent, about 1.1 million taxpayers, will see an average tax hike of about $ 120,000.
PAYROLL TAX
About 160 million workers will pay higher Social Security payroll taxes. The rate goes up to 6.2 percent on January 31 when the current, temporary 4.2 percent rate expires. The lower rate was extended in 2012 to give workers a little extra in their paychecks as a way to boost the economy. Unlike some of the other tax measures, there appears to be little interest from Republicans or Democrats in continuing the lower rate.
INVESTMENT TAXES
The capital gains tax rate will rise to 20 percent from 15 percent for most taxpayers who have income from gains on their investments. The tax rate on dividends will rise to the top income tax rate, 39.6 percent, from the current 15 percent dividend tax rate.
ESTATE TAX
The estate tax will rise to 55 percent from 35 percent. The value of assets exempted also drops to $ 1 million per person from its current $ 5 million per person.
ALTERNATIVE MINIMUM TAX
About 27 million Americans could be required to pay the alternative minimum tax (AMT), a tax that initially was intended to make sure the wealthy paid some tax. The AMT fix that Congress has enacted annually had resulted in only 4 million Americans paying the AMT.
UNEMPLOYMENT BENEFITS
About 2.1 million long-term unemployed Americans will see their extended jobless benefits cut off as of January 1, according to the National Employment Law Project, an advocacy groups.
EXTENSIONS OF TAX BREAKS
A mix of tax breaks for individuals and businesses worth tens of billions of dollars annually, including the research and development tax credit for business, will lapse. These include deductions for payments of state and local taxes and tax benefits for college tuition.
MEDICARE PAYMENTS TO DOCTORS
Doctors treating elderly and disabled patients who make up the Medicare population will see a double-digit cut to in rates paid by the federal government health care program. Medicare patients could have a tougher time finding doctors who will treat them.
(Editing by Fred Barbash and Jackie Frank)
Seniors/Aging News Headlines – Yahoo! News
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