Fiscal Cliff: $3,446 per Household

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Homes in Pittsburgh, Pennsylvania.

American households are facing an average tax increase of $3,446 in 2013, if Congress doesn’t avert the so-called fiscal cliff, the nonpartisan Tax Policy Center said in a study released today in Washington.

The top 1 percent of households face some of the largest tax increases and would see their average federal tax rates hit 40.5 percent, up 7.2 percentage points from this year. That would translate to an average tax increase of $120,537.

About 88 percent of U.S. households would see their taxes increase in 2013, with a typical middle-income household facing a tax increase of about $2,000.

After the Nov. 6 election, Congress is scheduled to return to Washington to debate the automatic spending cuts and tax increases starting in January unless lawmakers act. For calendar year 2013, taxes would increase by $536 billion, or about 20 percent.

“This is a very large tax increase,” Donald Marron, the center’s director, told reporters in Washington today.

If Congress does nothing, tax rates on income, capital gains, dividends and estates would increase, and the alternative minimum tax would spread to 21.7 million households, up from 4 million this year.

The top statutory tax rate on ordinary income would reach 39.6 percent, up from 35 percent, and the top rate on capital gains would be 23.8 percent, up from 15 percent. A 2 percentage point payroll tax cut is set to expire at the end of 2012.

Lawmakers agree they should extend the income tax cuts for most households. Republicans want to keep all the income and estate tax cuts for 2013 and begin overhauling the tax code.

Democrats, including President Barack Obama, want to let most of the tax cuts lapse for the top 2 percent of households, or individuals making more than $200,000 a year and married couples making more than $250,000.

See Richard Rubin’s full report at Bloomberg.com.

 

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