Tag Archives: Tax Policy Center

Understanding The Fiscal Cliff Deal

The Fiscal Cliff Deal

The taxes paid by most Americans will definitely increase despite the fiscal cliff deal just signed by Congress.

President Obama has declared that the fiscal cliff deal as a victory for middle class households. This may not be true because taxes are bound to go up and this will lead to an increase in middle class taxes.

The percentage of households and individuals i...

The percentage of households and individuals in each income bracket. “US Census 2005 Economic Survey, income data” . . Retrieved 2006-12-09 . “US Census Bureau, personal income distribution” . . Retrieved 2006-12-09 . (Photo credit: Wikipedia)

America also has a huge national debt of $16 trillion. The tax relief and pork included in the new deal will add about $4 trillion to the national debt over 10 years. The fiscal cliff deal has been hailed as a victory for the middle class but this deal means that about 77% of the American population will pay more federal taxes in 2013. There are bound to be tax increases in 2013 and this affect the people in the middle classes too.

This may seem pretty high but people in high income brackets will pay much more than this in 2013.
The new deal will definitely affect people in the $400,000-$450,000 income bracket.

For those in the top income bracket, investment taxes will increase from 15% to 20%. Another category of top income earners will experience an increase of 4.6% in the taxes they already pay. This means that the tax will move up from 35% to 39.6%.

The Obama 2010 health care law necessitated a higher amount of tax for families which earn high incomes. In 2013, households with incomes in the $500,000 and $1 million bracket will pay $14,812 more. Families making more than $1million per year will fork out $170,341 in federal taxes.

The new tax deal was passed into law on January 1, 2013. The aim is to get more money for social security which is financed by taxes paid by employees and employers of labor. The fiscal cliff deal was opposed initially by republicans but the law has now been passed into law.