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Did you know that your taxes will still go up?

Despite 'fiscal cliff' deal, taxes to rise for most Americans

AP 6 hr ago  By Stephen Ohlemacher

A nonpartisan tax research group says 77 percent of American households will see higher federal taxes in 2013.

WASHINGTON — While the tax package that Congress passed New Year's Day will protect 99 percent of Americans from an income tax increase, most of them will still end up paying more federal taxes in 2013.

That's because the legislation did nothing to prevent a temporary reduction in the Social Security payroll tax from expiring. In 2012, that 2-percentage-point cut in the payroll tax was worth about $1,000 to a worker making $50,000 a year.

RELATED: Congress passes bill, sends to Obama

The Tax Policy Center, a nonpartisan Washington research group, estimates that 77 percent of American households will face higher federal taxes in 2013 under the agreement negotiated between President Barack Obama and Senate Republicans. High-income families will feel the biggest tax increases, but many middle- and low-income families will pay higher taxes too.

Households making between $40,000 and $50,000 will face an average tax increase of $579 in 2013, according to the Tax Policy Center's analysis. Households making between $50,000 and $75,000 will face an average tax increase of $822.

RELATED: Taxes, political bickering threaten US economy in 2013

"For most people, it's just the payroll tax," said Roberton Williams, a senior fellow at the Tax Policy Center.

The tax increases could be a lot higher. A huge package of tax cuts first enacted under President George W. Bush was scheduled to expire Tuesday as part of the "fiscal cliff." The Bush-era tax cuts lowered taxes for families at every income level, reduced investment taxes and the estate tax and enhanced a number of tax credits, including a $1,000-per-child credit.

The package passed Tuesday by the Senate and House extends most the Bush-era tax cuts for individuals making less than $400,000 and married couples making less than $450,000.

Obama said the deal "protects 98 percent of Americans and 97 percent of small business owners from a middle-class tax hike. While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country."

The income threshold covers more than 99 percent of all households, exceeding Obama's claim, according to the Tax Policy Center. However, the increase in payroll taxes will hit nearly every wage earner.

Social Security is financed by a 12.4 percent tax on wages up to $113,700, with employers paying half and workers paying the other half. Obama and Congress reduced the share paid by workers from 6.2 percent to 4.2 percent for 2011 and 2012, saving a typical family about $1,000 a year.

Obama pushed hard to enact the payroll tax cut for 2011 and to extend it through 2012. But it was never fully embraced by either party, and this time around, there was general agreement to let it expire.

The new tax package would increase the income tax rate from 35 percent to 39.6 percent on income above $400,000 for individuals and $450,000 for married couples. Investment taxes would increase for people who fall in the new top tax bracket.

High-income families will also pay higher taxes this year as part of Obama's 2010 health care law. As part of that law, a new 3.8 percent tax is being imposed on investment income for individuals making more than $200,000 a year and couples making more than $250,000.

Together, the new tax package and Obama's health care law will produce significant tax increases for many high-income families.

For 2013, households making between $500,000 and $1 million would get an average tax increase of $14,812, according to the Tax Policy Center analysis. Households making more than $1 million would get an average tax increase of $170,341.

"If you're rich, you're almost certain to get a big tax increase," Williams said.

_http://news.msn.com/politics/despite-fiscal-cliff-deal-taxes-to-rise-for-most-americans

 
booklover545

Asked by booklover545 at 9:52 AM on Jan. 2, 2013 in Politics & Current Events

Level 38 (104,755 Credits)
This question is closed.
Answers (13)
  • Since the 2% SS tax goes back on EVERYONE'S check, EVERYONE got a tax increase of 2%. That's in addition to various other taxes.
    DSamuels

    Answer by DSamuels at 3:24 PM on Jan. 2, 2013

  • Let's see did congress vote themselves a pay raise and did the President sign it? Taxes go up every year.

    No, Obama signed an executive order lifting the 3 year pay freeze for ALL federal employees, including the VP and congress. Congress voted it down last night. No pay raise!
    DSamuels

    Answer by DSamuels at 3:25 PM on Jan. 2, 2013

  • Our taxes go up every year lol
    funlovinlady

    Answer by funlovinlady at 9:55 AM on Jan. 2, 2013

  • Yes, this was talked about before they passed it but from reports I've seen most people think that as long as they make less than 400k then their taxes will remain the same. Sad.
    missanc

    Answer by missanc at 10:52 AM on Jan. 2, 2013

  • Then someone stalls the money going to help the hurricane Sandy victims. I was under the impression that congress already gave them a few billion dollars already..

    The relief bill that came out of the senate was filled with pork. Instead of $9 billion for Sandy it was for $60.4 billion with all kinds of stuff added in, some of it to get a couple rep senators votes.
    DSamuels

    Answer by DSamuels at 11:20 AM on Jan. 3, 2013

  • Ok.
    maecntpntz219

    Answer by maecntpntz219 at 11:23 AM on Jan. 2, 2013

  • yep, happens every year here too, they will get it one way or another so we are just prepared for it
    luvmygrandbaby

    Answer by luvmygrandbaby at 11:49 AM on Jan. 2, 2013

  • Let's see did congress vote themselves a pay raise and did the President sign it? Taxes go up every year.
    Dardenella

    Answer by Dardenella at 1:39 PM on Jan. 2, 2013

  • Did the,y well I did not see that on any of my newfeeds.
    Dardenella

    Answer by Dardenella at 6:18 PM on Jan. 2, 2013

  • I heard there was no spending cuts, but still signed a piece of paper saying the unemployment will extend another year, with what money? Then he signed a executive order giving congress that raise, with what money? Then someone stalls the money going to help the hurricane Sandy victims. I was under the impression that congress already gave them a few billion dollars already....
    Anonymous

    Answer by Anonymous at 10:01 PM on Jan. 2, 2013