Wednesday, October 3, 2012

How looming tax hikes would hit typical families

A variety of tax cuts enacted during the tenures of Presidents George W. Bush and Barack Obama expire at the end of December. Expiring provisions include Bush-era cuts on wage and investment income and cuts for married couples and families with children. Also expiring is a 2 percentage point temporary payroll tax cut.

A look the tax increases facing typical families:

?A married couple with two children and an income of $100,000 would pay $7,935 in income taxes and $5,650 in payroll taxes this year, for a total federal tax burden of $13,585. Next year, they would face income taxes of $11,919 and payroll taxes of $7,650, for a total federal tax burden of $19,569, a total tax increase of $5,984.

?A married couple with no children that makes $60,000 (each spouse earns $30,000) would pay $5,105 in federal income tax for 2011. Their income taxes would rise to $6,308 next year and their payroll taxes would rise from $3,390 in 2011 to $4,590 in 2012.

?A single mother with three children and an income of $40,000 would benefit from the earned income and refundable child tax credits to receive a tax refund of $2,626 for 2011 and pay payroll taxes of $2,260 for a total federal tax burden of -$366. Under higher rates in 2013, she would owe $183 in income taxes and pay $366 more in payroll taxes.

?A married couple earning $200,000 (one spouse earns $150,000, the other $50,000) would see their income tax bill jump almost $6,000 (from $34,587 to $40,545) and their payroll taxes rise $3,358 ($9,742 to $13,000).

?A married couple earning $1 million faces income taxes of $311,344 for this year. That would jump to $354,224 next year at a maximum rate of 39.6 percent. They would pay almost $4,500 more in payroll taxes.

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Source: Tax Foundation

On the Web: http://interactive.taxfoundation.org/taxcalc/#calculator

Associated Press

Source: http://hosted2.ap.org/APDEFAULT/89ae8247abe8493fae24405546e9a1aa/Article_2012-10-01-Fiscal%20Cliff-Taxes-Glance/id-ed02dea7c2874858b88273d28e7ff11a

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