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What the Fiscal Cliff Really Means for YOU

Some lawmakers are back in Washington hoping to hammer out a last-minute deal to avert the so-called “fiscal cliff,” but so far it seems that there’s more name-calling than deal-making going on.

If no deal is ever reached, it will be more than just a political headache. Americans also could feel considerable pocketbook pain as taxes rise, unemployment benefits are cut off, and an array of smaller changes take effect.

The cumulative effect on Americans’ wallets could be enough to dent significantly the already weak economy. Federal Reserve Chairman Ben Bernanke has said the combination of tax increases and spending cuts could be enough to send the nation back into recession.

That’s the worst-case scenario, and despite the considerable gridlock, most experts expect that Congress and the president will eventually come to some sort of deal. Experts also say that even if no deal is reached by Jan. 1, retroactive fixes and other deal-making could prevent the most harmful effects from ever hitting most Americans.

Still, the Tax Policy Center, a nonpartisan think tank, says that nearly 90 percent of households would be affected if we go over the fiscal cliff completely and no deal is reached.

A stalemate would have very specific effects on certain groups of taxpayers, such as students, parents and married couples who have benefited over the past decade from certain tax law changes passed under the Bush and Obama administrations.

But the Tax Policy Center says that on average, taxes would go up for every income group, from the poorest taxpayers to the most wealthy:

  • Americans in the lowest 20 percent of the income scale could pay an average of about $400 more in taxes.
  • Middle-income households could pay about $2,000 more in taxes, on average.
  • The top 20 percent of taxpayers could pay about $14,000 more a year in taxes, on average.
  • The 1 percenters could pay an average of $120,000 more in taxes.

Here’s a look at some of the biggest issues likely to affect the largest groups of taxpayers if Congress cannot make a deal.

Tax rates will go up: If no deal is made, taxpayers can expect their tax rate to rise no matter what income group they fall in, said Roberton Williams, senior fellow with the Tax Policy Institute. That’s because previously passed rate cuts would expire…

Read More:  NBC News

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