Sign up as a Citizen Journalist and get involved in Information Activism.
Sign Up for Watchdog Updates!
The Tax Foundation released its report “How Would the Fiscal Cliff Affect Typical Families in Each State?” According to the report author Nick Kasprak, “”With the election behind it, the 112th Congress has a couple of months during the lame duck session to turn its attention to pressing fiscal issues. Large changes to both taxes and spending are scheduled to take place at the end of the year unless Congress acts. On the tax side, the biggest potential change is the expiration of all Bush-era and Obama tax cuts.”
Kasprak notes, “Additionally, the Alternative Minimum Tax (AMT) has yet to be patched for the current tax year, let alone next. Congress could pass a retroactive patch (which it has done in the past) that would apply to the current year as well as next year; however, if it does not, the AMT exemption level would revert to what it was twelve years ago, and certain credits (such as the Child Tax Credit) would no longer be allowed against AMT liability. If this were to happen, millions of middle-class taxpayers could see a substantial tax increase, which for some could be even larger than the change from the end of the Bush-era tax cuts.”
“Finally, the 2% temporary cut to employee-side social security payroll taxes is also scheduled to expire at the end of this year—a potential third tax increase that would affect the vast majority of taxpayers,” notes the report.
To illustrate the potential impact on typical families, we have used Census and IRS data to estimate income and deductions for the median two-child family in each of the fifty states. The Tax Foundation ran returns through its online tax calculator under two scenarios—2011 tax law (chosen because it is the latest year that an AMT patch was in effect), and 2013 law, assuming all Bush-era and Obama tax cuts expire and AMT remains un-patched. Here is how Floridians will be impacted:
Median Household Income for Four-Person Family (2011): $63,937
Total Itemized Deductions: $9,452*
AMT Disallowed Deductions: $1,770
AMT Allowed Deductions: $7,682
Tax Increase, 2011 to 2013: $3,331
From Child Tax Credit: $1,000**
From Other Bush Tax Cuts and Extenders:$1,052
From AMT: $0
From Payroll Tax: $1,279
Tax Increase as % of Income: 5.21%
*Family would take the standard deduction in 2011 and also under 2013 current law
**Includes amounts from AMT changes that would prevent taking the credit against it. The amount purely from the Bush-era tax changes to the child tax credit is $1,000 for every state.
To calculate your personal tax increase please click here to use the Tax Foundations online tax calculator.
Kasprak concludes. “While there are exceptions, the general pattern is median families in high-income and low-income states are more affected than those in middle-income states. Higher income families would be disproportionately affected by the imminent AMT changes—particularly those that owe higher than average state income tax, which is deductible under the ordinary tax system but not the AMT.”
The reports states, “At the opposite end, low-income states are disproportionately affected because three tax increases from the end of the Bush-era tax cuts—the reduction in the child tax credit, the elimination of the 10% bracket, and the reduced standard deduction for married filers—represent fixed increases that do not depend on income.”
Kasprak says, “Therefore, these increases, as a percentage of income, are largest for lower-income families.”
UPDATE: Below chart courtesy of CNN Money:
Tax Foundation Staff, The Fiscal Cliff: A Primer, TAX FOUNDATION SPECIAL REPORT NO. 204 (Nov. 8, 2012)
- Hidden provision of Obamacare raises Florida’s minimum wage
- Charlie Crist Says He Would Raise Taxes If Elected Governor
- Keynesianism is a Disease, Not an Economic Theory
- Florida veterans hit with massive property insurance rate increase on Veterans Day
- Barry Goldwater: Remembering a Conservative who had a conscience