While the exact amount is still unclear, Americans should expect their taxes to increase in the next few weeks. More than a dozen tax cuts are about to expire on December 31 and several new taxes are scheduled to be implemented at the start of 2013.
The expiration of tax cuts as well as the new taxes will affect 90 percent of taxpayers in the United States, from the very poorest to the wealthiest. An average household’s tax bill could increase by around $2,000 in 2013 according to the Tax Policy Center. Taxes to those belonging to the 1 percent would increase an average of $121,000.
Congress started the discussion on how to deal with the spending cuts and tax increases Tuesday. They would also tackle an overhaul of the tax rates in the US. President Obama said that it would be bad for the economy and would hit families who are already struggling with their budgets.
The payroll tax cut that was given in 2011 and 2012 as temporary stimulus is set to expire and both Democrats and Republicans are set to let it happen. Some provisions could be made so that the lowest earners will not have to suffer from the expiration of the payroll tax cut.
The expiration of the payroll tax cut will affects everyone who works. This is around three quarters of all taxpayers in the United States. A middle-class household with $40,000 to $65,000 earnings can expect its taxes to increase by an average of $672 in 2013.
High income Americans must pay an additional tax of 0.9 percent on their earnings above $250,000 if married and above $200,000 if single starting 2013. They must also pay 3.8 percent on capital gains, interest, dividend income over the same thresholds.
