D.C. must consider household cliffs also
MUCH of the talk in Washington about the deadline to reach a deal to reduce trillion-dollar annual deficits has centered on the effect on the federal government.
Missing the deadline would send the government off a so-called fiscal cliff that called for spending reductions.
But that fiscal cliff also would cut the spending of 121 million Americans - or more.
If Congress and the president fail to take preventive action, all the Bush tax cuts would be wiped out. That would reduce several tax credits for low-income earners, parents and students, and would affect way more than the upper 1 percent of Americans.
Roughly 90 percent of American households would face higher tax bills next year, according to the liberal Tax Policy Center.
"A married couple making between $20,000 and $30,000 a year would go from receiving, on average, a $15 tax credit to owing $1,408," reported the Wall Street Journal, using data from the center.
The Social Security tax on wages would rise from
4.2 percent back to the 6.2 percent it had been for a quarter-century following the last Social Security reform. That would take a bite out of 121 million workers.
Then there is the tax credit that Congress doubled to $1,000 per child under President Bush.
"For me it's a serious thing," said Traci Petty, 42, a single mother from Danville, Va., interviewed by the Journal. She would see a $1,500 cut in her expected tax refund of $4,000, which she counts on to cover necessities.
The biggest effect on the poor would come from the fiscal cliff's effect on small businesses, whose owners are reluctant to hire until they learn how this deal will shake out.
Todd Sardini told the Journal he would put a hold on expansion of his New Jersey contracting business if his taxes were to climb.
Government spending, not tax cuts, is the reason behind trillion-dollar deficits. The Bush tax cuts date back to 2001.
Four years ago, annual federal spending was $2.8 trillion. Now it tops $3.5 trillion.
The federal government should cut its spending first.
Forcing Americans to cut their spending first would not go over too well.