“Fiscal Cliff” Near, Unless Congress Plays Nice [AUDIO]
Almost every tax cut enacted at the federal level since 2001 is set to expire at the end of this year. According to a new report from the Tax Policy Center, nearly 90 percent of Americans would see their taxes rise if federal lawmakers don't act to renew the tax cuts.
Middle-income households would see an average increase of almost $2,000, according to the report, and households with the highest incomes face an increase of more than $120,000.
"The impacts will be even more severe in New Jersey because it's one of the highest-income states," said James Hughes, Dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers.
Hughes said the expiration of the tax cuts in 2013 has the potential of putting the nation back into recession and New Jersey into an "even deeper recession."
The federal government would see more than $500 billion in new revenue if the long roster of tax cuts were to expire. The windfall can reduce the nation's massive amount of debt, but according to the report, consequences would outweigh benefits.
Among the cuts set to expire - a two percent temporary payroll tax cut from President Barack Obama, Bush-era cuts on wage and investment income and cuts for married couples and families with children, and the temporary cut in Social Security taxes.
"If nothing is done and the tax cuts are rescinded, we do have the potential of taking a very steep fall," Hughes said.
The looming tax increases, combined with automatic spending cuts scheduled to take place early next year, have earned the nickname "fiscal cliff."
"The fiscal cliff threatens an unprecedented tax increase at year end," the report said.
Gridlock in Washington has been a theme over the past couple of years, so Hughes said political and economic observers are in the dark about how, or if, the situation will be addressed.
"The general pattern has been kicking the can down the road," Hughes added. He predicted the cuts will be extended for another two or three months in 2013, so lawmakers can delay the "hard decisions."