The average Wisconsin family should expect to pay around $3,000 more next year in federal income taxes if Congress doesn’t do anything to avert the so-called "fiscal cliff." Lindsey Moon reports.
The “Fiscal Cliff” refers to both federal budget cuts that will take effect January 1, and tax cuts set to expire the same day. Jackie Perlman is a tax analyst with H&R BLOCK. She says the expiring tax cuts will affect Wisconsinites in three ways. The end of Bush era tax cuts would mean everyone would owe substantially more when filing income tax returns in 2014. Changes to the alternative minimum tax will mean families will have a higher tax bill this coming spring. Pearlman says the third and most immediately noticeable change would be the end of President Obama’s payroll tax cut, “Monthly or semi-monthly or bi-weekly, however it is you get paid, your paycheck will, will go down by two percent.”
Experts say if the country goes over the fiscal cliff, workers won't see an immediate cut in pay. Andrew Reschovesky is a professor of public affairs and applied economics at the UW Madison. He says it takes time for the government to implement changes, “The payroll taxes which have been reduced will be a little higher, there will be, but probably not instantly because it takes a while to administer these programs.”
Reschovesky says if Congress doesn’t come to an agreement before the first of the year, there won’t be an economic meltdown on January 2. But Reschovesky says if something isn’t done shortly thereafter, it could send the country into another recession.