Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Most Will Face Tax Increase with or without 'Cliff' Resolution

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Most Will Face Tax Increase with or without 'Cliff' Resolution

Article excerpt

WASHINGTON -- Americans face a broad increase in taxes today for the first time in at least two decades, ending a prolonged period of declining taxation that has become a defining characteristic of the U.S. economy.

Despite the emerging agreement to avoid much of the so-called fiscal cliff, many Americans will see a higher tax bill because of the expiration of the payroll tax cut, which was enacted in 2011 as a temporary measure to boost economic growth. The tax holiday was preceded by a similar temporary cut in 2009 and 2010.

The deal apparently reached late Monday by Vice President Joe Biden and Senate Republican leader Mitch McConnell of Kentucky would address a separate tax -- the income tax -- and prevent tax rates from increasing for all but the wealthiest Americans. But both sides have decided to leave the payroll tax out of the agreement.

Unlike income taxes, which rise along with a worker's income, the payroll tax is a fixed percentage of an employee's salary. Allowing the tax cut to expire increases taxes on salaries by 2 percent for every American worker. Up to $110,100 a year in salary is subject to the tax.

This jump in payroll taxes, combined with other tax increases affecting the very wealthy likely to take effect as a result of the emerging deal, makes for the largest increase in taxes in about half a century.

With the country going over the fiscal cliff for at least a day because Congress did not approve the deal before the year-end deadline, a wide range of taxes go up Tuesday, though perhaps only for a matter of hours. If lawmakers ultimately fail to finalize the emerging agreement, it would mean thousands of dollars would come out of the pockets of average workers, the largest tax increase on Americans since World War II.

But more likely is a deal that extends lower tax rates for families earning under $450,000. At the same time, higher-income earners would face steeper income taxes and potentially fewer tax breaks, as well as an already enacted new tax to pay for the Affordable Care Act health care legislation.

For most American workers, the expiration of the payroll tax cut would be the only increase they experience. …

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