Tools

How you'll be affected by the fiscal cliff

By LEXIE O'CONNOR

UTICA, N.Y. (WKTV) - What's been called the fiscal cliff is now just weeks away when Congress must decide whether it should extend various tax cuts set to expire at the end of the month. NEWSChannel2 spoke with a local Accounting professor to explain the effects people will see.

Glen Hansen, an Associate Professor in Accounting at Utica College says that come December 31st, what's being called the fiscal cliff, a number of provisions are going to be expiring all at exactly the same time, several provisions that are going to affect everyone.

He says as part of the stimulus package, social security taxes had been decreased by 2 % in 2010, 2011 and extended to 2012, however that expires for this upcoming year, meaning every tax payer will go back to paying 6.2 % on their taxes rather than 4.2 %. This means that if you make $50,000 dollars you'll be paying about $1,000 dollars more, if you make $100,000 dollars you'll be about $2,000 dollars more.

Bush Tax Cuts as also expiring at exactly the same time what Hansen says will increase taxes from 10 % to 15% for the first $18,000 of taxable income someone makes. Also as part of Bush Tax Cuts expiring you'll be getting about $500 less back in tax credit per child.

The professor says if an agreement is not reached and this all happens, this will not only affect American's pay checks, but the whole economy.

"If Congress and the President could not agree on anything over the next 4 or 5 months it would be devastating," said Hansen. "I believe in my family if I lost 5 % of my paycheck that's money I'm spending on just regular things clothes, food, rent and that's expensive."

Aside from the tax cuts expiring, across the board cuts in domestic programs and defense spending will also be triggered at the start of the year to account for the nation's debt which could result in additional job loss.

"People will lose jobs if you have a government job or working for an industry that contracts for the defense, they'll be job losses," said Hansen.

However he expects the effects not to be so much a cliff, but gradual and he expects Congress to make changes very early in the new year if not before the December 31st deadline.

"The average person probably doesn't know that much about it or how it will affect them but their first pay check is likely to be a little more than 5 % less than what it normally is and that will wake people up," said Hansen. "And so politicians like to be elected they're not likely to let that go a lot longer than after people start getting their pay checks."

Most Popular

Most Popular

What's On