How Would the Fiscal Cliff Affect Typical Families in Each State?
November 15, 2012
Just weeks after the election, lawmakers have the fiscal cliff looming over them during the lame duck session, says Nick Kasprak, a programmer and analyst at the Tax Foundation.
- The fiscal cliff includes a combination of tax increases and spending cuts at the end of the year.
- In it, the Bush tax cuts are set to expire.
- In addition, the 2 percent cut to employee-side Social Security payroll taxes will expire.
- Furthermore, the Alternative Minimum Tax has yet to be patched.
- This means that certain credits, like the Child Tax Credit, would not be allowed.
The combination of tax and spending changes threaten families of all income levels. Data was compiled to look at how households with median incomes and two children were affected by the tax and spending changes. The average family was affected more by these changes in high-income and low-income states than those in middle-income states.
- In New Jersey, the tax increase is expected to be 6.82 percent of income.
- In Maryland, it is expected to be 6.74 percent of income.
- On the other hand, the tax increase on the average family in Maine is only expected to be 4.46 percent of income.
- Washington ranks the lowest with the tax increase on the average family being 4.12 percent of income.
Low-income states are disproportionately affected because three tax increases from the end of the Bush-era tax cuts -- the reduction in the child tax credit, the elimination of the 10 percent bracket and the reduced standard deduction for married filers -- represent fixed increases that do not depend on income.
Source: Nick Kasprak, "How Would the Fiscal Cliff Affect Typical Families in Each State?" Tax Foundation, November 12, 2012.
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