A Fiscal Cliff Fix: What It Means For Your Wallet

(Wilfredo Lee/AP)

Tax increases, spending and benefit cuts, reducing tax deductions – those are all on the table as Washington looks for a deal to avoid the “fiscal cliff.”

So what would the different options mean for most Americans?

Wealthy investors are already taking steps to shield themselves from the possibility of higher taxes, but what are middle and lower income Americans facing?

“There’s a big question about what’s going to happen to the payroll tax, and that was a tax deduction that averaged a couple of thousand dollars,” Howard Gleckman of the non-partisan Tax Policy Center told Here & Now’s Robin Young. “It’s going to be a significant tax increase for just about everybody who works… Changes in these deductions, these other things, are going to be dwarfed by what happens to the payroll tax.”

Politico: Tax loopholes alone can’t solve fiscal cliff
New York Times: Tax Talks Raise Bar for Richest Americans
Wall Street Journal: Uneven Bite of Limiting Deductions

Do you have questions about how tax hikes would affect you or your investments? Click here to send us your questions ahead of our conversation with an investment counselor.

Guest:

Howard Gleckman, resident fellow at the non-partisan Tax Policy Center and editor of the blog, Tax Vox. He tweets @howard_gleckman.

We welcome comments from all of our listeners. Post below. Please stay on topic and be civil. Comments may be moderated by us, but you are solely responsible for the content of your comments.

Pete Gloor

It always astounds and annoys me that, whenever we discuss taxes, including your discussion today, we only talk about the federal personal income tax. The truth is the federal income tax accounts for only about 30% of all taxes collected in this country.When you add in social securtity taxes, state taxes, property taxes, sales taxes, gas taxes, and even indirect taxes, like corporate taxes: a minimum wage worker can easity pay over 30% of her wages in total taxes. By the same calculation Warren Buffett or Mitt Romney pay only about 15% of their investment income and gains in total taxes.If we want to fix our tax system, we need to start by looking at all these different taxes we pay. There’s a good website that goes over all these calculations. It’s called FairShareTaxes.org.
Stacy Fulmer

Argh! Near the end of the conversation Mr. Gleckman made it clear that those in the 50K-80K range WILL see a change in their taxes if the payroll tax goes back to its former level next year as is now planned. Yet Robin, my generally compassionate Robin, seemed to miss that by focusing only on the point that they won’t see much change in their tax Deductions. For the middle class, taxes are taxes whether the money is taken with each paycheck or each April 15 or at each grocery trip. My family will see a change that will eliminate the raise we received from my husband’s employer last year. So much for that savings account.