Three months from Monday, Oct. 1, the nation will see the largest tax increase in history unless federal lawmakers act first to extend existing tax rates, U.S. Rep. Randy Hultgren, R-14th District, said in a release Monday.
The tax rates set to expire Jan. 1 are the Bush-era tax cuts, which would push taxes back to 2001 levels, and President Barack Obama’s temporary tax cuts — a 2 percent payroll tax holiday and the earned income credit. The combination of the expiration of those two sets of tax cuts and new tax increases set to begin on Jan. 1 has been dubbed by CBS as a “fiscal cliff.” The impact is expected to mean a tax increase for 84 percent of Americans, according to the CBS report, and CBS’ Moneywatch is advising taxpayers prepare themselves for the bite, which is expected to be significant.
Hultgren’s office said that come Jan. 1, the tax rates will expire if no action is taken. Citing the nonpartisan Congressional Budget Office, Hultgren’s office said that failure to extend the income tax rates and deal with the alternative minimum tax will increase taxes on working Americans by $232 billion in 2013 alone.
According to Hultgren’s office, this means that:
- A family of four earning $50,000 per year could pay almost $2,200 in higher taxes — a fivefold increase in their tax liability;
- A single mom earning $36,000 per year could pay more than $1,100 in higher taxes, nearly doubling her tax liability;
- Married senior citizens earning $40,000 per year could pay nearly $1,700 in higher taxes, more than doubling their tax liability.
According to Hultrgen's office, only the House of Representatives has passed a plan to stop the impending tax hike in January. Earlier this year, just before it passed the House, Hultgren explained his reasoning for supporting the plan in a video statement attached to this story.