Fiscal cliff deals means taxes will rise for most Americans
WASHINGTON (AP) — Most Americans will pay higher federal taxes this year, even though the tax package Congress passed New Year's Day will protect 99 percent of Americans from an income-tax increase.
About 77 percent of American households will face higher federal taxes in 2013 under the agreement negotiated between President Obama and Senate Republicans, estimates the Tax Policy Center, a nonpartisan Washington research group.
That's because even though just one percent of households will pay higher income taxes, an increase in federal payroll taxes will hit nearly every wage earner, the Tax Policy Center says.
Households earning between $40,000 and $50,000 a year face an average tax increase of $579 in 2013, according to the Tax Policy Center's analysis. Households making between $50,000 and $75,000 a year face an average tax hike of $822.
The reason: the legislation does not prevent the expiration of a temporary reduction in Social Security payroll taxes. Last year, a 2 percentage-point temporary cut in federal payroll taxes was worth about $1,000 to a worker making $50,000 a year.
"For most people, it's just the payroll tax," said Roberton Williams, a senior fellow at the Tax Policy Center.