PITTSBURG, KS.--- The end of the year "fiscal cliff" is looming over taxpayers heads.
"The fiscal cliff is the intertwining of two mutually exclusive events, one involving taxes, one involving spending," says Mike Mckinnis, Pittsburg State Economics Instructor.
A big concern is the ending of the Bush tax cuts made in 2001 and 2003.
"Those two tax cuts affected a lot of different types of bracket. Every tax bracket saw a decrease in the percentage," says Mckinnis.
During that time, a low 10% bracket was added to aid those with incomes lower than $16,000 per year. The capital gains tax for investors was reduced from 20% to 15%, and the estate tax was cut from 50% to 30%. In 2010, President Obama added a payroll tax cut which will also expire at the end of this year.
"The social security withholding for all Americans went from 6.2% down to 4.2%," says Mckinnis.
If President Obama and Speaker of the House, John Boehner, do not find a solution, these 3 tax cuts will be allowed to expire on December 31st. That would mean paying more money for taxes each pay period and less money in your wallet.
"On an annualized basis, I would say probably the average tax payer would be looking at losing $1,000 to $2,000 over the course of a year with these higher taxes," says Mckinnis.
Experts say that could be a snowball effect.
"If you have less take home pay, you're going to have less local spending, less tax collection by local governments, businesses are going to react to that lower spending by laying people off, and you're just going to have this accumulative effect," says Mckinnis.
The other part of the fiscal cliff would be the cutback in federal spending. That could effect any federally funded program including Medicare, food stamps, and even education. If we do not see a solution to the fiscal cliff by January 1st, we could be feeling the effects individually by our first pay periods.