5 Ways Feds' Tax Standoff Hurts the Young and Broke

5 months ago

YOUR PAYCHECK WILL BE EVEN SMALLER – You’ve probably stopped looking at the local, state, and federal tax amounts on your paystub. You’d want to look again sometime after the first full pay period of the new year. The marginal tax rate would siphon off $2,000 more per year in federal payroll taxes for middle class families, according to the nonpartisan Tax Policy Center.

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Fiscal cliff stalemate could end government cheese as we know it

What exactly is the "fiscal cliff" and what happens if you fall off?

While news broadcasters, pundits and politicians have spent weeks, months bandying the term around, little explanation has been given about how this impacts the average American.

So here it goes: If Democrats and Republicans in Congress and the White House can't get it together the budget cuts and tax hikes that would come from no deal would have a disproportionate effect on the poor, especially women and children.

That's according to estimates from the nonpartisan Tax Policy Center, which says taxes could go up an average $209, and the poorest 20 percent of Americans would see their after-tax incomes drop just under 2 percentage points.

On the other hand, if the Bush era tax cuts were allowed to expire, the rich -- the top 40 percent of American earners – who currently benefit from cuts to income, capital gains and estate taxes – would see a mere 0.1 percentage drop in after-tax income.

The politics of it all are important, too. Earlier this week, the White House and the Republican-controlled House of Representatives couldn't seem farther apart on agreeing on conditions for a talk. Various leaders and the president traded insults over the other side's lack of a "serious" proposal that will bring everyone to the table.

President Obama: “We’re going to have to see the rates on the top 2 percent go up, and we're not going to be able to get a deal without it," he told Bloomberg News on Tuesday.

House Speaker John Boehner: "There’s a stalemate [but] let's not kid ourselves," he told reporters earlier this week. "Republicans are not seeking to impose our will on the president."

Former Speaker Newt Gingrich: "I am, frankly, not at all encouraged by what I see and a little bit worried by it. I think, first of all, let me lay my cards on the table: I think that no deal is better than a bad deal," he told CNN's Piers Morgan on Tuesday. "I think going off this cliff is less dangerous than letting things build up for a year or two years to have an even bigger cliff."

Why listen to Gingrich? He's one of a few influential Republicans who is egging on his party to allow the new year to arrive without a deal. That could be disastrous for the middle class and, as stated above, mean very little for the rich. If more Republicans take that position, it won't matter who's to blame politically; it's not an election year.

This is what it all comes down to: Just how big or small will Washington's inability to do something hugely important without the usual theatrics mess with the vast majority of Americans?

If you're fuzzy on the math regarding the fiscal cliff, check out the video below. If that doesn't help, check out the gallery above.