Take a Look at Your Fiscal-Cliff Tax Exposure

Tax Policy Center calculator lays out impact of fiscal cliff and Senate Democrat and GOP proposals.

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At the national level, the contentious debate over the fiscal cliff is about figuring out politically acceptable ways to use the tax code to raise federal revenues, slow the growth of healthcare spending, and begin bringing down unsustainable federal deficits. And it also would be nice if we could do this without tipping the nation back into a recession.

Tax preparation

Citizens care a lot about these issues, of course. But on a personal level, we really need to know how our taxes might change in 2013. The Tax Policy Center (TPC), a joint program of the Urban Institute and Brookings Institution, has created an online fiscal-cliff tax calculator that does exactly that.

Lower-income taxpayers will not face higher federal income-tax bills because they usually pay no income taxes now and will not face tax bills next year regardless of what happens. They will pay higher Social Security payroll taxes.

The two-year stimulus program that cut payroll taxes by two percentage points, from 6.2 percent to 4.2 percent of covered payroll, is set to end this year. It is not expected to be extended.

Upper-income taxpayers may face the largest percentage increases in their tax bills. According to the TPC calculator, a couple age 65 or older that is in the 80th percentile of household income for their group ($120,766) would see their federal tax bill jump more than 50 percent, from $12,054 to $18,716, under the fiscal-cliff scenario. There would be no tax increases under the current Senate Republican and Democrat tax plans. The top 1 percent would pay the biggest dollar tax increases but their percentage increase would be smaller.

There are three big sets of variables driving individual tax bills next year: a household's filing status, household income, and the multiple 2013 tax proposals floating around Capitol Hill. The TPC has built standardized choices into its calculator so it can preload a lot of calculations into the tool and spare us a lot of work.

1. There are six taxpayer examples:

• Married, under 65, no children

• Married, one child in college

• Married, two children under age 13

• Single

• Head of household, two children under age 13

• Married, age 65 and over

2. Four different sets of tax rules:

• The 2012 law, unchanged except for a fix, or patch, to scheduled changes in the alternative minimum tax (AMT), which otherwise would sock millions of middle-income households with higher taxes

• The 2013 law featuring all those "fiscal cliff" changes set to take effect, including the end of low Bush-era tax cuts, the end of the 2 percentage-point reduction in Social Security taxes, higher AMTs, and a host of other unpleasantries

• The 2013 Senate Democratic tax plan

• The 2013 Senate Republican tax plan

3. Five different household income levels for each of those six taxpayer examples:

• Low income (20th percentile)

• Middle income (50th percentile)

• High income (80th percentile)

• Very high income (99th percentile)

• Top income (99.9th percentile)

The tool also has an option letting people create their own examples. The best way to use this option is to haul out your 2011 tax year 1040 return and be ready to plug in a fair amount of data.

When you select choices from the main calculator page and hit "GO," you will be taken to a page listing more detailed income and deductions choices. Most of these fields are already filled in with preset sample taxpayer values, so all you need to do to figure out tax hits of the two plans being compared is select the "calculate tax" button. However, if you wish to customize figures for any income, deduction, and expense entries, you can do that and get a more accurate answer.

U.S. News ran all the scenarios for taxpayers age 65 and older. We did not customize any of the income, deduction, and expense entries. For taxpayers in this age group, here are the sample incomes used by the TPC:

• Low income (20th percentile—$25,361)

• Middle income (50th percentile—$52,614)

• High Income (80th percentile—$120,766)

• Very High Income (99th percentile—$750,837)

• Top (99.9th percentile—$2,782,971)

Even with this single example, there were still 30 sets of different comparisons. They're listed here by income levels. They list regular federal income taxes after adjusting for any tax credits.

1. Low income (20th percentile—$25,361). There are no federal income taxes for low-income older taxpayers under any of these plans. Social Security payroll taxes would rise by $42 from $279 in the patched 2012 law to $321 in all of the other plans.

2. Middle income (50th percentile—$52,614). Social Security payroll taxes would rise by $56 from $372 in the patched 2012 law to $428 in all of the other plans.

• Patched 2012 law vs. 2013 fiscal cliff: $623 vs. $1,256

• Patched 2012 law vs. Senate Republican plan: $623 vs. $623

• Patched 2012 law vs. Senate Democratic plan: $623 vs. $623

• 2013 fiscal cliff vs. Senate Republican plan: $1,256 vs. $623

• 2013 fiscal cliff vs. Senate Democratic plan: $1,256 vs. $623

• Senate Republican plan vs. Senate Democratic plan: $623 vs. $623

3. High income (80th percentile—$120,766). Social Security payroll taxes would rise by $174 from $1,157 in the patched 2012 law to $1,331 in all of the other plans.

• Patched 2012 law vs. 2013 fiscal cliff: $12,054 vs. $18,716

• Patched 2012 law vs. Senate Republican plan: $12,054 vs. $12,054

• Patched 2012 law vs. Senate Democratic plan: $12,054 vs. $12,054

• 2013 fiscal cliff vs. Senate Republican plan: $18,716 vs. $12,054

• 2013 fiscal cliff vs. Senate Democratic plan: $18,716 vs. $12,054

• Senate Republican plan vs. Senate Democratic plan: $12,054 vs. $12,054

4. Very high income (99th percentile—$750,837). Social Security payroll taxes would rise by $1,892 from $12,582 in the patched 2012 law to $14,474 in all of the other plans. A 3.8 percent tax on unearned income, averaging $6,642 for these very high-income taxpayers, will be levied in 2013 to pay Medicare for health reform expenses. It's included in the federal income tax totals for all 2013 plans.

• Patched 2012 law vs. 2013 fiscal cliff: $167,387 vs. $209,239

• Patched 2012 law vs. Senate Republican plan: $167,387 vs. $167,387

• Patched 2012 law vs. Senate Democratic plan: $167,387 vs. $192,231

• 2013 fiscal cliff vs. Senate Republican plan: $209,239 vs. $167,387

• 2013 fiscal cliff vs. Senate Democratic plan: $209,239 vs. $192,231

• Senate Republican plan vs. Senate Democratic plan: $167,387 vs. $192,231

5. Top (99.9th percentile—$2,782,971). Social Security payroll taxes would rise by $3,419 from $23,092 in the patched 2012 law to $26,511 in all of the other plans. Medicare taxes to help pay for health reform will rise by $982 from 2012 in all 2013 plans. A 3.8 percent tax on unearned income, averaging $54,572 for these top taxpayers, will be levied in 2013 to pay Medicare for health reform expenses. It's included in the federal income tax totals for all 2013 plans.

• Patched 2012 law vs. 2013 fiscal cliff: $492,098 vs. $659,715

• Patched 2012 aw vs. Senate Republican plan: $492,098 vs. $492,098

• Patched 2012 law vs. Senate Democratic plan: $492,098 vs. $608,682

• 2013 fiscal cliff vs. Senate Republican plan: $659,715 vs. $492,098

• 2013 fiscal cliff vs. Senate Democratic plan: $659,715 vs. $608,682

• Senate Republican plan vs. Senate Democratic plan: $492,098 vs. $608,682

Twitter: @Phil Moeller