The discussion of the Bush-era tax cuts is one of the most reliable political footballs in recent memory. And with the December 31 deadline for the last two-year extension of the cuts looming, we can expect the debate to continue up to and through the election.
What does that mean to you and me? It all depends on where you live? CNBC's calculations show that Mississippi taxpayers will fare better than most people, but they still are looking at an increased tax liability of just over $1,300 (per household) for the year. Connecticut residents are on the other end of the scale and may be hit with a tax increase of almost $6,000 (per household) if the Bush tax cuts expire.
It is no secret that President Obama wants the cuts to continue for everyone except those in the top tax brackets, on July 9th he said this:
"The fate of the tax cut for the wealthiest Americans will be decided by the outcome of the next election. My opponent will fight to keep them in place, I will fight to end them..."
Following the President's public statement on the taxes, and his belief that people (and small businesses) earning more than $250,000 need to pay more, Congress lept into action:
- On July 25th, the Senate put together and passed a bill that would continue the tax cuts for everyone making less than $250,000 a year.
- In the first week of August, the House version of the bill approved a continuation of the cuts for everyone.
Feeling as if they had actually accomplished something, both the House and Senate left town for recess. However, based on the deep divide between the parties, it is doubtful that an agreement on extending the tax cuts in any form will happen before the coming election. CBS News reports that this is all "political theater" and quotes GOP Senator Mitch McConnell framing the situation this way:
"[T]his is more about messaging or passing the buck than it is about helping anybody or preventing an economic calamity at the end of this year."
Political theater aside, the clock is ticking on the tax cuts and the debate on the impact of keeping them in place or letting them die, rages on. If nothing is done, the Congressional Budget Office estimates that our economy in the first six months of 2013 could continue to sputter and contract as much as 1.3%.
What happens to you if the cuts expire? The Tax Foundation has done the math and provides a handy map to show the likely economic impact on people in every state. (For the record, the Tax Foundation describes themselves as, "a nonpartisan tax research group based in Washington, D.C.")
The Five States Facing The Biggest Tax Increases (avg. per household):
- Connecticut $5,783
- New York $5,542
- New Jersey $5030
- Massachusetts $4277
- California $4242
The Five States With The Smallest Tax Increases (avg. per household):
- Mississippi $1310
- New Mexico $1465
- Alabama $1496
- Tennessee $1522
- West Virginia $1530