If Washington drives the country over the “fiscal cliff,” which seems more and more likely, it’s going to hurt low- and middle-income Americans as well as the rich. Some in Ohio are rapidly trying to figure out just how much pain they’re in for. ideastream’s Nick Castele explains.
Jim Komos is with Ciuni and Panichi, an accounting firm in Beachwood. He says helping clients get their money in order for next year -- it’s been a challenge, to say the least.
KOMOS: “It’s difficult. It’s rolling a dice. But you do know things will probably be higher next year. They have to be.”
Those "things" are taxes. The rich will pay more.
KOMOS: “The top wage-earners, or the top two brackets will be hit the most...They could see up to a 10 percent increase...And that is a 10 percent increase in the actual tax they pay, and not an increase in the rate itself.”
Income tax rates, estate taxes, taxes on dividends and the sale of stock -- all will go up. And you won’t have to be wealthy anymore to get hit by the Alternative Minimum Tax. Plus, Social Security payroll taxes will jump two percent for everyone as a three year tax “holiday” ends. That alone will cut the average worker’s take-home pay by a $1,000 a year.
BEGALA: “That two percent kept money in our paychecks, put some money back in and played a significant role in the economic recovery.”
That’s John Begala, the director of the Center for Community Solutions. Ohio may lose $312.6 million in federal payments next year when automatic spending cuts activate, according to the state Legislative Service Commission. Those cuts would largely hit funding for education and health programs. Some low-income families could lose access to Head Start. Begala says that would affect about 5,000 kids in Ohio.
BEGALA: “It’s an investment in the future, given that most of these kids are at risk in some manner or another. That is penny-wise and pound-foolish.”
There will be defense spending cuts, and extended unemployment benefits could also get the ax. But while there will be cuts in Medicare payments to hospitals, the biggest social safety-net programs are exempt from automatic cuts triggered by the fiscal cliff -- so Social Security, Medicaid and food stamps won’t be affected.