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Despite Deal, Taxes to Rise for Most Americans

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House of RepresentativesBy STEPHEN OHLEMACHER

WASHINGTON (AP) - While the tax package that Congress passed New Year's Day will protect 99 percent of Americans from an income tax increase, most of them will still end up paying more federal taxes in 2013.

That's because the legislation did nothing to prevent a temporary reduction in the Social Security payroll tax from expiring. In 2012, that 2-percentage-point cut in the payroll tax was worth about $1,000 to a worker making $50,000 a year.

The Tax Policy Center, a nonpartisan Washington research group, estimates that 77 percent of American households will face higher federal taxes in 2013 under the agreement negotiated between President Barack Obama and Senate Republicans. High-income families will feel the biggest tax increases, but many middle- and low-income families will pay higher taxes too.

Households making between $40,000 and $50,000 will face an average tax increase of $579 in 2013, according to the Tax Policy Center's analysis. Households making between $50,000 and $75,000 will face an average tax increase of $822.

"For most people, it's just the payroll tax," said Roberton Williams, a senior fellow at the Tax Policy Center.

The tax increases could be a lot higher. A huge package of tax cuts first enacted under President George W. Bush was scheduled to expire Tuesday as part of the "fiscal cliff." The Bush-era tax cuts lowered taxes for families at every income level, reduced investment taxes and the estate tax, and enhanced a number of tax credits, including a $1,000-per-child credit.

The package passed Tuesday by the Senate and House extends most the Bush-era tax cuts for individuals making less than $400,000 and married couples making less than $450,000.

Obama said the deal "protects 98 percent of Americans and 97 percent of small business owners from a middle-class tax hike. While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country."

The income threshold covers more than 99 percent of all households, exceeding Obama's claim, according to the Tax Policy Center. However, the increase in payroll taxes will hit nearly every wage earner.

Social Security is financed by a 12.4 percent tax on wages up to $113,700, with employers paying half and workers paying the other half. Obama and Congress reduced the share paid by workers from 6.2 percent to 4.2 percent for 2011 and 2012, saving a typical family about $1,000 a year.

Obama pushed hard to enact the payroll tax cut for 2011 and to extend it through 2012. But it was never fully embraced by either party, and this time around, there was general agreement to let it expire.

The new tax package would increase the income tax rate from 35 percent to 39.6 percent on income above $400,000 for individuals and $450,000 for married couples. Investment taxes would increase for people who fall in the new top tax bracket.

High-income families will also pay higher taxes this year as part of Obama's 2010 health care law. As part of that law, a new 3.8 percent tax is being imposed on investment income for individuals making more than $200,000 a year and couples making more than $250,000.

Together, the new tax package and Obama's health care law will produce significant tax increases for many high-income families.

For 2013, households making between $500,000 and $1 million would get an average tax increase of $14,812, according to the Tax Policy Center analysis. Households making more than $1 million would get an average tax increase of $170,341.

"If you're rich, you're almost certain to get a big tax increase," Williams said.

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pm349

Hello! What do you think is funding Social Security? The fund will supposedly start paying out more than it takes in by the year 2035. But go ahead and reduce the FICA tax.

January 02 2013 at 11:38 PM Report abuse -1 rate up rate down Reply
mckenziecolt

Oh ok i see now. no i am not slow but no one put it like that yes i do want more money when i draw it dang it sure seems like a lot of money all at once.. i already can't afford to go shopping for food now.it seems like they PICK on the plain old working man to much my husband works his tail off and we still seem to stay right at one pay day away for going belly up. but i think something can be?but i don't know what???

January 02 2013 at 11:09 PM Report abuse rate up rate down Reply
janice5437

I think Harry Reid is the worst politician out there. He just let all the work the house did sit on his desk. He is the most disgusting and judgemental of all the politicians. I only wish everyone saw the movie 2016 and see why the president wants more executive power, scary. All this president wants to do is spend more money and the American people will suffer for it. He just wants control of our guns health care ect. Hitler did that didn't he.

January 02 2013 at 11:07 PM Report abuse -1 rate up rate down Reply
toosmart4u

This was a "temporary" tax reduction. This is not a tax increase it is your social security pension. The more you pay in the bigger your retirement check will be. It is your own personal account. And social security is not in trouble. The past presidents took money out of the fund for their own purpose and put in treasury notes. Now the s.s. administration is cashing in some and the republicans do not want them to do this and say they could put the money to better use. They store our money.

January 02 2013 at 10:56 PM Report abuse rate up rate down Reply
mckenziecolt

CRAP who cares its always been take take take and take for our GOV why change now??????????they are on a roll why stop them now??? I CAN'T FIX IT ALL ALONE AND THE AMERICAN PEOPLE WON'T STAND AS ONE AND CHANGE IT SO WHATS THE USE?????? THIS IS OUR DOING??? BECAUSE WE LET THEM DO IT TO US???? SO WHEN WE ALLLLLLLLL???? GET READY TO CHANGE IT CALL ME IF NOT STOP CRYING..BECAUSE MOST OF YOU VOTED FOR FOR THE PREZZ????? RIGHT AND ALL THAT.BUT IT STILL MEANS NOTHING UNTIL THE WORKING MAN IS ALL GONE THEN WHO ARE THEY GOING TO HAVE PAY TAXES THEN........OH WAIT WE CAN BORROW IT FROM CHINA,IRAN,KOREA,RUSSIA, WHO ELSE HAVE WE SENT MONEY TO???I AM SURE ITS ALOT MORE THAN THESE.. ANY WAY COWBOY UP GET OUT THE KY JELLY AND LETS GET TO IT.

January 02 2013 at 10:55 PM Report abuse -1 rate up rate down Reply
Will Hinkley

Now the "Lame Duck" Congress gets to go home and the newly elected one takes their seats. And then we see what happens next...

January 02 2013 at 9:35 PM Report abuse rate up rate down Reply
Smitty

The sheeple elect the most incompetent lying thieves they can find and then complain their being ripped off. ITS YOUR FAULT!

January 02 2013 at 9:34 PM Report abuse +2 rate up rate down Reply
nickell45

All you people are so stupid, the ss we pay in is for your retirement its not a tax.

January 02 2013 at 8:02 PM Report abuse +1 rate up rate down Reply
pdbliz

People,,,get off your lazy butts and get a job,,,,,,Help pay taxes,,,,,,And,,the Sandy Releif Money,,,,,,it was not all going to Sandy Releif,,,,there was PORK SPENDING money for other things...
The Rebublicans did right not to vote on it,,,,,,,,,.Why not vote on Abortation,,,,,Killing young lifes,,,,,,,Dope heads...pot heads,,,,WELFARE PUNKS,!!!!!STOP ALL WELFARE,,,GET A JOB..........ARE STARVE,,WHICH EVER COMES FIRST.....

January 02 2013 at 7:33 PM Report abuse rate up rate down Reply
uforme693432588

"If you're rich, you're almost certain to get a big tax increase," Williams said. And you know what, they will still be rich. The rest of us should be disgusted that the fiscal cliff bill included 75 billion in tax cuts for racetrack owners, the movie industry and others. This pork s@@t has got to stop. These bills should be reviewed by a non bartisan group before they are passed to eliminate any of this backroom pork belly (treasonous) bulls@@t.

January 02 2013 at 7:06 PM Report abuse rate up rate down Reply