No matter what deal is reached on the fiscal cliff, looks like most of us will be paying more taxes in 2013.
The 2013 tax changes that could go into effect, depending on a fiscal cliff deal, include higher income taxes, capital gains taxes, estate taxes... practically every area of our lives could cost us more thanks to Washington.
Rep. John Boehner, R-OH, has said there will be no taxes raised for the country's wealthiest earners. But The Washington Post reported Dec. 15 that Boehner is now considering letting taxes in 2013 increase on those earning more than $1 million a year, in order to reach a fiscal cliff agreement.
Let's say U.S. President Barack Obama and Boehner reach an agreement that allows the president's tax hike plans for 2013 to take effect. There's still a huge problem that remains with higher taxes in 2013: They won't fix our fiscal hangover.
The United States is nearly $16.4 trillion in debt. The president's tax hike proposal means extra revenue of $1.2 trillion - a far cry from what we owe.
And the U.S. middle class will have trouble staying financially afloat if they are squeezed by the following 2013 tax changes:
- The capital gains rate could jump to 20% from 15%.
- The payroll tax deduction of 2% will be eliminated.
- The current 10% individual income tax bracket will be cut while the 33% and 35% tax brackets will rise to 36% and 39%, respectively.
- Higher earners will see increased Medicare taxes to 2.35%, up from the current 1.45%. Self-employed workers will be hit harder with a rate of 3.8%, up from 2.9%.
- The top estate tax rate will rise to 55%, and the $5 million exemption will be lowered.
As Money Morning Chief Investment Strategist Keith Fitz-Gerald has said, raising taxes is not the answer. The economy needs all the money it can get to recover and to get the middle class to a healthier financial position.
Watch the accompanying video to find out everything you need to know before getting slammed with higher taxes in 2013.