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How much will your taxes go up if US falls off 'fiscal cliff'? (+video)

Congress has put off dealing with the fiscal cliff – a huge suite of legislation – until after the Nov. 6 election. If it doesn't do something by Dec. 31, taxes will go up on virtually everyone.

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Households that make under $20,113. The average tax bill for these 40 million households will rise $412, reducing their after-tax income by 3.7 percent. Currently, they pay 0.6 percent of their income in taxes; in 2013 it will rise to 4.3 percent, an increase of 3.7 percentage points.

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Households that make up to $39,790. The average tax bill for these 36 million households will rise $1,231, reducing their after-tax income by 4.5 percent. This is an increase of 4.1 percentage points in their average federal-tax rate.

Households that make up to $64,484. The average tax bill for these 31 million households will rise $1,984, reducing their after-tax income by 4.4 percent. This is an increase of 3.8 percentage points in their average federal-tax rate. 

Households that make up to $108,266. The average tax bill for these 26 million households will rise $3,540, reducing their after-tax income by 5.1 percent. This is an increase of 4.2 percentage points in their average federal-tax rate.

Households that make more than $108,266. The average tax bill for these 23 million households will rise $14,173, reducing their after-tax income by 7.7 percent. This is an increase of 5.8 percentage points in their average federal-tax rate.

The TPC also calculated the increase in taxes on the ultrarich – those in the top 1 percent who make more than $506,210. They will owe Uncle Sam on average $120,537 more – or about 10.5 percent of their after-tax income. This would increase their taxes by 7.2 percentage points.

And for those who go beyond ultrarich – some 117,000 taxpayers who earned on average $2.6 million – their tax bill will rise by $633,946, or 11.8 percent of their after-tax income. Their average tax rate rises the most – 7.9 percentage points.

“Households at the highest income levels would be particularly affected by the expiration of the [Bush] tax cuts and by the new health reform taxes,” says the report.

Under Obama health-care law, couples filing jointly will pay an additional 0.9 percent on earnings over $250,000 and 3.8 percent on investment income over that level.

If all these tax increases were to take place without a commensurate increase in government spending, independent economists expect it will send the economy into a tailspin. That’s because more than $500 billion would be taken out of the economy, or about 3 to 4 percent of gross domestic product.

“That’s a big hit,” says Mr. Williams. “There are estimates the economy in 2013 would go into a recession almost right away.”

Of course, Congress and the White House are well aware this. The question is when and how they agree to act.

Nothing is scheduled before Nov. 13 – a week after the election, says Pete Davis of Davis Capital Investment Ideas, which follows Washington affairs for Wall Street. Even if deals are struck, leaving things late “could create real trouble for the Internal Revenue Service,” he says. “It could delay some refunds. In fact, it could get a lot worse – they may not be able to process many returns at all.”

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