How does the Fiscal Cliff impact you?

Posted at: 12/05/2012 6:01 PM
Updated at: 12/05/2012 6:19 PM
By: Ray Levato

It's a fight over spending cuts and taxes. The Fiscal Cliff is on the horizon with your dollars at stake.

News10NBC spent the day finding out how this will affect your bottom line. Automatic tax hikes and spending cuts go into effect January 1 unless republicans and democrats reach a compromise on a budget that reduces the country's deficit and News10NBC learned that President Obama and House Speaker John Boehner spoke by phone that could be good news for negotiations.

Economists worry going over the cliff could trigger another recession. Republicans want to raise more revenue by closing tax loopholes. Democrats want to raise taxes on the top two percent of wage earners.

In addition to the Fiscal Cliff debate, lawmakers are also looking at the country's debt ceiling which could be reached by the end of the year. That means the U.S. risks defaulting on loans next year.

News10NBC went to the 12 corners in Brighton. One woman thinks the rich should pay more if it'll get a deal done to avert going over the cliff.

Genevieve Russo said, “What we're seeing is a fight between forces that just. It's in their self-interest not to get together and compromise.”

But one woman says soaking the rich will get the middle class wet too.

Gineen Magiera said, “Well, I'm concerned about the job loss. This all affects jobs ultimately as well. And if we're going to be taxing that upper one percent, it's all trickle down. And if they're paying more, we're all going to be paying more.”

To help sort out what would happen if we go over the cliff, News10NBC asked Michael Francis, a financial advisor and Vice-President of Brighton Securities. If nothing is done by January 1, your Social Security tax goes from 4.2% to 6.2 %. And the marriage penalty returns.

Francis said, “If I'm married and working, if I'm a working couple and I'm earning somewhere between $75,000 and $100,000, according to the Tax Policy Center, I will pay an additional $4,000.”

And there is something called the alternative minimum tax which is affecting more and more middle class taxpayers.

Francis said, “This was ultimately designed to tax the super wealthy. But it was never indexed for inflation. So it went from $200,000 down to potentially it could be impacting people earning from $65,000 to $70,000. And it's believed that tax will increase your taxes by about $4,700 per couple.”

For those people with stocks and bonds that have gone up in value -- if you're thinking of selling, Francis says do it before the first of the year. The capital gains tax rate is another one that would go up.

Financial advisor says people should call their congressional representatives and urge them to compromise to get a deal done.