Posted at: 12/31/2012 7:50 PM
Updated at: 12/31/2012 8:04 PM
By: Dan Bazile
Even with a fiscal cliff deal, your income would take a hit come January 1st, 2013.
But without deal to raise taxes only on the rich, there will be automatic tax hikes where the average family could be paying an extra $2,000 in taxes for the year.
There's also the alternative minimum tax or AMT. There hasn't been much talk about it. But it's estimated millions more Americans will be subjected to it next year.
Ed Welch from Liberty Tax Service in Albany says families making more than $150 thousand a year will have to pay the AMT.
“It’s estimated that it will increase the number of people who are subject to it by 28 million people,” says Welch.
Without a deal, there will also be automatic spending cuts, government reduction in jobs if not a complete shut down in some areas. Tim Meigher, Financial Advisor at Morgan Stanley Smith Barney says that along with the tax hikes will trigger an economic problem.
“That affects people's income. And when it affects people's income, that affects the economy and consumer spending and all the things that go with it,” says Meigher.
He says even if they reach a deal, it has to be substantive. He says the devil will be in the details of the spending cuts and those tax hikes, or else the market react negatively.
“Would there be a sell-off? In my opinion yes, there would be a sell-off. I don't think there would be anything near like a crash,” says Meigher.
The good news, Congress could block the tax hikes and spending cuts retroactively with legislation. So, the fiscal cliff could still be fixed without a deal.