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Fiscal cliff would hit poor hardest

Dec. 24, 2012 at 1:03 PM   |   Comments

WASHINGTON, Dec. 24 (UPI) -- Economic researchers at the Tax Policy Center said low income U.S. households with children would be the hardest hit by the so-called "fiscal cliff."

The impact of the federal budget that would become law Jan. 1 if a compromise deal is not reached by House Republicans and the White House is not equal among income brackets.

The budget includes $500 billion in tax hikes and spending cuts. Spending cuts generally affect lower-income earners the hardest.

In this case, for example, the Head Start program would serve about 100,000 fewer children and the Low-Income Home Energy Assistance Program would lose $271 million out of a budget of $3.4 billion.

Then there are the tax hikes. "It is striking how large some of the (tax) increases are," said Roberton Williams, a senior fellow at the Tax Policy Center, which is a think-tank jointly run by the Brookings Institution and the Urban Institution, The Wall Street Journal reported Monday.

Wealthier Americans will pay more in total, but less in terms of a percentage of their income, the Journal said.

Households earning $10,000 to $20,000 stand to lose between $68 and $605 if the "fiscal cliff" comes to pass.

Couples earning between $10,000 and $20,000 that have a child would see a much more substantial difference, as they would lose $1,324 out of a $2,761 in tax rebates and credits.

In the next bracket up from that, couples with a child earning between $20,000 and $30,000 would owe an average of $1,408 in federal income tax, a shift from the current rules in which they would be paid an average of $15.

On the other side of the income spectrum, those earning $1 million or more would see a tax hike of 24 percent. The average tax bill for those earning more than $1 million would climb by $200,000 the Journal said.

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