What would the ‘fiscal cliff’ cost you?

If President Barack Obama and lawmakers fail to reach a deal this month to avert a series of automatic spending cuts and tax increases, how much more will you need to pay in taxes?

It depends, of course, on how much you earn. But the nonpartisan Tax Policy Center estimates that the average American would see tax bills rise by $3,446 next year.

Taxpayers earning more than a $1 million will endure a $254,000 tax increase, on average, or about 11 percent of their income. Those earning between $40,000 and $50,000 will see a $1,700 tax jump, or about 4.4 percent of their income.

After-tax income would decline across all income levels, according to the Tax Policy Center.

The nation’s lowest earners would see about a $412 drop on average (a 3.7 percent cut in after-tax income), while the top 1 percent of earners would need to shell out an additional $120,000 (a 10.5 percent bite in after-tax income). Middle-class families earning between $40,000 and $65,000 annually would see taxes increase by about $2,000, leaving them with 4.4 percent less money to spend.

Why would Americans need to pay more in taxes? Because a series of tax cuts and tax credits enacted in recent years are set to expire Jan. 1. They are the tax cuts put in place during George W. Bush’s administration; a payroll tax holiday signed by Obama; and measures enacted as part of the 2009 economic stimulus that expanded the earned income tax credit and the child tax credit for working families.

Finally, more than 26 million mostly middle-class households for the first time may face the alternative minimum tax, or AMT, which could add about $3,700, on average, to tax bills. Congress has thus far failed to approve an inflation “patch” that expired last year and prevents millions of people from having to pay the tax.

But congressional tax aides said the Internal Revenue Service has advised Congress that trying to fix the AMT after the filing season begins in January would lead to processing delays of more than two months for nearly half of all returns — significantly postponing the delivery of refunds.

Bottom line: If Congress doesn’t act, most Americans are likely to pay more next year in federal income taxes.

More in Local News

A wobbly calf grows into a 1,800-pound Lake Stevens behemoth

A shaggy and sometimes cranky bison is the last of his herd. He lives amid encroaching suburbia.

Elderly couple escape serious injuries in crash with train

The driver drove down tracks instead of a road, hitting a slow-moving train near Stanwood.

Officials ID man shot and killed in apparent Everett robbery

Police believe the victim may have known the shooter, who drove away before the officers arrived.

Man, 60, in critical condition after Bothell crash

Police believe the driver may have been speeding when he hit a rock wall.

Missing Marysville woman found safe out of state

A Marysville senior who was reported missing in March has… Continue reading

FBI operation arrests 3 linked to exploitation of 32 women

The sting focused on Everett and other cities in Snohomish, King, Pierce, Skagit and Spokane counties.

Front Porch

EVENTS Seahawks event postponed A Toys for Tots Blue Friday fundraiser that… Continue reading

Man arrested in Monroe Walmart robbery; second suspect flees

The pair fled in a stolen Mitsubishi Lancer with a distinctive green spray paint job.

Dead boy’s ‘gentle giant’ uncle helped search, then confessed

Andrew Henckel, 19, of Texas, said he planned the drowning of Dayvid Pakko, 6. His bail is $1 million.

Most Read