US may skirt 'fiscal cliff' but faces higher taxes

Published on NewsOK Modified: January 1, 2013 at 11:56 am •  Published: January 1, 2013
Advertisement
;

WASHINGTON (AP) — A last-ditch tax deal in the Senate might let the U.S. economy escape the worst of the so-called fiscal cliff and avoid going back into recession. But even if the House goes along, the tax increases likely coming in 2013 will dent economic growth anyway.

In the early hours of the new year, the Senate voted to end a long stalemate and raise taxes on upper-income households, extend long-term unemployment benefits and postpone decisions over government spending cuts, officials said. But any deal needs approval from the House.

About $536 billion in 2013 tax increases were scheduled to take effect Jan. 1, along with $109 billion in cuts from military and domestic-spending programs, if Democrats and Republicans could not reach agreement.

Mark Vitner, senior economist at Wells Fargo, said he expects budget policy, including the higher taxes in the Senate plan, to shave 0.8 percentage points off economic growth in 2013. The economy doesn't have much growth to give. Vitner predicts it will grow just 1.5 percent in 2013, down from 2.2 percent in 2012.

The biggest hit to the economy is expected to come from the end of a two-year Social Security tax cut. The so-called payroll tax is scheduled to bounce back up to 6.2 percent from 4.2 percent in 2011 and 2012, amounting to a $1,000 tax increase for someone earning $50,000 a year.



Trending Now


AROUND THE WEB

  1. 1
    How a 15-year-old stopped more killings in Texas
  2. 2
    Should President Obama visit the Texas border?
  3. 3
    KOCO: Poisoned service dog recovering in vet's care as Oklahomans donate to medical expenses
  4. 4
    Best cities to launch a startup
  5. 5
    Drought-stricken California may restrict outdoor water use
+ show more