Taxpayers are staring into an abyss at the end of this year. Unless Congress changes current law, all of the Bush and Obama tax cuts will expire, and federal taxes will rise by $500 billion, or about $3,500 per household on average.
But averages don't tell this story, because some of the tax cuts and credits favor the wealthy, others help low-income Americans. The middle class falls, well, in the middle. But the design and effects of these various tax provisions explain the partisan deadlock between Republicans and Democrats about which cuts should be extended.
According to a study by the Tax Policy Center, the two biggest increases for most households would result from the expiration of the 2 percentage point cut in Social Security taxes, which are taken directly out of wages, and the end of the Bush tax cuts. Bush cut the tax rate on the lowest income bracket from 15 percent to 10 percent, on the middle bracket from 28 percent to 25 percent, and on the highest bracket (over $397,000) from 39.6 percent to 35 percent.