Brenda has raised seven children and still has two teenagers living at home. One is still in high school, while the other, a recent graduate, has been able to find only a part-time job. Her husband’s company hasn’t given a pay raise in three years and Brenda supplements the income from her own part-time job by waitressing at a local restaurant two or three nights a week. Family vacations went out of the household budget years ago, and the minor luxury of eating out once a week has been supplanted by an occasional sending out for pizza. Faced with rising prices at the gas pump, the supermarket, and various points in between, Brenda (not her real name) is used to finding ways to scrimp and save to feed her family.
“I use cheaper cuts of meat, or I buy stuff when it’s on sale, or I buy in bulk,” she said. “You have to really be on your toes and be aware of how much you’re spending.” She wonders how retirees on Social Security are surviving, but concludes, “Working families are not much better off.”
The budget squeeze Brenda describes is common to millions of American families trying to earn and save enough to pay for the necessities of life. Yet unless Congress and the White House can agree by year’s end on an extension of tax cuts that have been in place for most of the past decade, workers will see an increase in the taxes taken out of their paychecks next year and a loss in the amount they claim for deductions when it comes time to pay their 2013 taxes.
The increases have been dubbed “Taxmageddon,” named after the Battle of Armageddon, foretold in the Book of Revelation, that is to occur at the end of this age. Chances are the world won’t come to an end on New Year’s Day, 2013, but for millions of Americans, it may become a more expensive place to live in. The tax hikes, scheduled to take effect on January 1, will take their toll on families at all economic levels, at an average of $3,500 per household, according to the Tax Policy Center (TPC), a joint project of the Urban Institute and the Brookings Institution. The after-tax purchasing power of low- and middle-income Americans will be diminished, along with the capital available for investment from high-end earners. Some economists are warning that the combination of tax increases and spending cuts required by the sequestration provision of the Budget Control Act of 2011 could knock an already weak economy into another recession, adding to the ranks of the 12 million Americans officially counted as unemployed and the millions more who can find only part-time work, or have given up looking altogether.
“It would probably lead to a recession early next year,” predicted Doug Elmendorf, director of the Congressional Budget Office (CBO), unless Congress acts to halt the drive off what some are calling the “fiscal cliff.”
“You can call this a fiscal cliff,” Sen. Orrin Hatch (R-Utah), ranking Republican on the Senate Finance Committee, said earlier this year. “You can call it Taxmageddon, as others have done. Whatever you call it, it will be a disaster for the middle class. And for the small businesses that will be the engine of our economic recovery.”
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