Local 10 economist, Brett Graff, explains the "Fiscal Cliff" and what it means for South Floridians.
Question: What is the fiscal cliff?
Brett Graff: The fiscal cliff refers to the tax breaks that are set to expire on Dec. 31.
If they do, there are three main tax breaks that we're really going to miss! The first is the income tax break. As of now, the lowest tax bracket pays 10% in income taxes. If the current breaks expire, the lowest earners will have to pay a 15% income tax. Instead of paying 35%, the highest earners will have to pay 39.6 %.
Question: What does this mean for payroll taxes?
Brett: In South Florida, security guards make an average of $23,860; they will have to pay an extra $477 if we go off the cliff. Registered nurses make an average annual of $68,680 a year; they'll pay an extra $1,373 a year. Our elementary school teachers earn about $45,400 a year; they'll pay an extra $908. Computer Managers earn $133,010; they'll pay an extra $2,200.
Question: How would going off the cliff impact other items?
Brett: Some people are eligible for the child care tax credit. Going off the cliff would slice that credit from $1,000 to $500.
The marriage penalty would go up to $1400 a year.
Medicare reimbursement is slated to fall by 27%. That essentially means doctors will get 27% less for the patients they see. If that happens, analysts expect them to limit how many cases they take. Studies show that when medicare patients don't have money, they simply stop taking their medications.
Question: How will falling off the cliff impact our overall economy?
Brett: Our spending fuels the economy. If we have less money, we'll buy fewer things. The businesses we support will earn less; they won't hire new workers and they may lay off current workers. Those people will spend less. Let's face it, our mortgages won't be cheaper. We'll feel choked.
For more information, visit: www.thehomeeconomist.com.