I’ll be back with another post about the fiscal cliff in a couple of days, but there’s some interesting data out there today from the Tax Policy Center, which has released a study detailing how impending tax increases will affect Americans at different income levels.
The charts below are broken into quintiles — five cross sections that each represent about 20% of the total population.
In 2012 dollars, those quintiles are:
0 – 20%: up to $20,113
20% – 40%: $20,114 to $39,790
40% – 60%: $39,791 to $64,484
60% – 80%: $64,485 to $108,266
80% – 100%: $108,267+
Because of extreme variability in the top quintile, it’s worth noting further breakdowns used occasionally in the study: 90% $143,373; 95% $204,296; 99% $506,210; 99.9% $2,655,675.
The fiscal cliff involves a variety of expiring Bush-era and Obama-era tax cuts, including increases in income tax rates, in the Alternative Minimum Tax (AMT), estate taxes, payroll taxes, and others.
Here’s a great chart showing the percentage change in overall federal taxes for average members of each quintile:
And here’s the same data in a chart:
So the nation’s top earners would see a slightly higher percentage hit than the other 80% of Americans, but half of that difference is due to the greater impact on the top 1%.
The percentage differentials among the four lower quintiles are very similar.
Of course, the lower the quintile, the more likely that the income is being spent on housing, transportation, food, and basic needs.
If taxes rose that much on middle- and low-income Americans in one fell swoop, the economic consequences could be devastating.