We are a little more than a month removed from President Obama’s triumphant re-election and his first second-term challenge has arisen. Instead of focusing his attention on organizing effective immigration reform or addressing critics of his drone strike policies, the President is battling Congress … again. All attention, in Washington and throughout the world, has been fixed on the fiscal cliff.
The United States is less than three weeks from an economic crisis that has the potential to slump us into another recession. The fiscal cliff is a term that describes several simultaneous events that will begin to impact Americans on January 2. Planned Parenthood reports that the dreaded slope is a combination of several expiring policies including the Bush-era tax cuts, President Obama’s payroll tax cuts, and sequestration, which are several individual cuts.
There are numbers in the millions and billions and trillions … enough to make the most seasoned political junkie’s head whirl. But for those uninterested in politics, this will affect you as well.
Of course celebrations on January 1 will commence with or without Congress and President Obama agreeing on a deal. But those laughs will devolve into tears when our income taxes are returned with an “amount owed” label.
The picture (courtesy of ABC) surmises how the cliff will impact tax returns. But that’s the beginning. ABC News found that if Congress allows us to drive off the cliff in Thelma & Louise fashion, “taxpayers would owe on average $3,500 more per household.”
The reality is women, particularly black women, are most at risk of suffering financially if no compromise is reached by New Year’s Day. PayEquity.org found that black women have median income of $18,244 annually, so their taxes will increase significantly.
Combine this with the expiring of the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC), which were both included in the American Recovery and Reinvestment Act of 2009, and this could be enough to put families into debt. When families are struggling, consumer spending decreases.
If these tax credits are not extended, the National Women’s Law Center reports that:
- Over 12.7 million tax filers will have less money in their pockets in 2013 if the CTC improvement expires. More than two-thirds of these tax filers are women.
- Women would suffer over 70 percent of the estimated $9 billion financial loss in 2013.4
- In 2010 the CTC and the EITC kept 9.3 million people out of poverty, the majority of whom (4.9 million) were women and girls.
The threat of another recession is imminent if the clock strikes 12:01 a.m. on January 1 without a resolution. The fiscal cliff war wages in D.C. President Obama is fighting to increase taxes on families making more than $250,000. His belief is that allowing the Bush-era tax cuts to expire on the top 2 percent of Americans will generate $1.6 trillion in new tax revenue, which will assist in balancing the budget. Republicans, including House Speaker John Boehner, are refusing to agree to any deal that doesn’t include entitlement cuts to programs, including Medicare.
But here’s the truth: If there is no agreement, American families will suffer. Federal spending will be eliminated by $85 billion and education, health care, law enforcement and other necessary social programs will be collateral damage in the war.
All elections have consequences. Our tax returns and social programs shouldn’t be one of them.