The looming tax increase


While lawmakers in Washington debate whether to extend all of the Bush tax cuts or only most of them, Annie Lowrey reports that the temporary cuts to the payroll tax passed during the financial crisis to boost consumption is unlikely to be renewed.

“Independent analysts say that the expiration of the tax cut could shave as much as a percentage point off economic output in 2013, and cost the economy as many as one million jobs. That is because the typical American family had $1,000 in additional income from the lower tax… Support is lacking for two main reasons. First, both Democrats and Republicans would rather focus on the broader political and economic issue of the fate of the Bush-era income tax cuts… Second, though the economy has not become significantly stronger over the past year and the tax increases in addition to spending cuts coming next year could push the country into a recession, independent economists say that the economy could shoulder the payroll tax increase without undue harm.”

Via the Wonk Wire.