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I was astounded recently to hear someone say they believe the talk of a “fiscal cliff” is artificial and not a legitimate threat. There is an artificial component to it in that government created it, but the threat is legitimate, and not only will it impact everyone of us in one way or another, even if an agreement is reached in Washington, but the cumulative economic impact could be significant.

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There are several components to the so-called “fiscal cliff,” some of which are less widely known than others. Most people are aware that the present six income brackets taxed at rates of 10 percent, 15 percent, 25 percent, 28 percent, 33 percent and 35 percent will expire, and revert to the pre-Bush era five income brackets taxed at rates of 15 percent, 28 percent, 31 percent, 36 percent and 39.6 percent. Without some reconciliation in Congress, everyone, even those at poverty level, will see their taxes increase.

The marriage tax penalty will return. The tax code, before the 2001 EGTRA (Economic Growth and Tax Relief Reconciliation Act), required a husband and wife to pay more in taxes when they filed jointly than they would as single taxpayers. This will expire the end of the year as well. According to calculations from the tax publisher CCH, the marriage tax penalty translates to a nearly 17% increase in taxes for those married couples who file jointly, regardless of bracket.

There are also more than 70 so-called tax extenders scheduled to expire on December 31. These are tax breaks for businesses and individuals that are technically temporary but usually end up being extended. They include the itemized deduction for state and local sales taxes, tuition and fees, and educators’ out-of-pocket classroom expenses.

The Jobs and Growth Tax Relief Reconciliation Act of 2003, or JGTRRA, temporarily reduced the capital gains tax rate. Most capital gains have been taxed at 15 percent for the past nine years, and investors in the 10 percent and 15 percent tax brackets have not had to pay any taxes on profits from appreciated asset sales. Qualified dividends have also been taxed similarly. We now will revert to the pre-JGTRRA capital gains rate of 20 percent. The zero capital gains rate for low-income filers will return to 10 percent, and stock dividends will be taxed as ordinary income, meaning the top rate could be as high as 39.6 percent.

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The Child Tax Credit will expire, which means each head of household will only be allowed a $500 deduction for each qualifying child as opposed to the current $1,000 deduction.

Currently, all taxpayers, regardless of income, are allowed to claim full annual exemption amounts for themselves and dependents. This exemption will be reduced or eliminated for higher income households.

For those who itemize deductions with their tax returns, the old limits will return. The aggregate of itemized deductions for higher income taxpayers will be reduced by three percent if the deductions exceed an annual threshold of a taxpayer’s adjusted gross income.

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The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by

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