Howard Gleckman of The Tax Policy Center in Washington, D.C., describes the fiscal cliff's impact on your taxes

12:03 AM, Nov 8, 2012   |    comments
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WASHINGTON, D.C. (WUSA) --- Politicians didn't want to talk about the fiscal cliff during the election but it's now moving quickly to the front burner as a lame duck Congress has fewer than seven weeks to stop a combination of tax increases and spending cuts economists say almost guarantee a return to recession.

"The fiscal cliff was created by Congress in 2010. Remember in 2010 we had a big fight in Washington over what to do about the debt limit.  Congress decided to force itself to deal with this problem.

"It would create a series of deadlines after the election that will force it to fix the long-term budget deficit, and what it did was at the end of this year, two very bad things are going to happen.

"The first one is that all of the tax cuts that were passed between 2001 and 2010 will disappear.

"The second thing that will happen is a series of very large spending reductions, over $100 billion in spending cuts, half of them in defense, half from other spending programs, every single government program except Medicaid and Social Security is going to get cut at the end of the year if we go over the cliff ," said Howard Gleckman a Resident Fellow at The Tax Policy Center in Washington, speaking of what is known as sequestration..

"If we go over the fiscal cliff we will increase taxes by $500 billion through 2013. That's an average tax increase of $35 hundred for every household in America, and we'll cut spending by over $100 billion. That's going to be particularly difficult in this area," Gleckman said.

The CEO of the Greater Washington Board of Trade, Jim Dinegar agrees.

"Sequestration means automatic across the board cuts for defense programs, non- military personnel and non-defense programs so think Smithsonian. Think the Department of the Interior, the Department of Commerce, across the board cuts.

"It goes into effect on January Second because congress could not agree on any other deal and so these were then considered automatic cuts so distasteful that of course we will reach a deal without it. They didn't and we face this now it will hurt this region more than any other region in the country," Dinegar said.

"If the government pulls $500 billion out of the economy by raising peoples' taxes, that's money they can't spend to buy stuff. Instead, they're giving it to the government and if the government takes $100 billion in spending - when the government spends, it spends it on things. It hires people. It buys things - it won't be able to do that. All that means less demand in the economy, and we're going to go back into a recession," Gleckman told 9News.

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