Families across Tennessee are bracing for a possible tax increase if lawmakers in Washington D.C. do not agree on whether to extend tax cuts and to which taxpayers.
The so called “Fiscal Cliff” refers to an upcoming, across the board tax increase and spending cuts if lawmakers do not come to an agreement on which Americans will continue to receive tax cuts and which ones will have to take a tax hike.
Republicans have wanted to extend tax cuts for all Americans, while the Obama Administration has pushed to extend the tax cuts to only those Americans making less than $250,000.
In recent weeks there has been some movement with President Obama extending the tax cuts to people making $400,000 or less.
Speaker of the House John Boehner tried to offer a compromise that allowed people making up to $1 million to keep the tax cuts.
The measure failed to make it to the House floor for a vote.
In the meantime, families like the Cordrays of Hendersonville are starting to plan for the effects a tax increase could have on their family's budget.
“Because we do not know what the future holds, some things have to be put on hold,” Jennifer Cordray said. “Obviously eating, [the] mortgage and car payment can't be put on hold but extra curricular activities and vacations can.”
The Cordrays have a three-year-old son and both are working while going to school.
“It boils my skin when I think about it,” Ben Cordray said. “At the end of month we have our budget [and] we know what has got to go out and we can't exceed those numbers so what makes Washington think they can.”
According to the Tax Policy Center, tax for the average middle class family will increase by $2,000 if all the Bush-era tax cuts expire.
In addition to tax credits expiring, a pay roll tax holiday that was extended in 2012 will also expire. That holiday reduced the social security taxes withheld from paychecks by two percent.
That would affect around 120 million households.
The Cordrays estimate they would end up paying around $2,400 more a year or around $200 more a month.
“This is real because now you are going to pull $200 out of our budget,” Ben Cordray said. “Where does that come from? What do we give up looking long term?”
He continued, “Long term that is $200 that could go toward Samuel's college fund, monthly, or to our retirement or to pay off a mortgage.”
The family said in the short term they would likely not have to make major changes to their budget. Long term they are prepared to make substantial changes so they can meet long range goals they have as a family.
“If there is anytime left, we may get part time jobs and there are tons of home marketing things that people are doing now,” Jennifer Cordray said. “We are both in school now to better our education so we can better our future.”
The House of Representatives plans to reconvene Sunday to take up the issues surrounding the Fiscal Cliff.