Calculating Your Fall Over the Fiscal Cliff

Calculating Your Fall Over the Fiscal Cliff

Faced with an increasing tax bill and a diminishing paycheck, how do you figure out what a fall over the so-called 'fiscal cliff' means to you?
MEMPHIS, TN (abc24.com) - It seems clear, even the great Monty Hall would have a tough time navigating through the pitfalls of the ‘fiscal cliff’.

Hall was the long time host of television game show “Let’s Make A Deal”.

Perhaps you are looking towards the fiscal cliff and wondering what lies in store for you.

It is doubtful Monty Hall makes a dramatic 11th hour appearance. So, faced with an increasing tax bill and a diminishing paycheck, how do you figure out what a fall over the cliff means to you?

“Falling off the cliff is really going back into recession,” said Dr. John Gnuschke, “that would be the cliff.”

Gnuschke is the Director of the Sparks Bureau of Business and Economic Research at the University of Memphis.

Most indicators suggest we are headed over that financial cliff—the perfect storm of spending cuts and tax increases. This is what the professor envisions.

“Taxes are going to go up, ultimately, for the wealthy,” said Gnuschke, “Tax rates on the middle class will not go up; spending cuts will be marginal.”

All of which would seem to be designed to keep us from falling, so what’s with all the talk of gloom and doom?

“Most of it is political posturing,” Gnuschke told abc24.com.

Just in case there is a tumble, creditcards.com features a “Fiscal Cliff Calculator” so you can determine where you would land.

“Suppose you made $100,000,” Gnuschke said, “the calculator shows total taxes would go up $5000.”

Forty thousand seemed more reasonable for an average Memphis income; the calculator showed taxes jumping from about $4900 to $6900—right in line with what the President has been saying.

“The money he’s talking about,” said Gnuschke, “is about $2000 a household, and that’s where the Grinch is going to steal $2000 out of your stocking this year, if we don’t get this resolved. That’s it right there.”

While the “Fiscal Cliff Calculator” may seem like a valuable tool, Gnuschke told abc24.com, “It does not allow for enough variables.”

Chief Tax Officer Mark Steber of Jackson Hewitt told abc24.com the cliff is about more than higher taxes and smaller paychecks.

For instance, it could push back the tax season. While that may sound like a good thing, millions of early filers would be forced to wait extra-long for refunds.
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