Bucks Blog: A Tax Calculator for You to Try as Washington Debates

If you’re like me, you have been following the debate over the so-called fiscal cliff with a sort of low-grade headache. With so many variables, it’s hard to keep all the possible outcomes straight.

The Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution, has taken a crack at helping individual taxpayers evaluate how various options would affect their overall federal tax burden, including both payroll taxes and income taxes, next year. The center has created a set of calculators that allows you to compare the total tax liability for different sorts of taxpayers in 2013, based on four scenarios. (Wonk warning: The calculator was created by tax policy mavens, so it contains a great deal of detail, perhaps a bit too much for a casual user.)

Still, if you ‘re interested in what might result, or not, from the negotiations in Washington, here are the four tax policy scenarios presented in the tool. The calculator doesn’t reflect the latest proposal made by House Republicans because it lacked sufficient detail about tax rates to model, said Roberton Williams, senior fellow at the Tax Policy Center:

1) 2012 tax law (with an alternative-minimum-tax patch, to limit the number of taxpayers affected by the tax). This is what you’d pay if Congress continued the tax policy in place this year, with an A.M.T. patch, for 2013 income.

2) 2013 tax law. This is what you would pay for all of next year if Congress doesn’t act.

3) The Senate Democratic plan, which would extend the expiring Bush-era income tax cuts for a year for all except the top 2 percent of taxpayers. It would extend the credits originally enacted by President Obama in 2009, but allow the temporary payroll tax cut to expire.

4) The Senate Republican plan, which would extend the Bush-era income tax cuts for everyone but would allow the 2009 credits and the temporary payroll tax cut to expire.

The site offers examples for six basic taxpayer scenarios (single with no children, married with two children under 13, etc.) that you can further tweak with your own information.

Among the various assumptions built into the calculator is that both the employer and employee shares of the payroll tax — the taxes that fund Social Security and Medicare — are assigned to the worker. A note explains, “Economists believe that the employer’s share of the tax is actually borne by the worker in the form of lower wages and therefore the tax calculator assigns both employer and employee shares of the tax to the worker.”

To look at just one example, the calculator shows that a single filer with no children and adjusted gross income of $18,600 would have a total tax liability (including payroll and income taxes) that is $802 higher under the 2013 scenario if Congress fails to act, than under the scenario of continuing the 2012 tax laws with an A.M.T. patch.

The total liability for the same taxpayer, under either the Senate Republican plan or the Senate Democratic plan, would be $372 higher than the patched 2012 scenario, according to the calculator.

Put another way, the taxpayer’s liability would be $430 higher under the 2013 scenario of Congress failing to act, than under either of the Senate plans.

Try out the calculators yourself. Did it help your headache, or did you still have to resort to ibuprofen?

Article source: http://bucks.blogs.nytimes.com/2012/12/05/a-tax-calculator-for-you-to-try-as-washington-debates/?partner=rss&emc=rss