CLEVELAND - The fiscal cliff bill raises taxes on incomes by 39.6 percent on individuals earning $400,000 a year or $450,000 a year for couples. According to President Obama, that's the wealthiest 2 percent of Americans.
According to the Associated Press, many average American workers will also be paying more in taxes. There will be a 2-percent increase in the Social Security Payroll Tax. The money will be taken right from your payroll check.
Two years ago, there was a tax cut so workers would pay less to Social Security, but on Jan. 1, 2013 that tax cut expired and Congress agreed not to make it part of fiscal cliff negotiations.
The package passed Tuesday by the Senate and House extends most the Bush-era tax cuts for individuals making less than $400,000 and married couples making less than $450,000.
Obama said the deal "protects 98 percent of Americans and 97 percent of small business owners from a middle-class tax hike. While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country."
The income threshold covers more than 99 percent of all households, exceeding Obama's claim, according to the Tax Policy Center. However, the increase in payroll taxes will hit nearly every wage earner.
Social Security is financed by a 12.4 percent tax on wages up to $113,700, with employers paying half and workers paying the other half. Obama and Congress reduced the share paid by workers from 6.2 percent to 4.2 percent for 2011 and 2012, saving a typical family about $1,000 a year.
Here's how it affects you: if you earn $50,000 a year, you will pay $1,000 in taxes this year. It will come right out of your paycheck. That comes out to a little more than $19 dollars cut in your paycheck every week.
Florida AAA says gas prices could go up too because of the fiscal cliff plan. Why? Because we have a plan in place to avoid a fiscal cliff there's more optimism about the economy. If a deal didn't pass, gas prices would have stayed the same or gone down because there would be less optimism about our economic future.