The largest tax hike in history is due to strike the United States on January 1, 2013. Known as “Taxmageddon,” it would impose $494 billion in higher taxes on the American people in the first year. So terrible would be its impact that yesterday Fed Chairman Ben Bernanke warned Senate Democrats that the country is headed toward a “fiscal cliff” and that Congress must deal with the impending tax nightmare.
On Wednesday, House Speaker John Boehner (R-OH) announced that his chamber will take up the issue before the November election. Knowing Washington’s general reluctance to do anything of substance in an election year, Boehner’s announcement was welcome news given the disastrous ramifications the threat of such a massive tax hike is already having on the economy. That’s according to Mohammed El-Erian, CEO of Pimco, the world’s largest bond trading firm. El-Erian argues a “prolonged political inaction is likely to postpone building plants and purchasing equipment and to discourage them from hiring.” And that is only an inkling of the blow that would strike the economy if these tax hikes actually took effect.
How could nearly half a trillion dollars in higher taxes hit the American people so fast? What hath prior Congresses wrought? Heritage’s Curtis Dubay explains that the tax hikes come from a series of expiring tax cuts and the imposition of even more new taxes. And Heritage’s J.D. Foster writes that Americans can expect to see the following tax consequences starting next year:
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