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US President Barack Obama steps off Marine One on the South Lawn upon return to the White House on December 27, 2012 in Washington, DC. Obama returned to Washington under pressure to forge a year-end deal with Republicans to avoid the tax hikes and spending cuts of the 'fiscal cliff.'
Paychecks will shrink and Californians will shell out more money to the federal government in 2012 if lawmakers are unable to renew certain tax cuts, accountants and tax attorneys said on Thursday.
That could be tough for families, as taxes will eat up a larger portion of their income. Gregg Wind, a partner at L.A.-based accounting firm Wind & Stern LLP, said a married couple that earns $50,000 each could wind up paying a combined total of $4,000 more in taxes.
“$4,000 could mean a family vacation,” Wind said. “It could mean new furniture for their home. (It’s) a fair amount of money.”
The state's wealthiest couples will fork out even more money, Wind said. California voters passed Proposition 30 in November, which increase the tax rate for people earning more than $250,000 a year.
For example, a married couple in California that has a taxable income of more than $1 million will have a tax rate in excess of 13 percent, Wind said.
If the federal tax rate for the wealthiest people increases to 39.6 percent and the 3.8 percent Medicare tax applies to investment income, that couple could see their tax rate rise to 56 percent, Wind added.
A free-fall off the fiscal cliff would also hurt people on the opposite end of the income scale, said Arnie Wuhrman, a tax attorney at Serenity Legal Services in Murrieta. It could determine whether people can put food on their tables.
“It’s been around for a long time and it’s going to be quite a shock to the system, especially for the lower income levels,” Wuhrman said.