(Tax Foundation) -- TaxFoundation.org reports, "One of the least reported facts about the 11th hour debt limit deal between the White House and Congressional leaders is that it assumes that on January 1, 2013, virtually every working American will begin paying much higher taxes than they are today." According to the Tax Foundation, "baked into the deal is a $3.5 trillion tax increase, yet plan supporters say it does not raise taxes" since the "current law” (baseline) assumes that all of the Bush-era tax laws expire as scheduled at the stroke of midnight on December 31, 2012.
This means that all income tax rates will go up across the board, the child credit will fall from $1,000 to $500 and the marriage penalty will return. The analysis notes that meanwhile, federal spending is expected to total nearly $46 trillion over the next ten years.
If Congress should decide to not let the Bush/Obama tax laws expire, then there is an additional $3.5 trillion overdraft in the works.
This is just like if you were working on your family budget and because of past debts, you were close to bankruptcy. In order to make the budget balance, you budget that in six months you and your spouse were going to both get a second job and earn an additional $25,000. But six months later, you decide that you can’t handle working another part-time job and so, you default.
