Unless something is done between now and then, taxes are slated to go up across the board beginning early next year.

Altogether, higher taxes — the result of the dreaded “fiscal cliff” — will impact nearly 90 percent of all taxpayers, from the very richest to the very poorest.

More than a dozen tax breaks will expire December 31, and according to the nonpartisan Tax Policy Center, beginning with 2013 tax will rise $2,000 for the average American.

A combination of tax increases and spending cuts — of between $650 billion and $1.2 trillion in all, by some accounts — will crush the fledging recovery, a new report from the nonpartisan Congressional Budget Office (CBO) states. The CBO further estimates the cuts and taxes could push unemployment up and the nation into recession.

Two likely tax increases

1) Both Democrats and Republicans seem ready to let the payroll tax cut expire, which will impact everyone who works — some three-quarters of all tax filers. For households earning between $40,000 and $65,000, this would mean a tax hike of $672.

2) Under the Affordable Care Act, for “high income earners” Medicare taxes would be imposed at a rate of 3.8 percent on net investment income, and increase by .9 percent on earned income.

In addition, President Obama has mentioned increasing income tax rates for married couples earning over $397,000 to 39.6 percent, from the current 35 percent.

For such high-income earners, personal exemptions might also be reduced or eliminated, under the president’s proposal.

Obama also wants to let lower rates on dividends and capital gains begun in the George H.W. Bush era lapse. If that occurs, it is possible the tax on dividends — the so-called “unearned income” tax could rise to 43.4 percent, and many observers believe rates on long-term capital gains will rise to 20 percent.

Estate taxes

At the end of the year, the top tax rate for estate taxes is slated to rise to 55 percent, from a current 35 percent. Also, the effective exemption will fall to $1 million, from $5.12 million.

The president has also proposed setting the exemption for estate taxes at $3.5 million, indexed to inflation. Republicans, by contrast, want to eliminate the estate tax entirely.

Alternative minimum tax

It is possible that lawmakers will come together and overturn the expansion of the alternative minimum tax. Under current law, 26 million taxpayers would pay the expanded tax. The AMT sets a minimum tax rate for people earning above a certain income threshold.

Because the AMT is not indexed to inflation, Congress has repeatedly passed a temporary “patch” so the tax does not expand to impact tens of millions more taxpayers. If Congress does not act before December 31, however, the AMT exemption will be reduced for married couples to $45,000, and single taxpayers earning as little as $33,750.

A top priority for both parties should be to avoid the year-end spending cuts and tax increases which, if left unchecked, threaten to throw the U.S. back into recession. If Congress and the White House fail to act, on Jan. 1, 2013, the nation will be faced with potentially devastating consequences.

The fiscal cliff stemmed from an impasse in Congress, when lawmakers could not agree to raise the U.S. government’s debt limit in August 2011. Without an agreement, automatic spending cuts to defense and other programs were triggered to help trim the nation’s deficit.

Though no solution is easy, what is clear is that trillion dollar deficits cannot be sustained. Moreover, these budget imbalances cannot be constrained solely by cutting expenditures, nor by taxing the richest one percent in the U.S.

Instead, the government needs higher revenues from a broad spectrum of the American public. It is unfortunate that despite the billions of dollars spent in the recent election cycle, the American public still does not have a clear solution on how to remedy our fiscal ills.

Originally published in the Sarasota Herald-Tribune