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November 12, 2012
No. 341
How Would the Fiscal Cliff Affect Typical
Families in Each State?
By
Nick Kasprak
With the election behind it, the 112th Congress has a couple of months during the lame duck
session to turn its attention to pressing fiscal issues. Large changes to both taxes and spending are
scheduled to take place at the end of the year unless Congress acts.1 On the tax side, the biggest
potential change is the expiration of all Bush-era and Obama tax cuts.
Additionally, the Alternative Minimum Tax (AMT) has yet to be patched for the current tax year,
let alone next. Congress could pass a retroactive patch (which it has done in the past) that would
apply to the current year as well as next year; however, if it does not, the AMT exemption level
would revert to what it was twelve years ago, and certain credits (such as the Child Tax Credit)
would no longer be allowed against AMT liability. If this were to happen, millions of middle-class
taxpayers could see a substantial tax increase, which for some could be even larger than the change
from the end of the Bush-era tax cuts.
Finally, the 2% temporary cut to employee-side social security payroll taxes is also scheduled to
expire at the end of this year-a potential third tax increase that would affect the vast majority of
taxpayers.
To illustrate the potential impact on typical families, we have used Census and IRS data to estimate
income and deductions for the median two-child family in each of the fifty states. We then ran these
returns through our online tax calculator under two scenarios 2011 tax law (chosen because it is
the latest year that an AMT patch was in effect), and 2013 law, assuming all Bush-era and Obama
tax cuts expire and AMT remains unpatched.
1 See Tax Foundation Staff, The Fiscal Cli1ff: A Primer, TAX FOUNDATION SPECIAL REPORT NO. 204 (Nov. 8, 2012),
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