WASHINGTON, D.C. (WYMT) - You have probably heard about the "fiscal cliff" facing lawmakers in Washington, but what does it mean for you if congress fails to reach a compromise? Economists say the outlook isn't great.
The fiscal cliff is the name economists have given to a series of tax cuts that are set to expire the first of the year. These include Bush-era tax cuts from 2001 and 2003, and last year's two-percent payroll tax cut. These cuts, combined with planned cuts in government spending, will result in more than 500-billion dollars disappearing from the economy, which economists fear will lead to another recession.
Lawmakers had little to say about the cliff in the weeks leading up to November 6th, but now that the election is over, Republicans and Democrats are starting to negotiate.
President Obama says his re-election is a mandate to raise taxes on the rich.
"I just want to point out, this was a central question during the election. It was debated over and over again, and on Tuesday night we found out that the majority of Americans agree with my approach," said the president.
Congressional Republicans appear ready to concede the wealthy should contribute more, but they say raising taxes is not the answer.
"We need more revenue in Washington. We need more private sector jobs. We don't need to raise tax rates. We need to limit loopholes and deductions for the wealthy," said Senator Lindsey Graham of South Carolina.
While the debate continues as to what to do about the top two percent, economists say both parties seem ready to let tax cuts that effect the lower and middle class expire, namely the payroll tax and the alternative minimum tax.
"Well there's no agreement about extending it beyond its current run this year. It was passed as stimulus and there doesn't seem to be any appetite for more stimulus here in Washington," said Roberton Williams, a Senior Fellow with the non-partisan Tax Policy Center.
Experts say Kentucky workers are sure to see less take-home pay next year. They say those tax increases will be tough on Kentucky businesses too.
"You've got coal companies and other companies in this community that are on the verge of bankruptcy because they've pushed right up against it, as far as decreasing revenues and higher cost," said Richard Crowe, a retired economics professor.
Whatever Congress and the president decide to do, economists we talked to say Kentucky workers are going to be hit hard. The U.S. Census Bureau reports the average household income in Kentucky was a little more than $41,000 in 2010. Economists with the Tax Policy Center predict people earning that much will pay a little more than $1,700 more each year.