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At a glance
Indiana taxpayers would see increases in three areas if elected officials don’t prevent the nation from going over what’s become known as the fiscal cliff. The typical Hoosier family would be required to pay these additional amounts:
•Child tax credit:…$1,000
•Other Bush tax cuts
and extenders:…$1,266
•Payroll tax:…$1,387
Source: The Tax Foundation

Fiscal cliff would hit Indiana hard

Family of 4 may see $3,653 tax rise

Schenkel

Indiana taxpayers rank 13th in a list of states’ residents who would be most affected if the nation goes over the so-called fiscal cliff, according to a report released Monday.

Almost 90 percent of Americans would face higher taxes next year if Congress fails to avert the scheduled $400 billion in tax hikes and $100 billion in spending cuts. Economists say going over the cliff could send the country back into recession.

Taxes for the typical Hoosier family would increase by 5.27 percent of income, based on estimates using Census and IRS data, said the Tax Foundation, a nonpartisan research organization in Washington.

A family with an income of $69,328 – the median four-person household income for Indiana last year – would pay an additional $3,653 in taxes next year, according to the study.

Joe Schenkel, president of Consumer Credit Counseling Service, said many of the organization’s clients wouldn’t be able to afford such a hike in their expenses. The increase averages more than $300 a month.

“These figures scare me,” Schenkel said after learning of the projected annual and monthly tax increases for Hoosiers.

Indiana law requires that anyone entering a debt management program, such as those offered by Consumer Credit Counseling Service, establish a monthly budget that balances or shows a surplus. The local nonprofit isn’t allowed to work with clients who can’t demonstrate enough income to cover even bare-bones expenses, Schenkel said.

But even those who can cover the basics don’t have much left over.

“We don’t have clients who have $300 a month extra,” he said.

Anyone now on an established repayment plan might have to drop out of the program if hit with that much additional tax burden, he said.

“When you’re at that point, you don’t have a lot of choices,” Schenkel said. “The alternative is to look at declaring bankruptcy.”

Ohio residents would pay an additional $3,437 – or 4.72 percent of total income – on median household income of $72,764. The state ranks 34th on the list.

The states most affected by sharply increased taxes would be New Jersey, at an increase of 6.82 percent of income; Maryland, 6.74 percent; Connecticut, 6.62 percent; Massachusetts, 6.53 percent; and New Hampshire, 5.81 percent.

Working Hoosiers would be hit by the end of a temporary cut to Social Security payroll taxes – returning to 6.2 percent from 4.2 percent. The tax break has been in effect since January 2011 to help families weather the weak recovery.

sslater@jg.net

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