STEVE INSKEEP, HOST:
And now we have another installment in our occasional series Fiscal Cliff Notes, your quick guide to some of the big economic issues.
(SOUNDBITE OF NEWS REPORTS)
UNIDENTIFIED MAN #1: On January 1st, 2013, there's going to be a massive fiscal cliff of large spending cuts...
UNIDENTIFIED WOMAN: From the painful cuts to the Defense Department, food safety, education...
UNIDENTIFIED MAN #2: The Bush tax cuts, the payroll tax cuts...
UNIDENTIFIED MAN #3: Taxmaggedon.
UNIDENTIFIED MAN #4: It's a cliff.
UNIDENTIFIED MAN #5: Whatever your preferred imagery, it's a really big deal.
INSKEEP: All right. Let's talk about one part of that supposed fiscal cliff at the end of the year. It is the tax cuts passed under President Bush. They nearly expired in 2010, were extended once, and are now set to expire again. The higher rates would affect many millions of Americans, and the warnings of that increase have become part of the rhetoric of the political campaign. NPR's Tamara Keith checked to see who would really pay the most.
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TAMARA KEITH, BYLINE: These are the sounds of Hamilton Lempert's office. Actually, it's a hospital.
UNIDENTIFIED WOMAN #2: Dr. Lempert, room eight, please. Dr. Lempert to room eight.
KEITH: He's an emergency room doctor in Cincinnati and works almost exclusively on overnight shifts.
DR. HAMILTON LEMPERT: I spent the first 30 years of my life in school in order to do what I do. And I work between 40 and 70 hours a week, and I earn money doing what I do.
KEITH: This puts Lempert in the top 5 percent of income earners and the top tax bracket. He says he knows he's fortunate, and paying taxes is just something that comes with it. When he runs his financial information through an online calculator to figure out how his tax bill would change if the Bush-era tax cuts are allowed to expire, he gets a shock. He'd take about a $20,000 hit.
LEMPERT: That's a lot of money. I will have to decide what to do for vacation. I may not be able to put as much away towards purchasing a replacement car when my car dies.
KEITH: That car is, as he describes it, a beat up, 14-year-old Subaru. Lempert's tax bill will rise because itemized deductions will be limited, marginal tax rates will go up and dividends will be taxed at a significantly higher rate. Roberton Williams is a senior fellow at the nonpartisan Tax Policy Center.
ROBERTON WILLIAMS: Virtually everyone in his income category will see their taxes rise in average about $14,000. That's about a 5 percent reduction in their after-tax income, and 5 percent is something that's, even at that income level, noticeable.
KEITH: Williams says in terms of dollars and cents, and even as a percentage of income, the people who will be hit the most if the tax cuts expire are the wealthy, because they've gotten the greatest benefit from the cuts. Tamara Keith, NPR News. Transcript provided by NPR, Copyright National Public Radio.