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Tax Policy Center Spells Out Repercussions of 'Fiscal Cliff'

Comstock/Thinkstock(NEW YORK) -- Watch out for the 'fiscal cliff.'  A new study forecasts that unless Congress acts, soaring taxes at the beginning of next year could blow a hole in your wallet.

The nonpartisan Tax Policy Center said on Monday that taxes would rise an average of $3,500 per household, thus slicing after-tax income by over 6 percent.

In other words, there'll be less money to spend, businesses will have to lay off staff and the country will likely experience another recession although not quite as bad as the previous one.

Still, no one wants that to happen but any action on Capitol Hill, which is deserted now because of the election season, won't happen until the proverbial lame duck session, if at all.

According to the Tax Policy Center, those at the top 1 percent of the pay scale will see taxes increase by a whopping $120,000 while those at the bottom will see an average of $412 in additional taxes.

Americans earning between $40,000 and $65,000 a year will pay an average of $2,000 more in taxes annually.

Overall, collective taxes will go up $536 billion in 2013.  Most of it has to do with the expiration of tax breaks passed in 2001 and 2003 as well as the payroll tax holiday that began in 2009 also ending.

The White House and Republicans have been at loggerheads over what to about the expiring tax cuts, with the GOP wanting to extend them for all Americans while President Obama and Democrats say that anyone earning $250,000 or more should pay more to help bring down the deficit.

Copyright 2012 ABC News Radio

ABC News Radio