The haggling is primarily about allowing the high-end of the tax table to revert to the previously higher rates. Most all of the congress agrees that they want to extend the tax cuts at the lower and middle. If however, everything expired, here's what you would be looking at:
1) Elimination of the child tax credit ($1,000 per child). For middle and lower income families with children, this is a big hit.
2) The lowest rate would jump from 10% to 15%. For someone with taxable income of $12,000 this would mean a tax increase of $600 ($12,000 x 5%).
3) Most capital gains would be taxed at 20% instead of 15%. For the wealthy, this is a lot of money. For someone with $200,000 in capital gains, it would mean another $10,000 in taxes.
4) the highest tax bracket would jump from 28% to 39.6%.
Obama lowered the Social Security tax (payroll tax) from 6.2% to 4.2% for this year. If the rate reverts back to 6.2%, this will impact anyone that works. A family earning $80,000 in wages would bring home $1,600 less next year ($80,000 x 2%) than they do now.
Numbers 3) and 4) is where the disagreement is for the most part. If any of these tax cuts are not extended, deficit numbers may shrink slightly, but consumption would also shrink somewhat as people have less discretionary income. This is why Obama not only extended the Bush tax cuts (after railing against them), but also cut the payroll tax rate. Any politician up for election knows its politically better to sacrifice the budget (long term prudence) in order to put more money in voters hands.
