What does the ‘fiscal cliff’ mean for your taxes?

>>> we're back now at 7:42. this morning on "today's money," we're talking with the fiscal cliff, something you'll be hearing a lot of in the coming months. if congress fails to act by the end of the year a package of tax increases and spending cuts threatens to throw the country back into recession. today financial editor jean chatzky is here to sort it all out. good morning.

>> reporter: this .

>> good morning.

>> this is based on a stalemate that's bn in existence for a time. what's at stake here?

>> at the end of the year, as you said, there's spending cuts that affect more than 1,000 government programs.

>> mandated. absolutely. that could go into effect. tax cuts set to expire, including the bush tax cuts and the payroll tax cut. combined, all of these things could wipe about 5% growth off the economy, throw us into recession and the tax increases from 90% of americans.

>> that sounds like the doomsday scenario . i mentioned there's been a stalemate so far, but the pressure is going to month on both sides to get something done. what's the likelihood we end up falling off this fiscal cliff?

>> it's teetering right now. we've got eight senators, democrats and republicans, meeting behind closed doors in mt. vernon trying to come to some sort of a compromise, but there are other people who suggest that if we're allowed to gover the cliff, their negotiating power from both sides gains strength.

>> let's break this down to the average person and the average family, all right. describe for me what happens to people at various income levels if all of these things actually fall into place .

>> so, we're looking at 6% tax increases across the board, but for the lowest 20% of earners, that's about $400. for the middle earners it's about $2,000 a year and f the top 1% it's about 10%, but that equals $120,000.

>> and, again, if we fall off the cliff, and let's all hope we don't get to that poin we have level heads prevail here, what about the job situation in the country?

>> it will not be good. we're looking at one survey out of george mason university that says it could cost us more than 2 million jobs. also, lower growth, increased volatility in the markets which options traders have already started to hedge against, and employment benefits could be reduced.

>> what will the outcome of the election do to all of this? how will it impact it, and where is the room for negotiation? where is the solution here?

>> the solution is not going to come until after the election. people are in total agreement on that, and what looks most likely at this point is that those payroll tax hikes -- payroll tax cuts be allowed to expire which will cost middle income filies about $1,000, higher income families about $2,000 and we'll get some sort of compromise on the rest.

>> so if you hear the term fiscal cliff and you don't think it applies to you.

>> you're wrong.

>> you're wrong.

>> thanks very much. we appreciate it.