What tax deal could mean for you
December 7th, 2010
12:07 PM ET

What tax deal could mean for you

The White House is working to get Democrats to support a last-minute deal on taxes that President Barack Obama hammered out with Republican leaders.

The compromise would extend the Bush-era tax cuts for two more years, keeping income tax rates at their current levels for everyone, as Republicans insisted. Obama and other Democrats wanted tax rates to rise only for individuals earning more than $200,000 a year and for families making $250,000 or more a year.

If the deal goes through, here's what it will mean for you:

Payroll taxes – Wage earners will have extra money in their paychecks with the lowering of the payroll tax from 6.2% to 4.2%. Someone earning $50,000 a year would pay $1,000 less in Social Security contributions next year. Someone earning $100,000 would pay $2,000 less. The payroll tax rate would go back up to 6.2% in 2012.

Income taxes - Not much to see here - at least in terms of your wallet. The compromise would extend the Bush-era tax cuts for two more years, which basically means the income tax rates will remain exactly the same for the next two years at their current levels for everyone.

White House fact sheet on agreement

Individual tax breaks - Low- and middle-income tax filers will see an increased value in credits for two years if they file for an earned income tax credit, the child credit or a revamped tax credit for college costs.

Unemployment benefits - The package would leave in place for 13 months the option to file for extended federal unemployment benefits. In some states, especially where job loss is extremely high, it can be up to 99 weeks.

Estate taxes - The estate tax exemption, which lapsed this year, would be would be set at $5 million and the top rate would be set at 35%.

CNNMoney.com: Tax cut deal and surprise stimulus - the cost

If a deal can't be reached:

Taxes will go up for everyone, since the current rates set under President George W. Bush expire automatically at the end of 2010. Democrats control both houses of Congress, but the Republicans will take control of the House of Representatives in January, and the Democratic majority in the Senate will be smaller than it is now.

The estate tax would return in 2011 with a $1 million exemption level and a top rate of 55%.

Post by:
Filed under: Finance • Taxes
soundoff (596 Responses)
  1. jb1960

    If you voted for the Retarded party then you get what you deserve. Sure the middle class taxes won't go up but your pay has gone down anyway so you will not benefit at all. The rich had their pay go up so they get to keep more. Now they are giving us money from Social Security so they can force most of us into thinking that it is broke so They can end it. All the people retiring in the next decade will be out of luck and on the streets begging. Don't forget about heath care the motto is don't get sick and if you do die quickly.

    December 7, 2010 at 4:42 pm | Report abuse |
  2. Shari from Madison

    I'm not thrilled with this deal, but I can live with it. This is the only way Republican's will extend unemployment benefits. Also, even though I find Republican's repugnant, I don't want my taxes to go up. Republican's will not support a tax cut for only some people. They are hypocrites, but the idiot voter's have put them in charge so we have to deal with them.

    December 7, 2010 at 4:47 pm | Report abuse |
    • dale

      I support the GOP, even though I disagree with extending the unemployment payments. I don't believe in discrimination, to pick and choose who has to pay more and who doesn't is flat out wrong!!!

      December 7, 2010 at 4:52 pm | Report abuse |
  3. tired of the nonsense

    I have no problem paying my taxes. What I do have a porblem with is that according to the federal govt if you make over 250k a year your rich. Not so in long island where the property taxes are ridiculous and ny state taxes are high and all the other taxes that are added on to your cable bill, phone bill, electric bill, etc. I think if Obama would have had a tax increase on people who make 1 million or more there would be a lot less people disagreeing with a tax increase. I own a small business and my question is this why should I have to pay more tax if i make more money when I work more for that money and have more stress and spend less time with my family. Here is an example if someone owns a dinner, bakery, bagel store , they're open 7 days a week you work very long hours. holidays too then you go home a do your payroll and order supplies. So if I make over 250k why should i pay more tax. I did more work and sacrificed more for it.
    the super rich can afford it and there family is not going to be affected if they are taxed more but to say 250k is rich is ridiculous

    December 7, 2010 at 4:51 pm | Report abuse |
  4. tired of the nonsense

    I would love to hear some comments

    December 7, 2010 at 5:02 pm | Report abuse |
    • Tim

      There is no way to effectivly prorate who worked harder for their money and therefore deserves a higher/lower tax rate. I too don't mind paying taxes, the system need to be regulated. The system also doesn't know how your family is affected by your pay. No matter where you live, if your debt and spending is in control, you should be able to live confortably on 40-60k/yr. I can assure you I think I would feel rich if I suddenly started making 200k/yr.

      Someone earlier stated that the taxation system needed to be corrected instead of just throwing more money at the broken system we have. I agree with that statement.

      December 7, 2010 at 5:13 pm | Report abuse |
  5. Bill

    How is this a compromise? Noone had to give anything up (unemployment benefits got extended, tax cuts got extended, payroll taxes went down – all without any mention of where the money to pay for all these breaks coming from. Why don't we REALLY COMPROMISE and give everyone $1 MIL.

    December 7, 2010 at 5:40 pm | Report abuse |
  6. Jeff

    The facts are that this tax break is a continuation of the policies of the Bush era that sunk us into this mess. Less now means more later. It would be better to let the tax break for the wealthy expire now and the middle class a year or two from now so we can begin to pay off our debt. I don't think people are aware enough that the debt threatens the long term viability of our economy and our indepedence. Being a debtor nation places our country into a position of vulnerability. We need to increase taxes and decrease spending. Not a pleasant or easy solution but it is the only answer even if politically impossible.

    December 7, 2010 at 5:41 pm | Report abuse |
  7. Chuck

    My fellow americans, the mainstream media has misled you. China owns a small percentage of our debt. The majority is held by wealthy business people in the form of bonds and securities. They get paid a percentage every quarter on them. When the government wants to borrow more money the release more in an auction. The treasurey is in charge of who gets what. We need our representatives to install a flat tax and obolish the IRS. This would bring more people into the system paying taxes and each person would pay their fair share. We need them to cut spending but do it in a way that doesn't harm the recovery. Also charge 25% on all Chinese goods and US companies operating oversees that sell goods back to us get charged 25% as well. This would cut the trade deficit and bring jobs back home. China is't going to stop trading with us they have no one else that is even close to us. We need to start dealing with them in a position of leverage versus weakness. Next by cutting each federal department 20% across the board, this would produce even more money to pay off the deficit. We all might as well face this challenge now while it is still manageable before we are driven into ruin. Remember just like you were taught as kids, its not how much you make but how much you spend. Bring our troops home and use our military only when absolute necessary, for they and us are the true treasure of this country.

    December 7, 2010 at 5:53 pm | Report abuse |
  8. BRRzeszutek

    This is how I see it: The very same people that want the tax break , are the same people that put us into the national financial mess we are currently in. I heard that this tax break is worth 60+ bil. dollars over ten years. I hope that this compromise buys atleast a little bipartisianship in D.C. ( I sure it won't) It is sure gonna cost enough.

    December 7, 2010 at 8:52 pm | Report abuse |
  9. Lee from Boston

    What the President and Congress should focus on for the next two years is to REFORM and SIMPLIFY TAX LAWS so that everyone pays their fair share in taxes, and that everyone clearly knows where their tax dollars are going. A tax reform law should also include tax credits for businesses and organizations that have DEMONSTRATED job growth and stimulated economic growth. If an individual, or business or company have in fact (and can prove) they have created job growth and opportunities, then they ought to receive credit.

    December 14, 2010 at 10:20 am | Report abuse |
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19