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%.

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Filed under: Finance • Taxes
soundoff (596 Responses)
  1. RoadRunner, Albuquerque, NM

    Justinteima second agoThe President should bring everything to a screeching halt, in an all out confrontation with the wealthy elitist power brokers, who want to suck Social Security dry so that they can misappropriate their power of transferring wealth from the working class to the super rich. This is more about breaking the back of Social Security than it is about the rich keeping "their" money. Tax revenues belong to the state, not to those who owe them. When general revenue legislation was set up, it was done so on a "progressive" basis, so that it was intended for those who earned more to pay more, b/c of disporportionate benefit. Likewise, when Social Security was established, it was intended to be an "insurance" against old age impoverishment. Who ever heard of raiding an insurance company to pay for roads, bridges, infrastructure, congressional salaries, defense contracts, etc.? Yet that is exactly what the republicans now intend to do, and their newest enlistment, is PFC Obama. We need another Harry S. Truman to tell these parasites where to go.

    December 7, 2010 at 12:17 pm | Report abuse |
    • Darrell

      This isn't President OBAMA doing this it's the FRIGIN REPUBLICANS. Don't blame Obama blame the nuts cases who either stayed home from voting or voted republican. I through the main blame on the 18 thru 35 year old Liberals who stayed home during the last election.

      December 7, 2010 at 12:32 pm | Report abuse |
    • strikeking

      Hey roadrunner, SS is already broke! I suppose you think there is a trust fund? SS is a ponzi scheme, wake up dud, they've been spending the SS money as fast if not faster then its been coming in for many many years! With boomers wanting to retire the government will have to use the general fund revenue. Oh but wait that running a deficit too. I'd suggest you look at incoming government revenue verse out going for everything and then you might realize we ALL have been getting screwed. Wake UP!!!

      December 7, 2010 at 12:35 pm | Report abuse |
    • Getsu-shin

      I agree with you wholeheartedly. Where are the ghosts of FDR and Harry Truman when we need them. This isn't all the Republicans want to dismantle. Add Medicare and Medicaid to the list.I am a poor, elderly deaf double amputee and the Republicans want to ensure that I will be spending my declining years living in a pup tent in a parking lot. Will the Republicans be supplying room service by chance? Social programs as the above are a right not a priviledge we pay for them. I worked my whole life and contributed, and now when I need to tap into social programs the powers that be want to either eliminate them or gut them. Remeber the push to link social security to the stock market .

      December 7, 2010 at 12:46 pm | Report abuse |
    • fofotavour

      President Obama, I love you. But since I lost HOPE, I feel better.

      December 7, 2010 at 12:47 pm | Report abuse |
    • JohnRJ08

      Social Security is NOT broke. That is a FOX News lie. All that has to be done to fix Social Security is to take it out of the General Fund, which is where LBJ put it, so that the government can't borrow from it to fund things like unfunded wars.

      December 7, 2010 at 12:49 pm | Report abuse |
  2. JohnnyInSNJ, Blackwood, NJ

    Who would have known once we got on the "Change" ferry, that it would be Obama to sell US down the river.

    December 7, 2010 at 12:17 pm | Report abuse |
    • Nick

      Let's face it. It's not about his campaign promises. I'm sure during his campaign he could not have foreseen being held hostage by Republicans, saying they absolutely will pass nothing until the tax cut issue is resolved, and their idea of resolution is to keep them for the rich. It's a shady move where Obama was put in a lose-lose situation.

      December 7, 2010 at 12:22 pm | Report abuse |
    • Joe

      "It's a shady move where Obama was put in a lose-lose situation"...

      you're kidding right? He knowingly put himself in this position by making grandiose promises to win over simple-minded middle America by pulling at their fears and heartstrings through promises of better healthcare, jobs etc.. as it turns out, he can't deliver that through robin-hood economics... funny thing about socialism... eventually you run out of someone else's money.

      Give me a break, this guy isn't the messiah that everyone held all their hopes for rainbows and unicorns for everyone... turns out that being let down on promises might be the lesson to be learned when running for president. Mr. Obama, you can run for Jesus when that's up for re-election.

      December 7, 2010 at 12:32 pm | Report abuse |
    • jellymon

      To Nick–Just to re-educate you. The DEMOCRATS have had, and still do, majorities in both the House and Senate. So please inform me as to how the Republicans have held Barry hostage?? Hmmm...?? You fail to grasp the fact that the Dear Leaders policies are what's wrong. You should be blaming your fellow 'intellectual' liberal Democrats for the lack of support. Stop listening to Mathews, Olbermann, Rhoads, etc. Think for yourself man!

      December 7, 2010 at 12:42 pm | Report abuse |
    • regertz

      Curious. On the one hand a condemnation of Obama for doing what he promised to do and by the same commentator a condemnation of him for "letting us down" by not doing what he promised to do. At least be consistent and say you don't like Obama's reform efforts and you favor the GOP policy of doing nothing except balancing the budget -well balancing it so long as large tax credits can go to the wealthy and corporations. Don't go and shed croc tears for the other side while saying he should follow the Republican line. The President did what he promised and the GOP used extremist charges to try and hobble him. We'll see how it plays out. I do think now though he should have just sat back and let the tax credits expire. The Clinton years were quite good without them and I see no evidence the credits are bolstering the economy. Besides holding to the last minute with the GOP realizing it can't force a change would likely have led to a much better deal for most of us.

      December 7, 2010 at 12:44 pm | Report abuse |
    • Chris

      Hey Joe simple minded America is the conservataive christians who vote Republican...Also the same idiot who ran to the poles to vote Republicans to control teh Senate again...First on teh agendda was not jobs...It was the tax cuts for rich and then health care for the health care industry which pads their pockets....When simple minded fools like you start realizing its the Republicans who know what to say and bs voters this country will prosper once again...

      December 7, 2010 at 12:46 pm | Report abuse |
  3. Martha Mapp

    I am outraged that the Unemployed, which includes me, were held hostage by the Republicans to get tax breaks for the rich. Let me say that again, I AM OUTRAGED!

    Don’t get me wrong, I NEED my unemployment insurance, INSURANCE that I paid for by working for over 40 years and paying into the system. I am in my late 50s and have diligently been looking for a job. I even paid out of my own pocket to get retrained for a job that will pay half of what I used to make but have not gained employment in that field yet either. If they cut off my benefits, I don’t know what I will do. I remain optimistic that I will find a job before I become a “99 weeker” but do lose sleep over that sometimes. If you have not heard, the people like me that are in their 50s are unlikely to re-enter the job market. I am determined to beat the odds but while I am trying, I have to eat and pay rent.

    We are in economic times that are almost without parallel, there are a lot of good hard working people out here that are hurting. To be held hostage and have to sit back and watch the Democrats just bend to the Republicans yet again and give away tax cuts for the wealthiest amongst us is just outrageous.

    December 7, 2010 at 12:18 pm | Report abuse |
    • Please

      Hold your outrage for the DEMS. 80% of the taxes are already paid by the top 20% of earners. How much more do you think is the "fair share?" DEMS want to give "tax breaks" to those not paying taxes! Thats called welfare my friend.

      December 7, 2010 at 12:31 pm | Report abuse |
    • Chip

      Hey – I'm outraged, too, but Obama should've said "Screw it – no compromise. Let the tax cuts expire for everyone.". that would've been the fiscally responsible change I voted for her. He lost my vote in 2012.

      December 7, 2010 at 12:35 pm | Report abuse |
    • L23

      I'm sorry you don't have a job. Don't mean to confuse you with facts, but you did not pay anything into the 'system'. Unemployment insurance is payed by your employer – believe me, it costs me a pretty penny every time I sign that check.

      December 7, 2010 at 12:35 pm | Report abuse |
    • SeanNJ


      December 7, 2010 at 12:37 pm | Report abuse |
    • ScottE

      Give me a break Martha. Many are hurting, yes, but just to blame the GOP for the incompetence of the Dem Congress for all this time was crazy. By raising the taxes of one group during hard times does not encourage small business to hire especially many of those are the ones who would have to be punished. The reason why some of the unemployment benefits were held up was the way the Dems wanted to pass them through Congress. If you are angry you should blame Obama. The unemployed would have not been in this position but are because of his promise for an 8.5 % unemployment rate while campaigning. Everyone knew that was unobtainable, yet he continually promised this.

      December 7, 2010 at 12:37 pm | Report abuse |
    • SeanNJ

      Don't those 20% have more than 80% of the money? Sounds like they're getting a pretty good deal.

      December 7, 2010 at 12:38 pm | Report abuse |
    • KPATL

      Martha,.. your anger is justified, but really misplaced,.. The top 2% of earners pay over 80% of the taxes,.. You have a vision that "the rich" people are hanging out in Kennedy compound in Mass and in NY, LA and San Francisco,.. and you would be right,.. but most of those people are actually Democrats. Obama was protecting the liberal coffers for 2012... And as for the unemployed,.. they have no incentive to find work if they are on unemployment,.. you are the exception and not the rule.

      December 7, 2010 at 12:46 pm | Report abuse |
    • Tom

      Martha, I do feel for you. I am not in the upper class, just a middle class stiff like you who has worked all my like and paid into unemployment like you for the last 40 years. I have a family, but we are not rich. HOWEVER, unlike you, I have saved via 401K plans and IRA's thru out my working life. It sounds like you have spent just about every dime you earned over 40 years if you have to depend on unemployment benefits to survive.

      December 7, 2010 at 12:47 pm | Report abuse |
    • Amanda747

      You did not PAY into the system for unemployment insurance, your employer did. It's not like social security. I don't know why people don't get this.

      December 7, 2010 at 12:48 pm | Report abuse |
    • myra

      at least you get unemployment, my husband's company in feb 09 , told the unemployment office he quit, he did not get anything in writing when they laid him off. we fought them but since he had no proof to the contrary he was denied unemployment. he is still not employed and is out pounding the pavement everyday he is 47, i am working a full time and part time job just to put food on the table... so while i feel for those who unemployment may run out, working 75 hrs a week is not exactly what i had in mind for me at 57. so enjoy what you do have...

      December 7, 2010 at 12:53 pm | Report abuse |
    • ddg000

      L3 – so where does the employer get their money? Through the work of the employees. Whether the employer pays the employee who pay the government, or the employer pays the government directly, the money still comes from the income generated by the employee.

      December 7, 2010 at 12:56 pm | Report abuse |
    • jkenney1973

      Sorry, you're logic is off. By your logic, the workers created their own jobs. Are they paying themselves as well? The employer pays the workers for their service. The workers either stay with that employer or moves on. The employer is the one making the money.

      December 7, 2010 at 1:01 pm | Report abuse |
    • WOW

      Are you guys kidding me...There were several millionaires that came out and said that they did not want or need the tax cuts. Never should Warren Buffet say that he pays less taxes than his secretary! Im reading these comment and its making sick to my stomach. Obama tried to comprimise with take cuts for everyone making under a million....the Repubs said NO.... and those are the people you want in 2012....everyone here must be making over $1 million. NOT!!!!

      December 7, 2010 at 1:06 pm | Report abuse |
    • Ian

      You do not pay for you Employment Insurance, your Employer does.

      December 7, 2010 at 3:48 pm | Report abuse |
  4. Spotschild

    President Obama! Go hard or go home!!

    December 7, 2010 at 12:18 pm | Report abuse |
    • Obama is weak

      Obama has been very weak president. I am progressive supporter. I have been supportive of Democrats last election by donating and spending time to defend them. I will no longer do that. Our household pay a lot of taxes and any tax break would help us, but in a long run, we must leave this place better for our kids and grand kids than what we got from our parents generation. We all need to sacrifice. We are in two wars. We have threat from Iran and North Korea. We have China that may surpass us into global economy. Obama has fed us to the wolves in healthcare, environment, immigration, and now cut taxes for the rich in the expense of our kids and grand kids. He is not going to get a vote from republicans when he runs in 2012. They hate him, put it simply. If he keeps alienating us, we demand, primary challenge for 2012 or independent candidate if he gets into the ballot.

      December 7, 2010 at 12:45 pm | Report abuse |
  5. Kris

    So how many billions are we going to be short by allowing more tax cuts to the wealthiest? Just how do we pay for police, fire and other necessities? I am getting to the point of hating the Republicans. They care only for the wealthiest and this last issue with tax cuts and unemployment extensions only proves it.

    December 7, 2010 at 12:19 pm | Report abuse |
    • Objectionist

      The Federal Gvmt does pay for the items you mentioned. That's local. An in some places, its not even taxes. I have to pay for my fire protection annually through a subscription.

      December 7, 2010 at 12:23 pm | Report abuse |
    • Objectionist

      Sorry – Doesn't pay – Did type all of it.

      December 7, 2010 at 12:24 pm | Report abuse |
    • Freedom0127

      Police & fire departments are funded with your STATE and LOCAL taxes. They are extending the FEDERAL tax cuts that have been in place, which have nothing to do with funding your police & fire departments!

      December 7, 2010 at 12:35 pm | Report abuse |
    • Chaosevil

      I hate them all! Buncha rich greedy spineless worms. No one in office deserves to be in office. And all the "Obama thsi and that posters" dude, hes just a sock puppet

      December 7, 2010 at 12:37 pm | Report abuse |
    • KPATL

      Those same wealthy Americans produce more employees and tax revenue than you or I will ever pay,... with the companies that they have built and run ( at a profit) unlike our government and every failure that they touch. Shall I name a few? Veterans Adminstration, US Postal Service, Department of Energy ( formed under the mental midget Jimmy Carter to get us off foreign oil) Social Security ( bankrupt) Medicaid/Medicare ( bankrupt). You are throwing rocks at the industry and ingenuity that comes from the private sector and they are a helluva lot more responsible than the government....

      December 7, 2010 at 12:52 pm | Report abuse |
  6. Objectionist

    Seems like a large compromise on Obama's part.

    December 7, 2010 at 12:19 pm | Report abuse |
  7. just me

    oh well – we'll get em next time – it really is just a drop in the bucket of our national debt.

    December 7, 2010 at 12:20 pm | Report abuse |
    • mountain chef

      Chester, besides giving up your tax breaks, there is a line on the 1040 form where you can also freely donate additional funds when you do your taxes, that is of course you do pay taxes...considering less than 50% of all Americans pay taxes, due to all the tax exemtions many get, unless of course you are one of the 50% who are able to spend my hard earned dollars on your social agenda.

      December 7, 2010 at 12:46 pm | Report abuse |
  8. chester

    Tax cuts are BS. I will give mine up if it means better education funding. Put absolute earning caps of 100k/year on every American.

    December 7, 2010 at 12:20 pm | Report abuse |
    • Marie M

      Chester, feel free to give up all your tax cuts. Every year you have the opetion to do this when filing your taxes. I hear all these people stating that we need to stop the tax cuts, well you can do that lf you want, just stop claiming any exemptions on your income, easy as that.

      December 7, 2010 at 12:28 pm | Report abuse |
    • mountain chef

      If we kept everyone at a100k cap who would then be able to create a job at that level? You know you need money to create a job in the public bus. sector. I know big bad corporations...but it's the little guys like me, who employ you; they are the ones you really hurt.

      December 7, 2010 at 12:37 pm | Report abuse |
    • Concerned

      I agree that education is the best route to fixing issues in the long run. However when town taxes come due thats the first place to the the chop block.

      December 7, 2010 at 12:43 pm | Report abuse |
  9. steve

    Obama caved again. He's all hat and no cattle....when are we going to elect a real progressive in this country? So much time lost and treasury wasted. The rest of the world is laughing at us while we continue to deteriorate and Obama is enabling this country's destruction. It's so sad to see.

    December 7, 2010 at 12:21 pm | Report abuse |
    • chester

      Agreed. The rightwingers who accuse this country of being socialist have never seen real leftist politics in action. I pray that one day it will happen.

      December 7, 2010 at 12:22 pm | Report abuse |
    • Dan

      We have seen serious left wing policies go into effect. Where have you been the last two years? Oh, and the debt has increased dramatically. I certainly hope we don't see it again. Otherwise, this country will be in serious trouble.

      December 7, 2010 at 12:34 pm | Report abuse |
    • YBM

      when are we going to elect a real progressive in this country?.....................Hopefully never. If it ever happens, it will be the end of this country. We will have completed the journey of the Roman Empire and for the same reasons. Electing Obama is too close for comfort as it is.

      December 7, 2010 at 12:49 pm | Report abuse |
  10. Bob Dog

    Wow, I'm very disappointed in President Obama. It doesn't appear he has the confrontation skills to get what he and most of his party wants. He just yields to the republicans and piles more debt on our country. I regret voting for him. It appears he isn't up for the job. He is behaving like a weak, idealistic and naive "Jimmy Carter." I'd vote for anyone who will lower our deficit AND stop giving money away to the most wealthy.

    December 7, 2010 at 12:22 pm | Report abuse |
    • Marie M

      I think he is listening to the people this time, not the politicians. Good for him!

      December 7, 2010 at 12:30 pm | Report abuse |
    • NikkiB

      To Marie M, what people do you think he's listening to? I question folks that like to use that term. I am part of "the people" and I disagree. He isn't listening to the people. I voted for him and would vote for him again. I don't think he is weak, I think he is trying to compromise. As much as we don't want to admit it, politics is about deal making. i believe that when they run for President they beleive in what they are saying but once they get into office they realize, it isn't that easy and you have to shake hands and make deals and take what you can get. That's the American way and that's why we're in the position we're in and why China owns us right now. We just can't seem to stand on our own.

      December 7, 2010 at 12:54 pm | Report abuse |
    • RT in KC

      You mean giving away the money that already belonged to them.

      December 7, 2010 at 12:55 pm | Report abuse |
  11. Brian

    This turncoat has broken every promise he ever made......and you wonder why people of the US are apothetic? What a jerk!

    December 7, 2010 at 12:22 pm | Report abuse |
    • Nick

      Turncoat? What would you have done if nothing will pass because Republicans made a "pact" not to do anything until they basically got what they wanted? It's a lose lose situation. It's not about weak or strong, it's about continuing on with all the other items that need to be addressed as well, such as the unemployed. It's hard to do anything if not a single bill can pass. Analyze the situation, not the person.

      December 7, 2010 at 12:25 pm | Report abuse |
    • jmlstl

      Doesn't the Dems still hold the majority?

      December 7, 2010 at 12:36 pm | Report abuse |
    • Matt

      Hard to do anything when Republicans are blocking anything? I didn't know they had the majority in Congress.

      December 7, 2010 at 12:36 pm | Report abuse |
    • wonderwall

      @Nick: Obama and the Dems have been in for 2 years with full control. What the heck were they doing for the last 2?? STOP KOWTOWING. The Repubs will never work with Dems; they never did during Bushy, they never will.

      December 7, 2010 at 12:38 pm | Report abuse |
    • Gerry

      Nick, while I agree with you that compromise is hard. If Republicans make a "pact," The thing you do is call them out on it. Not just talk about it but say it with some damn anger. Show them they are full sh!t. That they are not interested in fixing the country, they're interested in keeping the country the way it is. Call them out on their tax cuts and question why it left us with a huge deficit before office. When they make spending excuses call them out on who supported fighting a war in the WRONG country. Just plain out say they are full of Sh!T.

      December 7, 2010 at 12:54 pm | Report abuse |
    • NikkiB

      You're ignorant and uneducated. Write back when you have something more substantial to say. President Obama has been in office almost half a term. Interesting that you would expect him to have lived up to everything he said he would so quickly and with such opposition. Are you really that naive? Respect the man for what he's trying to do and if you don't like it, run for President yourself. Until then, shut up and color. I didn’t vote for Bush but I respected him as my President and the job he had to do. I wouldn’t wish this job on anyone and respect those that step up to the plate and try to make a difference.

      December 7, 2010 at 1:01 pm | Report abuse |
  12. joseph george

    He will not get my vote again.. He bettrayed his base, unlike George Bush, he doesnt seems to have spine to stand up for what he believe in,, or does he believe in any thing!!!????????????????

    December 7, 2010 at 12:22 pm | Report abuse |
    • just me

      ou praobably didnt vote for him anyways- clinton had to work across the aisle- look what he acomplished.

      December 7, 2010 at 12:25 pm | Report abuse |
  13. James

    Obama is showing that he has no backbone. Why not just hand the presidency over to the Republicans right now? If you think this is the only unreasonable demand that they are going to get to by just trying to block, Obama, then you are mistaken. Taking away the tax cuts for people making over 250,000 a year would have been a great start to eating away at the deficit. Republicans can talk all they want about fiscal responsibility, but not allowing the end of the tax cuts for the wealthy proves that they are only concerned about keeping money for the rich. Obama needs to grow a pair and challenge them on these obstructionist actions instead of conceding to them.

    December 7, 2010 at 12:22 pm | Report abuse |
  14. FatSean

    Revoke all tax cuts and get on with cutting back SS, Medicare, Military, Welfare, Farmer Subsidies...

    December 7, 2010 at 12:22 pm | Report abuse |
  15. Woody Brown

    Weak...Mr. Obama might as well man-up and change his party affiliation to Republican.

    December 7, 2010 at 12:23 pm | Report abuse |
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