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. Anothermuse

    Why is this repeatedly termed as tax break? If it isn't passed it's a tax increase, since no one has been paying it for years. I find it interesting that the middle class, most of whom aren't paying federal taxes, fully expect the deficit to be cured by taxing the rich. In two years, economic recovery hopefully already in solid territory, the entire package for all tax levels should be eliminated. But this adminstrations demands that all federal burden be placed on "the rich" (in Dem terms that means anyone who can take care of themselves)is a good part of the reason why the recovery has been so slow. Why invest in job creation and expansion if the government plans on taking more from you.

    December 7, 2010 at 1:05 pm | Report abuse |
    • KOD

      I'm starting to believe from these posts that all those complaining about the continuation of the tax break are those that are not working, not paying taxes, or on welfare. They all believed that the rich were going to have to give up their riches (or "share the wealth") when St. Obama took over, and they would be given even more freebies. If they were contributing members of society, they would understand that these breaks are necessary for those of us that earn under $200K and pay our taxes without being a burden on society.

      December 7, 2010 at 1:38 pm | Report abuse |
  2. ED FL

    It makes it easier when you and the congress all fit into the 250.000 dollar categorie and derive the most benefit from keeping the tax cut. as a disabled veteran that has had his cost of living increase stopped the past two years i would be glad to pay a little more taxes if the President kept his word on letting the cuts expire. I know my mind has changed for the 2012 election and very few are going to give another chance for false promises.

    December 7, 2010 at 1:08 pm | Report abuse |
  3. jurorno5

    I carry around in my wallet a graph that shows the top 1 percent went from having 8 percent of total income in 1973 to 18 percent in 2008. The top 0.1 percent went from 2 percent of the total income in 1973 to 8 percent in 2008. It would have been better to have let the Bush tax cuts expire for everyone. This cave-in by the President and his party likely spells the end of support from me through the next election cycle.

    December 7, 2010 at 1:09 pm | Report abuse |
  4. yanni

    What I find amazing is that we actually have a fulltime legislature. After 200+ years you would think that we have nearly all the laws that we need for our country to run. I understand new technology and new processes may require new legislation and we need to pass budgets based on what the federal government has to spend, but come on; hundreds of new laws every year. Isn't this just the special interests getting their concerns addressed? Does anyone know how many session days there were in the first Congresses? Obama, Bush, Clinton and Congress do you actually think that any of them ever cared about what is best for us all?

    December 7, 2010 at 1:09 pm | Report abuse |
  5. ken wayne

    The only compaints about the rich are not the poor, but those that want to be rich. But, lets face it, if the rich didnt buy, the economy would sink even more. I buy cars, I buy clothes, i eat in nice restaurants, I hire landscapers, house cleaners. pool men, I spread the wealth, Dont you get it. didnt Communism fail!!!!, The moment you win the lottery, you will change your mind. on what side you are on. We are all animals of preservation and survival.

    December 7, 2010 at 1:10 pm | Report abuse |
  6. Carlos

    Maybe I'm a little dumb on this. But read this further. When Obama took office, I received immediate relief in my paycheck. I.e. my tax rate changed, I saw more money in my check. With this Tax cut, It reduces the my tax liability. while not at the level that Obama wanted it, but it is a REDUCTION in your tax liability. My Advice to everyone, take a look at this site: http://calculator.taxpolicycenter.org/ and in a ton of scenario's I put together, the benefit outweighs what is seen. While not at the levels The President wants them, it is a relief. I may actually get a significant tax return for the next two years! I think it's a great move to extend them to EVERYONE, not just the wealthy to rich.

    December 7, 2010 at 1:11 pm | Report abuse |
  7. crywaterbaby

    I am absolutely disturbed by what is happening concerning the Bush Tax Cut extension. I understand the concern for the people who will lose their benefits, lose their medical insurance, pay higher taxes and become further in debt but allowing the most privileged 2% of people in this country to effectively make the 98% of people who are not privileged indentured servants is not right.
    It is delusional to think that continuing these tax cuts for the top 2% will create more jobs. The current unemployment rate has not been this high since 1982-1983 and will continue to grow with no end in sight. The number of jobs sent overseas has had a devastating effect on both American families and the economy. Why is this happening? Because it cost the people creating the jobs less money to employ people overseas that it does to employ Americans and let’s face it is all about the money.
    How can we fix this problem? Let the tax cuts expire at the end of the year and let the top 2% create the jobs in this country that we so desperately need. Let them put their money where their mouths are. I realize that this will be painful for some people but there are so many more people who receive no relief now or who have never received relief that are not even counted that I believe it is worth it to end the tax cuts and put that money back into the economy. Use that money to create jobs that will benefit our country in the long term by investing in clean and renewable energy like solar panels and wind mills not only will this create jobs it will also decrease out dependency on foreign oil further reducing the deficit.
    Giving into bullies is never the right move especially when they are obstructing progress for all and abusing their power at the expense of 98% of the people they govern. It’s a disgrace.

    December 7, 2010 at 1:11 pm | Report abuse |
    • KOD

      ... and you're delusional if you think that ending the tax cuts for those wealthy business owners will make them hire more Americans. It will give them more reason to hire cheaper help in India, Mexico and China.

      December 7, 2010 at 1:43 pm | Report abuse |
  8. Tim H

    So if a person works hard and is successful they should have to pay more taxes than someone else? They are punished for being successful??? This is why there should be a flat rate tax and everyone pays the same percentage. I don't like Obama but I applaud him for reaching a good decision.

    December 7, 2010 at 1:11 pm | Report abuse |
  9. DD

    I agree Obama needs to stop bowing down. I also am outraged with his federal government employee pay cuts. I have no problem taking a pay cut, but if a federal pay cut is in order then cut every federal employees pay. Don't single out one branch of the government, hit all of them. (postal employees, military, judicial , etc.) Then maybe all branches will only have to take it in the shorts for 1 year instead of only a select few for 2 years.

    December 7, 2010 at 1:11 pm | Report abuse |
  10. PaulBoomer

    Obama should locate his cojones and let the cuts expire instead of caving as usual.

    December 7, 2010 at 1:11 pm | Report abuse |
    • JCarlos_Q

      Oh yeah, the President should have held his ground and allowed the millions of jobless Americans suffer for it.
      I have an idea, let's make you president !

      December 7, 2010 at 1:46 pm | Report abuse |
  11. melindasp

    President Obama has just landed in shark infested waters and the Republican smell blood. Two more years of tax breaks for the top 2% and only a thirteen month unemployment extension for the millions of working poor that cannot find a job. A real leader would have demanded the continuation of the tax breaks for 98% of Americans only, and accepted nothing less. Let the Republicans block everything, and continue to do so, for the world to see. They would have blinked after the public outrage continued to grow. We would have accepted the pain (possible increase in taxes) just to see him stand up for himself and the majority of Americans. A victory for the Republicans and millioniares unless the Democrats in Congress save the President from himself.

    December 7, 2010 at 1:13 pm | Report abuse |
    • KOD

      Speak for yourself and eliminate your own tax cut ! I don't want to suck it up so the Idiot-in-Chief looks good. I'm just happy I won't have even less to live on – since I seem to be one of the few posting who has a job and actually pays my own bills without expecting the idiot in the White House to pay them for me with money stolen from the wealthy. I don't believe in Robin Hood !!

      December 7, 2010 at 1:47 pm | Report abuse |
  12. Jay

    Dear CNN,

    Did you even watch the entire speech?! Instead of trying to garner ratings using attention-grabbing words, video, and sound clips (which only continue to fuel the debate at hand), why not try writing about the story in its entirety. I assume that whoever wrote this article must have take some kind of class on ethics in journalism while obtaining his or her degree, but since your writer obviously has completely forgotten that they exist, I am attaching a wikipedia link for his or her reference: http://en.wikipedia.org/wiki/Journalism_ethics_and_standards

    I am a democrat and ultimately lean towards favoring tax increases, but I know when a story looks like utter RAP with a capital C!

    December 7, 2010 at 1:13 pm | Report abuse |
  13. Minnesota Mike

    STOP, STOP, STOP.....blaming the republicans

    Democrats have had COMPLETE CONTROL (i.e Pres, Senate, House) for the past 2 years. Why didn't they do something about this before the election??????? Why didn't they do something in year 1. The answer – not all dems would support it OR they were worried about re-election.

    Look in your own house before casting stones on the minority party.

    December 7, 2010 at 1:13 pm | Report abuse |
  14. LS

    Once again, President Obama had to compromise with the Republicans to do as much for the poor and middle income citizens. Without him, the Republicans will continue to serve the rich. They don't care about working class Americans. I don't understand why so many poor and middle class Americans vote Republican. It has already been proved that the trickle down theory doesn't work. Republicans don't really care about the deficit. America cannot afford a Republican President and a Republican controlled Congress. We need Obama in 2012!

    December 7, 2010 at 1:13 pm | Report abuse |
  15. jimbo

    It appears the political 'give and take' is working again. It wasn't for the past year. My main observation about this blog site... does anyone speak English as their first language? The sentence structures are third worldish.
    I get the impression the people who hate (envy) the rich and love the poor (themselves) are self serving anti capitalists. Welcome to the capitalist USA. There are other countries where you would be happier but you would still be unemployed.

    December 7, 2010 at 1:14 pm | Report abuse |
    • George

      Sounds like you are rich. But would you be rich without the poor and middle class? NO!

      Corporate greed and government corruption (lobbying) has killed capitalism. It is no longer a system that works for everyone and soon we will see the end of all and it won't be pretty.

      December 7, 2010 at 1:21 pm | Report abuse |
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