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. K3citizen

    Obama just commited political suicide. Was he hoping to win over GOP voters for 2012? Nice going Barry, you threw away a few million votes just to get a few thousand. I used to think the GOP were the ones to blame for wrecking the economy, but Obama "Has some splaing to do!"

    December 7, 2010 at 1:26 pm | Report abuse |
  2. Fricsaid

    How I long for a day when our government is about "the common good" again. So many times, words are believed instead of actions. Thanks to all of the crooked politicians, I trust none. Thanks to all the lies, I believe nothing. Our government hires people that do nothing more than educate them on the human psyche. We are told the things we want to hear, only to briefly appease us while the real world goes on behind closed curtains.

    Every day I read about how much Republicans are better than democrats and vice-versa. It's so easy to point the finger. You want to impress me? Try holding yourself accountable. As we are told lie after lie, this country is going in the toilet. All you have to do is look at the stock market to know that industry is making money, yet unemployment stays up and the poor stay poor. What does that tell you? It tells me that there is a lot of money not going to where it needs to be going, and thats in the pockets of middle-class america. I love my country, but we haven't had anybody running it worth speaking of for many, many years.

    December 7, 2010 at 1:28 pm | Report abuse |
  3. John s

    I work in the private sector, my pay has been cut 40 percent over the last 3 years, I also pay more for my health insurance. I know my company does not have the money to keep me at my old pay rate, either does our Government. Pay cuts for all Federal and state workers!!!!!!!!

    December 7, 2010 at 1:29 pm | Report abuse |
  4. wcb2009

    So he decided to pay the ransom...

    December 7, 2010 at 1:30 pm | Report abuse |
  5. Annie

    Amber, yes, I really think Obama cares that much about the 9% unemployed. He comes from middle-class middle American folks with Kansas roots and I think the plight of the unemployed and their children and their extended families – many of whom may also be unemployed – and their communities is eating away at his gut. I hate the compromise. It's crazy, nuts, counterproductive of all we need to accomplish for the country. But if I were in Obama's shoes, I would also surely choose the immediate course of action that would NOT put millions more in jeopardy of living in their cars and eating out of dumpsters, with no place to receive mail or shower to spruce up for the job search. There's down and then there's DOWN. The Republicans behave like bullying 2-year-olds. Unfortunately we can't just park them on the "naughty chair." We have to work with them somehow as if they're thoughtful caring adults focused on solving real problems instead of kids who's only aim is to be "king" in a game of "king of the mountain." AAARRRGGHHHH!!!!!!!!!!!!!!!!!!!!!!!!!

    December 7, 2010 at 1:30 pm | Report abuse |
    • KOD

      Wow !!! How was that Kool-Aid?
      "yes, I really think Obama cares that much about the 9% unemployed. He comes from middle-class middle American folks with Kansas roots and I think the plight of the unemployed and their children and their extended families – many of whom may also be unemployed – and their communities is eating away at his gut. "
      Obama from middle-class middle-America ??? The guy had a privileged life in Hawaii and Indonesia !!! And the only thing thats eating at his gut is that he can't take from those wealthier than himself (and there probably aren't many of those !) Lets see him try to live a middle class life !!!!!

      December 7, 2010 at 2:03 pm | Report abuse |
  6. YBM

    The deficit would not be so high if it were not for the unneeded/unsuccessful bailouts and that healthcare fiasco. If liberals get their way, this country will be as poor as Greece and in the same condition. There will be no reason/incentive for someone to want to work hard and succeed, as their success will be taken away and given to lazy people that do not want to work and only have their hand out.

    December 7, 2010 at 1:31 pm | Report abuse |
    • Joe Stalin

      Pray that it happens ~ worse than Greece
      Urban warfare in the streets of USA
      there is a reason to believe in god

      December 7, 2010 at 1:35 pm | Report abuse |
    • Jeff, an Independent

      We are already here. Look to California. They are in worse shape than Greece.

      December 7, 2010 at 1:41 pm | Report abuse |
  7. Kevin

    I hope cancer kills him.

    December 7, 2010 at 1:31 pm | Report abuse |
    • Fricsaid

      What a terrible thing to say of anyone. It's people like you that add to the problem and not the solution.

      December 7, 2010 at 1:36 pm | Report abuse |
  8. Minnesota Mike

    Annie,

    When numbers are the only thing that "count" (literally); how can you blame the repubs when they are in the minority in both the house and senate. Would SOMEONE please explain this to me, please.

    December 7, 2010 at 1:32 pm | Report abuse |
    • Samantha

      Minnesota Mike they have a few Buddies in the Democratic Party called the Blue Dog Democrats {Republicans in drag}.

      December 7, 2010 at 1:38 pm | Report abuse |
    • Dan N

      They are a minority, but dems still didn't have enough in the senate to prevent a fillibuster, so it didn't matter about the house and POTUS's alignment. Also, reps are united, but the dems aren't. It's not that complicated. Reps have terrible policy, but they know how to play the game. And please don't group the left, liberals, and dems together. It's a diverse group of people who fall into these categories which is why it's not the same united front as the reps. And Obama has always been centrist. He only seems left because he ran against Bush basically, who was ridiculously rep.

      December 7, 2010 at 2:59 pm | Report abuse |
  9. BCF

    People can't find work because blue-collar jobs AND white-collar jobs are being outsourced overseas. Accountants in the US can make over $100,000, while in other countries they can make $26,000. Now we are giving tax breaks to the CEOs and execs who benefit from making Americans jobless?!?!? We know that the "Bush Era Tax Breaks" have not created jobs in the past 10 years. End outsourcing and mega-conglomerations.

    December 7, 2010 at 1:34 pm | Report abuse |
  10. Samantha

    The People who make the least amount of money usually are the ones who work the hardest since most of their work is manual labor. For all the liar who say they make more money because they work hard stop lying. The average Millionaire either married into the money or inherited it (mostly the Republicans). Everyone work for their money Rich or Poor and everyone should pay their share to keep our Government running. The next time there's a natural disaster your going to want FEMA to come in and save the day, but you don't want to pay taxes.

    December 7, 2010 at 1:34 pm | Report abuse |
    • Joe Stalin

      Want to go to private chat?

      December 7, 2010 at 1:36 pm | Report abuse |
    • Opinions

      You are so totally off in your assumption. I am not one of the 'rich' but I work with them and the majority busted their rears and took a lot of risk to start and run companies. Mental stress is just as much if not more damaging to a person as physical stress, I know I've done both. The rich do pay their fair share, they also put the money they make back into the economy. We all need to start seeing each others part, but I know a lot of people who dont contribute anything to society just live off welfare and those are the people you should be angry at.

      December 7, 2010 at 1:40 pm | Report abuse |
    • Dan N

      I think Samantha and Opinion both have valid points. The thing people seem to dismiss though is that the rich worked hard (schooling, initial risk) to get where they are, but then in general have much less hard work to do again. Lower class people just keep working, day in and day out, and barely have enough breathing room to invest in things that could help them get to the next step. One example – I have friends who are happy that they got a better job, but then realize they are still broke because they have to buy new clothes for work, etc.
      Money also comes much easier to those who already have money. The taxes on the rich have to be higher because they have the advantage of money naturally flowing towards their position. Taxing the rich isn't "unfair punishment" – it's actually fair regulation of money flow. This way they have to keep working hard, rather than sitting back after they make their sum and watch it grow in investments.
      And if the cuts were to expire, I doubt you would see companies downsizing to make up for the personal loss. They've already slashed as much as they could to keep up in the last 2 years. I know the company I work for has.

      December 7, 2010 at 3:33 pm | Report abuse |
  11. MikeBell

    Is this a contrast between reality and ideological utopia? And is this an instance where a progressive faction's doctrine yielded to economic reality? Or is this just going to be spun as an action taken for the 'Greater Good'?

    December 7, 2010 at 1:35 pm | Report abuse |
  12. Susan

    I'm so mad at Obama. Bent over for the Republicans once again.

    December 7, 2010 at 1:35 pm | Report abuse |
    • Frisky

      The 'moderates' that voted in the mid term elections undermined Obama's power to have A N Y leverage in this situation. Consider this when you vote in 2012. The loudest voices won, and he has no choice but to compromise with the republicans who swore NOTHING would get done if this didn't happen.

      December 7, 2010 at 1:39 pm | Report abuse |
    • Samantha

      He didn't bend over to the Republicans the Liberals who didn't vote in November did. If he allow Bush tax cuts to expire in January with nothing in place it will be far worse than the compromise take the time to read what the alternative is. If he allows this thing to drag on to January when the Republicans take over the house and the new senate take over then nothing is going to be done. I repeat FOR ALL THE LIBERAL WHO DID NOT VOTE IN NOV THIS IS YOUR FAULT NOT THE PRESIDENT. I VOTED DID YOU?

      December 7, 2010 at 1:43 pm | Report abuse |
  13. PA Squid

    I'm sorry but the tax cuts and Military medical care and unemployment compensation and so on are NOT what is causing the deficit and pecking away at it by freezing federal pay (60 billion), making military pay for 20% of medical (12 billion), unenployment (25 billion) are feel good bandaids to the mindless that can't count to trillions.

    The numbers above equate to 97 billion. We gave 787 billlion out in STIMULUS money (most not spent yet) not counting bank bailouts, auto industry bailouts, failed mortgage purchases, etc. The ONLY way to fix our problem is to provide the means for economic growth in the private sector and STOP wantonly spending our money like it is his.

    Get a grip people. The amounts being discussed right now are so damn small it isn't worth fighting over. We need job growth to increase income which increases spending which increases taxes which increases revenue for all levels of government. And we need to STOP spending on worthless pork, earmarks, stimulus, and bailouts.

    If you work you live; if you sit back and do nothing you get exactly that, NOTHING!!!!

    December 7, 2010 at 1:35 pm | Report abuse |
    • Samantha

      Well stupid cutting taxes for the rich has proven that is does not stimulate the economy or create jobs. If you think it does your one of the ones who can't count to a trillion. 1. First the Republicans want to raise the retirement age. If that is done there will be less jobs for young people coming out of college, and the unemployed. The should be an incentive for people of a reasonable age to retire. First the job will be recycled. Second if they retire in decent health they can travel, shop, eat and other things that will provide jobs. Most of the people who retire later in life health will prevent them from doing anything but making doctor visits.

      December 7, 2010 at 1:50 pm | Report abuse |
  14. Bill

    Less coming in, more going out. Not good! We need to stop relying on Government to solve the economic woes. They run every program into the red, what makes you think this move would be any different. Solve the problem yourself, get a job. It may not be the one you like, or one you think is "beneath me", but if you think Big Bro is going to bring you prosperity... you're in for "a hell of a wait".

    December 7, 2010 at 1:35 pm | Report abuse |
    • BCF

      Big bro isn't suppose to give...but the gov is suppose to protect! protect the American People and our economic interests. globalization is not in America's best interest...it is in the best interest of business and exploitative imperialists.

      December 7, 2010 at 1:39 pm | Report abuse |
  15. Frisky

    Thank you Tea Party for being so loud and dumb that we have ended up here.

    December 7, 2010 at 1:35 pm | Report abuse |
    • Jeff, an Independent

      Tea Party wasn't responsible for a Democrat Presdent and Democrat Controlled Congress that added 3T to the debt in the span of four years, hasn't had a balanced budget, and passes every piece of crap legislation they get their hands on.

      December 7, 2010 at 1:39 pm | Report abuse |
    • Frisky

      Bush fiddled while Rome burned, and he took us to the brink of disaster. The Tea party screamed FISCAL RESPONSIBILITY and now they watch without a SOUND while the rich get their blackmail tax break extension. Hypocrites.

      December 7, 2010 at 1:41 pm | Report abuse |
    • YBM

      No, we ended up here because of unneeded/unsuccessful bailouts and a healthcare fiasco pushed by ultra liberals that finally po'ed normal americans enough they went out and let their dissatisfaction be known.

      December 7, 2010 at 2:08 pm | Report abuse |
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