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. Dont TreadOnMe

    Where is the compromise? What was gained by agreeing on what republicans want and not the majority? The middle class will again bear the burden of mistakes made by CEOs and high income earners. He will be held responsible for pushing this through not republicans. Keeping in mind that he will also freeze wages for the middle income wage earners in the federal government.

    Im sorry but I cannot see this as progress for the president, but more as a setback. CEOs and high income earners will benefit from this more than anyone, this includes all our politicians on the hill

    December 7, 2010 at 1:37 pm | Report abuse |
  2. Theodora

    Our President had no choice! The "Rich" do not deserve a Tax break; their greed has ruined this country. They disgust me. I am surprised that Obama got what he did for the Middle working Class people of this country. Those Republicans could care less about working class people and I am an Independent. I voted for Bush, this is not the same Republican Party of the eighties. I have a suggestion why don't we cut their salaries in half, may be this will help our deficit and our economy.

    December 7, 2010 at 1:38 pm | Report abuse |
    • Joe Stalin

      Pretty name ~ wanna go to private chat?

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

      It is moderately funny tha tyou say greed like it is a bad word. Are you seriously saying the middle class got where they are because they DIDN'T want to make money. I assume you have turned down raises, bonuses etc because you are NOT greedy?

      December 7, 2010 at 2:00 pm | Report abuse |
    • Dan N

      Just because they are accusing the rich of doing something doesn't imply that other groups aren't. Don't make assumptions please. One of the reasons there's so much gridlock is because because people don't understand how to convey ideas logically and others jump from one side of an argument to the exact opposite, rather than considering all the fun stuff in the middle.
      Greed is something only the rich can really afford to do. Every one isn't being greedy as much as trying to make life less crappy. The rich are the ones with power who can actually affect change
      Each class channels it's desires in different ways.
      At a poor level, it's really crime. At a middle class level, it's consumerism. At a wealthy level, it's comfortable living and vacations. At the super-rich level, it's called greed, and it's destroying our country.
      Like always, It sucks when taken to either extreme, and we should all work to meet in the middle.

      December 7, 2010 at 6:03 pm | Report abuse |
  3. jimbob

    Looks like the GOP is at it again. protect the rich to the detriment of the middle class. They just never learn.

    December 7, 2010 at 1:38 pm | Report abuse |
    • 1234

      ...and how is this "...to the detriment of the middle class"? The middle class is still getting their tax break.

      December 7, 2010 at 4:01 pm | Report abuse |
  4. Fricsaid

    There is one word that sums up the condition of this country today.....greed.

    December 7, 2010 at 1:39 pm | Report abuse |
  5. rational

    @ errin in dc – thanks for a normal post and I totally agree. It has always been about the compromise in getting anything done in DC, doesn't matter who is in office repubs or dems. There are so many misfacts from both sides on in this post that it is almost unbearable to read. You have to sort through the lies, mis-facts and name calling to get to a readable sentence. There should be a rule, if you are just going to lie, misquote and call people names, don't post ...save your vomit for your friends who all have the same opinions.

    December 7, 2010 at 1:39 pm | Report abuse |
  6. curiousme

    obomber is the ugliest case of uncle tom.

    December 7, 2010 at 1:39 pm | Report abuse |
  7. NYC Kristen

    This is so messed up. Obama is proving to be no better than Bush. No wait...at least Bush had a back bone and was able to push through his agenda, no matter how evil it was. Obama has SUCH great intentions, and it's such a let down to see him compromise his stance time and time again. GROW A PAIR, MR. PRESIDENT!! SHEESH! You know what the Republicans are gonna do? They will find a way to blame Obama when our debt sky rockets, even though it's their pushing for more pampering of this country's richest. "Trickle Down Economics" has led to almost 10% unemployment and a stalled economy. The rich are stockpiling their millions while the rest of us starve.

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

      The debt has 'skyrocketed' because your boy and his ultra liberal cronies pushed for unneeded/unsuccessful stimulus and a fiasco of a healthcare bill with no way to pay for them. You liberal coolaide drinkers need to do a little thinking for yourselves instead of standing around with your hands out. Liberals are the worst of the "elitists." Their plan is to keep the most people possible with their hands out and dependent on them, so they can stay in power. The elitist belief is the average american is not smart enough to know what is good for them and the government has to take care of them and tell them everything to do.

      December 7, 2010 at 2:20 pm | Report abuse |
    • NYC Kristen

      'Scuse me, YBM but I actually work for a living. I have my own health insurance, pay ALL my own bills. I have my hand out for no one. The BILLIONAIRES and big corporations have their hands out when they don't even need the help! They hide their money in other countries, and outsource away our jobs. Then they expect tax breaks? Wall Street dudes bringing home record bonuses during the RECESSION? WHO has their hand out??? Those greedy B*stards can never have enough! And I don't want to hear about the "Kool Aid" when you losers worship some hick from Alaska who likes to shoot herself some wildlife and make up blatant lies that you all lap up. Look at some of the other first-world countries and the services their gov't. provide their people. Or are you one of those American's who has no interest in learning about anything outside of your own backyard?

      December 7, 2010 at 3:39 pm | Report abuse |
  8. Joe Stalin

    What everyone should do is write in vote for "Mickey Mouse" on every ballot at every local, state and federal level in all future elections.

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

      I like it. 🙂

      December 7, 2010 at 1:43 pm | Report abuse |
  9. Steve

    Taxes are a need for any country that will drive on. This has been a issue since old times, people complained then and they will complain now. However a simple fix to this whole issue is a flat tax.

    5-15% tax rate across the board.

    Why should a person you consider lazy simply because they don't make over 200k a year pay more or less in taxes? You forget America, Joe the plumber is needed to make crap flow in this country. However a CEO making over $1 million is not.

    Did you ever think that someone could work a job for less money, for the simple fact that they love their job?

    December 7, 2010 at 1:42 pm | Report abuse |
  10. Publius 13

    @Anothermuse. You are not too bright. The tax rates do not apply to the money that the small businessman uses to buy a drill bit or to pay a worker. Don't you understand basic income taxes? The tax rates don't apply to gross income or even to adjusted gross income, which is the money used by small business to pay worker salaries and for drill bits. That money is unaffected by tax rates. Tax rates apply to TAXABLE income–that which is left over AFTER the workers have been paid and the drill bits purchased. The entire argument about small business creating or not creating jobs based on the tax rates paid by the business owners was a red herring injected into the debate by a Republican plant during the election–you may remember him as "Joe the Plumber." The MSM is too uneducated to understand the complete non-applicability of tax rates to hiring and purchasing decisions of small businesses.

    December 7, 2010 at 1:42 pm | Report abuse |
  11. Frustrated American

    Oh My how convenient for Obama.
    What OTHER event happens in 2012? AN election maybe? Cut a deal now to save his hide and then campaign on something else for the election.
    It has become perfectly clear to me that our current President is in NO WAY a representative of the average American worker. He is also certainly not a representative of "CHANGE" from our state as a Union. He is a politician. He is He is average at best and all indications currently point toward a regression in or state as a Union before we can get him out of office in 2012.
    I wish that there were some venue available to the average person that would allow the utter disgust to be vented and even EXACTED upon ALL politicians. I cannot stand them. They are the modern day equivalent of a shyster, crook, attorney, thug or just plain common thief of the public trust. It will take a horrible event, I fear for the American population to rise up and take control of our Nation's course again. Our government as it is today, is not "of the people, for the people", it is of the politicians for the politicians, their investments, great healthcare plans and pensions all PAID FOR on the backs of Average Americans that cannot afford to retire!"
    I think that about sums my opinion up.

    December 7, 2010 at 1:43 pm | Report abuse |
    • Samantha

      If you frustrated blame yourself because if your not a part of the solution your a part of the problem. President Obama is not compromising because he wants to but because he has to because he knows that after the Republicans take the house Senate in January Millions of Americans will lose their unemployment benefits and with job creation struggling to grow there will be more people homeless, hungry, and crime will also rise because at the end of the day people are going to feed their families. The Liberal decided to stay home and not vote in Nov so now they will pay. SO IF YOU DID NOT VOTE IN NOV STOP WHINING BECAUSE THIS IS YOUR FAULT.

      December 7, 2010 at 1:58 pm | Report abuse |
    • Dan N

      Though i don't share your disgust for Obama, i agree there should be a forum for this. I had an idea that would push all of this polling nonsense aside.
      Have a government website that each citizen could setup an account with (call in, give SS# or something). Then a copy of issues like this, or just questions could be posted, and people could respond with their votes. You'd see a direct popular voting sample on the issue at hand. Politicians wouldn't be able to make up anything or refer to conflicting BS polls.
      People could also actually vote. At least for the presidential and mid-terms. Like, come on people, we all have things to do but get out there. I'm always surprised by how many non-voters there are, yet they still think they have a right to complain about anything.

      December 7, 2010 at 6:15 pm | Report abuse |
  12. Kimo

    Specious argument number 1: People who make over $250K/year work hard to get that money. As if people who make under $250K a year don't. Some of them work two jobs. Watch the cable show called Dirty Jobs. Those people by your argument should all be millionaires. Specious argument number 2: It's not the government's money, it's your money. Like you are surprised every time you get your paycheck to find taxes have been taken out? You negotiate your salary based on what you will have after taxes. You knew you were going to have to pay them when you took the job. If you want a raise, ask for a raise. Don't hope to get it by getting the government to lower your taxes. Specious argument 3: You can lower everyone's taxes and still balance the budget. Can't happen unless you want to cut social security, defense spending, medicare and medicaide but everyone goes nuts if anyone even suggests cutting any of these things. Americans want their cake and eat it too.

    December 7, 2010 at 1:43 pm | Report abuse |
    • Joe Stalin

      Kimo Ć’ucks barnyard animals every day!!!

      December 7, 2010 at 1:46 pm | Report abuse |
    • Not a housewife

      Anybody ever watch "The Real Housewives of _____ (Beverly Hills, New Jersey, Atlanta, etc., etc.)"? I watched it last night. I saw a bunch of quibbling, bored, over-Botaxed women being served tea by servants in their insane villas. Now, I recognize that reality TV is not really a reflection of reality, but I lived in LA for a very long time, and I can assure you that a level of unreasonable wealth is held by a very small minority of people in this country, who live among the poor with very little concern for their well being. Are we really so concerned about the tax burden on these people? And more importantly, do you honestly think that easing the burden on them is going to magically create more jobs, or even help the economy? As if they people are going to be the ones to go out and use their extra dollars to buy American cars, support local growers, or stop exploiting the employees they already have. Give me a break.

      December 7, 2010 at 1:57 pm | Report abuse |
  13. conoclast

    Obama is acting like a statesman; he's saying damn-the-reelection-torpedoes, the American worker needs this help. Going one step further, I for one won't be surprised if Obama commits another statesmanlike deed and refuses to seek a second term. Tragically, the weakness in the American Democratic Experiment has been exposed and cynically exploited by the republicans: we simply will not follow a minority president, especially one with a funny name.

    December 7, 2010 at 1:45 pm | Report abuse |
    • 1234

      What a crock !!! You've obviously been drinking the Kool-Aid too. Obama isn't doing this or anything else for the good of the American people !!! #1 being Health care reform which was opposed by the majority of Americans – who is that for? Oh right, the millions of illegal aliens that he won't allow to be evicted from the country (including his own aunt, who ever so surprisingly, was granted asylum after Obama was elected). His health care reform is hurting millions of middle class AMERICANS whose companies are discontinuing health care as a perk due to the new rules. Yes, I understand that many lower class Americans can't afford health insurance; so offer an affordable plan for legal AMERICANS, but don't ruin everyone else's health care !!!
      And of course, we've all been waiting for the race card to be used in this discussion... even when the issue has nothing to do with race – just common sense.

      December 7, 2010 at 4:19 pm | Report abuse |
  14. N. Hardin

    Sadly Mr. Obama has proven himself to be a completely useless, gutless incompetent. He makes the Bushes look competent. I can't see how I could vote for this wimp again, FISA, rendition, healthcare, support or lack thereof of Federal employees, Wall street 'reform', Gitmo, the BS wars, Bush tax cuts, – he's shown no courage at all. He was obviously able to impress his Harvard professors with his case study analysis and his ability to speak the Engish language, something that apparently Harvard was will to let slide with GW, but real world courage is beyond his ability...

    December 7, 2010 at 1:47 pm | Report abuse |
  15. chris

    As much as I hate to say it, I have to give Obama credit here for getting SOMETHING done. So he compromised? So what? Good for him. Would it have been better to just dig-in in a stand-off and have nothing happen?

    The Republicans are drunk over their mid-term win but they will learn the hard way that you don't poke a quiet hornet's nest.

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