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. estar

    Lots of good comments. Everyone has good points. The problem is what is the right solution? Obama will be made out to be wrong no matter what he does. I do believe he is trying to do the right thing and I think that it is the ridiculous political games that are getting in the way of resolution. Repubilicans vs. Democrats; Right vs. Left....who cares.....come together and do what needs to be done. The strong has always helped the weak and if we want our country to survive and maintain it's strength as a nation, then those 'rich' people who have the financial capacity to pay more in taxes to make up for those who can't pay as much, it's just a necessary step. I am not 'rich' but I am in one of the highest tax brackets and I basically only see about 2/3rds of my earnings after taxes (if that). Is it fair....probably not....but the sad truth is that there is no other solution that is going to make every single person happy. It seems that the only thing that would make everyone happy is if no one had to pay taxes and then expect the government would just come up with money out of thin air to provide all the programs that we the people ask for....those people are clearly not living in reality.

    December 7, 2010 at 2:38 pm | Report abuse |
  2. IBONIT

    Pragmatism is WIMPY!!!

    December 7, 2010 at 2:42 pm | Report abuse |
  3. Dragon

    This is HOSTAGE Taking by the Republicans...

    December 7, 2010 at 2:42 pm | Report abuse |
  4. Lola

    I sure like Obama's tax cuts a whole lot better than what the the Republicans are going to want. They are only concerned with getting the very wealthy a big tax break. Then us less than wealthy citizens will pay the larger amount of taxes like we always have in the past when Republicans are in office. If I was extremly wealthy I wouldn't like Obama's tax, but I'm not. So get ready middle income families, if Obama's plan isn't voted in, we will be the ones paying the most on our country's budgets and debts and we will also help the wealthy to stay wealthy.

    December 7, 2010 at 2:44 pm | Report abuse |
  5. Confused

    I want to know why so many Americans feel the wealthy OWE them anything? They have jobs – they work – they just were lucky enough to get a better paying job than me. That doesn't mean they OWE me part of their money. I just don't get it.

    December 7, 2010 at 2:46 pm | Report abuse |
  6. Joe the Plumber

    Remember me ?

    December 7, 2010 at 2:46 pm | Report abuse |
  7. john townsend

    people need money to spend money which inturn makes jobs. most americans dont make enough to barely live let alone go out and buy things so the economy can turn around. Gas is $3.09 a gallon where i live any extra money i have goes there. point being the economy will never turn around when every dollar you own is either taxed or giving to big oil. doesnt really pay people to work in this country i am only 25 but have been working since i was 18 and i know people on welfare who hook the system anyway they can and live better than i do. TALK ABOUT THE AMERICAN DREAM AHAHAHHAHAAH.

    December 7, 2010 at 2:47 pm | Report abuse |
  8. Lola

    Face the facts folks....There IS a class system....always has been, always will be.

    December 7, 2010 at 2:48 pm | Report abuse |
  9. Aeromechanic.

    Here is the deal according to another CNN headline: Tax breaks for the wealthy will cost the U.S. $383 billion while the middle class share is $40 billion. Thats right people, we are going to give the people who don't need a tax break the biggest one of them all and the rest of us get an extra $20 per week on our checks. Woo hoo!!

    December 7, 2010 at 2:49 pm | Report abuse |
  10. just to clear something up.

    Correct me if I'm wrong, but I'm under the impression that your tax bracket is the rate you pay on the last dollar you earn. Is this true, because people are seem to be under the impression that their tax bracket is charged against their entire income, when according to my understanding, the first dollar you earn is at the lowest bracket, and it goes up from there.

    Am I right?

    December 7, 2010 at 2:50 pm | Report abuse |
  11. Dragon

    American Companies and banks are over $2 Trillion Dollars capitilized. Check out the Stock Market profits and Bank strength. Do you home work.

    What you need to put in perspective here is that American business and Republicans are willing to take the American people hostage and not hire so as to continue to see the ecomomy falter for political gain. This is a Quit Pro Quo between the republicans and American busineses and Banks

    American business are hiring heavily abroad for lower pay. The republicans agree with this strategy and want to break the back of the unions. That is why they did not agree with GM baliout while they agree and vote to approve Banks bailout and TARP

    These people are willing watch the middle class suffer while their families are dying in Afghanistan & Iraq to provide the liberty they so enjoy.

    This is a Sham...

    December 7, 2010 at 2:53 pm | Report abuse |
  12. Andrew

    So, rich people have higher mortgages and car payments so now we are supposed to feel sorry for them and they need the tax break?

    Really?

    And to those who think everyone has the same opportunity in this country as everyone else, you are living in a dream world. Statistically that belief is proven incorrect, time and again.

    December 7, 2010 at 2:53 pm | Report abuse |
  13. Kassora

    I am also sick of the divisiveness... and class warfare... however, the politicians (on both sides) have created this divide, so it DOES exist now. Ronald Reagan said that for capitalism to work, money MUST trickle down. Right now, money only trickles into the top 3% of top earning employers. This is one reason the middle class is disapearing... AND without the middle class everyone suffers... No one is left to buy the rich/wealthy's products and since the Middle Class is POOR now, the socialist programs will sky rocket, which means the rich will be paying for it all.

    Right now large companies (for the most part) are not tricking their wealth. The Middle Class cannot spend. Since these large corporations need to show profit for their investors, they RAISE their rates hoping to compesate some money that has been lost from the Middle Class not being able to spend. This of course makes us all spend LESS, then they raise their rates... etc, etc and the cycle continues.

    Thus, my point...

    Large Corporations (for the most part) care more about showing large profits for their investors than allowing money to TRICKLE... If we want to fix this we need to give tax breaks to corporations who choose to do the right thing with their wealth and stop catoring to some Rich hot shot investor who should have NO say in the right of a Middle Class American to EAT, or have a roof over their head. Nice Tax breaks should be given to business ... but ONLY when a company creates a job... They either need to allow their profits trickle, or the Gov will be forced to take it to pass it out and create more socialist programs ... (I prefer the former). This is not rocket science really...

    It really ticks be off to know that these tax breaks will put us in debt for 10 TRILLION dollars in 10 years yet no one really wants to address the problem. Um hello... During the Bush Tax Cuts companies did not create jobs – they gave the profits to their investors, so WHY would they start now??!! Our leaders are basically saying, "Hmmm this didn't work, but lets just keep doing it and get further into debt.... " Why would they care, they are probably the very investors who are getting this kick back... money trickles just FINE to them.

    December 7, 2010 at 2:55 pm | Report abuse |
  14. Scott

    Dear knuckle dragging mouth breathers (you know who you are):
    Do you have any idea on what % of the american population don't have higher education as an option regardless of how "hard" they work. There are a lot more factors than "hard work" that get people elevated to these higher tax brackets. I worked hard yes, but I see people work hard all over who just don't have the opportunities that I had. To accuse low earners of being lazy welfare recipients is absolutely DISGUSTING! I am in the top 2% of earners and I am ashamed as to how many americans look upon the lower earners. Get a clue.

    December 7, 2010 at 2:58 pm | Report abuse |
    • dale

      Scott, I don't agree with you, because more than anything, the decisions we make today will affect us later in life. How many people died today trying to get to our Country just to have a chance? Did you know that 70% of millionaires in America are first generation millionaires!!!! You need to get a clue!!

      December 7, 2010 at 3:12 pm | Report abuse |
  15. dale

    Anyone spending there unemployment check on Christmas gifts should be kicked-out of the County!!! If you are that much of a pathetic loser that you need an unemployment check to feed and cloth your sorry butt for 3 years, I'm offering to pay to deport up to 5 people. I don't care what Country you go to, but please get the hell out of mine!!!

    December 7, 2010 at 3:01 pm | Report abuse |
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19