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. slam dunk

    There are a lot of points so missed by everyone. 10 yrs ago when the orignal BUSH TAX cuts many on both side were against them because of the deficit. Then what happened we got into to 2 wars with out paying for them. Guess what the budget got out of control surplus to deficit with republicans and the wheel. Now those that want to keep these tax cuts in place will continue to watch the Dollar decrease in value and china completely own us. Clinton increase taxes 3% worked Gingrich against himself and balanced the budget while bombing the hell out of saddam and keep our enemeis at bay. BUSH came into office and guess what put us in hell. Obama got a bag of crap Dow at 6,000 (now at 11,000 LMOAT 12,000), many jobs were lost and kept declining while BUSH was in office obama took that, and guess what we as a people are the least informed public that can be swayed by simple politics. these tax cuts are hurting this country, politics are hurting this country, a lot of the jobs lost are not coming back. The private sector jobs are up. Get and education so you can get them. We all got to sacrafice i would rather do it through a tax and demand that the deficit be handled. A things will come after that.

    December 7, 2010 at 3:48 pm | Report abuse |
  2. Brenda

    I'm tired of paying for all the lazy people that decide to set home and or go to college on the tax payer and milk the systems. I see it every day. This is getting old. I believe that the people who pay taxes should be allowed to vote on how their money is being spent. Welfare and SSI needs to be revamped. These 2 programs are being abused. The government wants to save money, then really buget the country. Don't make the working class pay for everything. This will hurt the country more. The less money the working person has in their pocket, the less they will spend and put back into the country. There should be an equal income tax for everyone, and I mean everyone. We all pay the same. Also the unemployment, I know people that are milking this program. They wouldn't take jobs, because they know that the govenment will keep them. There are jobs out there, maybe not what you want to do the rest of your life. But for the time being you could until something better comes along.

    December 7, 2010 at 3:50 pm | Report abuse |
    • dale

      Brenda you are one smart lady.
      I would like someone to define "working-class"; so if I work 2 full time jobs and make $200K a year as a single man, would I still be considered part of the "working-class"?

      December 7, 2010 at 3:56 pm | Report abuse |
    • Scott

      You're an idiot

      December 7, 2010 at 4:04 pm | Report abuse |
    • Nhan

      Try living on unemployment. It's not the life of luxury you think it is. I, my wife, and my sister have all been on unemployment at some point in our lives. We all have college degrees (mine from MIT) but were laid off for economic reasons, not because we weren't doing our jobs. Unemployment was well under half the salary we were making while working, but it barely kept us afloat while we looked for jobs. I would have loved to have a new job the minute I was laid off, but it's not easy to find a job in an economic downturn. Unemployment is a very useful thing and is not a welfare system. We pay our taxes so a safety net like that is in place. Do people abuse it? Sure they do, but it's better to fix what's wrong with the system than to punish the honest people who need and deserve it. I'm tired of people calling those on unemployment lazy. If you lose your job through no fault of your own, you'll feel that way, too. Lazy has nothing to do with it.

      December 7, 2010 at 5:54 pm | Report abuse |
  3. dale

    To everyone who support giving the Federal Government more of your or perhaps your bosses money, you don't have to wait on Obama, just send your check or money order to:

    U.S. Department of Treasury
    3700 East-West Hwy, RM 622D
    Hyattsville, MD 20782

    December 7, 2010 at 3:50 pm | Report abuse |
  4. Dave

    You're all missing the point. The problem isn't taxes or how much everyone should be taxed. The problem is Washington spending, spending, spending, and many in the public wanting everything under the sun for free. Everyone needs to pay their dues, but that doesn't mean raping the so called rich in order to fund freebies for the poor. Sadly, Obama has taken the class warfare, wealth vilification game to the extreme. Leadership is needed in Washington and responsibility is needed across America. We have neither and THAT is why we are in this boat. Party matters not.

    December 7, 2010 at 3:54 pm | Report abuse |
  5. Bill

    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.

    I don't get it, but I do. The rich helping the rich.

    If Social Security is in trouble why are they lowering the percentage the employee and the employer pay down by 2% for each. Using the 100K mark which is close to the Cap will give both the employee and the employer each $2000 tax reduction, but will have an adverse impact on the employees' social security benefit when they actually retire. Obviously this will put social security in a worse position for retirees. I don't see states like Louisiana lowering their income tax which is ridiculously high (5% for the same bracket) for what the citizens receive.

    December 7, 2010 at 3:57 pm | Report abuse |
  6. James

    It's all just for posturing and good-will, politics if you will. The bottom line is a certain amount of funds are needed to run the country. Regardless of where the funds will be raised (taxes) they will be raised. It may be called payroll tax, it may be sales tax, it may be gas tax, it may be an internet tax.

    December 7, 2010 at 4:03 pm | Report abuse |
  7. Mike Dodd

    Since when did the lack of a "Tax Increase", become a "Tax Cut". Folks, this does not cost the government anything. It's not the governments money that they paid out (a cost). It our money that we get to keep. This is good for everyone. If you want to bring down the debt, shrink the government, balance the budget.

    December 7, 2010 at 4:06 pm | Report abuse |
  8. Tyredofit

    If you want to balance the budget stop handing out "refunds" to people who don't pay into the tax system in the first place. I can see offering credits to get a low-earning person down to not having to pay in, but they shouldn't be getting "refunds" that exceed the amount they actually paid in taxes. Someone who's living off SSDI and the like shouldn't be getting $8000 and $12000 "refunds" when they never paid that much in to begin with.

    December 7, 2010 at 4:09 pm | Report abuse |
  9. Tom Repasky

    Taxes going up would not be bad. Since I can not find a job it has no impact on me. Food and Shelter are most important to me. Unless there are enough jobs, this is all just a play involving the rich and wealthy and how they control the Congress.
    Giving anything to the rich is not a mistake it is an abuse of the system that claims to care about everyone. It's been more than 2 years now, and I still can not find a job. Either over qualified or most probably too old. Certainly not rich.

    December 7, 2010 at 4:17 pm | Report abuse |
  10. Tim

    The only reason I would defend not increasing taxes for the richest is that they are not the one's using the government programs the taxes pay for.

    Make those who partake in the programs pay for them. You want to be on welfare? There is going to be an increased tax on what money you do make. These programs are not free and I don't feel like it is fair to charge us for stuff we don't use.

    I make a modest 60k/year to support my stay at home wife and 5 kids. We do not use any government assistance programs. I should only be required to pay taxes towards the programs that I participate in.

    The rich have a right to argue when you want to make them pay for healthcare for illegal immigrants, welfare, food stamps, unemployment.

    December 7, 2010 at 4:21 pm | Report abuse |
    • Tom Repasky

      Hi Tim,

      I agree with you a bit. However, since I do not go to Federal Parks, should I not have to pay to help maintain them? Since I do not have a real representative in Congress, so I have to pay for their salaries? Yes I voted.

      It seems if we all picked and chose what we want to 'pay' for, there would be very little left to share. Welath has an obligation, just like the poor to support the country, even if we do not use all its services.

      December 7, 2010 at 4:31 pm | Report abuse |
    • Tim

      Tom,
      I agree with your response. What I propose is a standard tax rate for the things that apply to everyone: military, police, federal salaries, federal building upkeep, etc. Then if you want to participate in something extra, say government run healthcare. You then are going to have a 1.5% adder to your taxable wages for the program your are a part of.

      December 7, 2010 at 4:35 pm | Report abuse |
    • jb1960

      The programs are not the problem. It is the way they are run. We need oversight and better was to use them. All the government does is throw money at problems rather than finding out how to actually make it work.

      December 7, 2010 at 4:45 pm | Report abuse |
  11. Paul

    What’s good about a tax break when everything is going up such as gas, utilities, and food.

    December 7, 2010 at 4:30 pm | Report abuse |
    • Tim

      Irrelevant.

      December 7, 2010 at 4:32 pm | Report abuse |
  12. Evan

    Palin, the Tea Party, and Republicans must be burdened with worry about those who matter most and will suffer most if this tax deal passes, namely, those earning over $250,000 per year! They're barely squeaking by, with those earning over $1 million a year sick to their stomachs about how they're going to make ends meet. How could President Obama be so heartless as to focus his concerns on those making under $250,000 per year?

    Don't say the Republicans didn’t warn you! By electing Palin to President in 2012, you can fix all that, saving those earning over $250,000 from such indignities as selling vacation homes across the globe and getting rid of second Rolls Royce’s just to get by! It's an appalling situation under Obama, where the focus needs to shift to earners over $1 million, let alone those poor souls earning over $250,000.

    December 7, 2010 at 4:33 pm | Report abuse |
  13. high school economics student

    Bill Gates and Warren Buffet can and will talk about how they support the tax increase for a major reason that's hiding in plain sight from everybody. The tax increase is an income tax increase, right? Guess what? They don't have an income! You heard it here first! Bill Gates and Warren Buffet make exactly $0.00 a year that is filed under income. And yet they're still incredibly wealthy. How? Holdings and stock in their respective companies, as well as money currently in the bank. So they pay exactly $0 income tax. Yes, they do pay capital gains tax, but that's not the issue on the table here. So of course, it's easy for them to promote the income tax increase – it doesn't affect them!

    December 7, 2010 at 4:39 pm | Report abuse |
  14. king kinder

    raising taxes on the rich will hardly solve the problem, but it's a good idea. imagine what the rich thought back in the old days (Reagan) when they were paying over 40%. Hell at one time they were paying 90%. Do you think they complained? nope. cutting spending won't solve the problem either, because we're gonna be paying more on interest of our debt than a lot of other programs. wiki the budget and look for yourself. descretionary spending, which is what they could actually cut, is a very small percentage of the Budget. Ending both wars would save a crapton of money, for sure, one of the reasons why Obama's budgets look so much bigger is because he includes the war spending in them instead of leaving them out like Bush did.
    and for the whole "class war" argument, wake up, seriously, this country is not a democracy, only 40% of the population even bothered to vote inthe last election. we are country run by Rich People for Rich People. Washington is full of millionaires looking to line their own pockets. Most millionaires don't even pay payroll taxes, the majority of their wealth comes from investments, so raising taxes on them won't make that big of a deal to them.

    December 7, 2010 at 4:40 pm | Report abuse |
  15. Brian L

    Tim-

    Really? A la carte government? First, you underestimate how much of the government's services you use. Unless you hole up in a cave and eat bugs you are benefitting from government spending. Secondly, imposing a tax on those receiving welfare is like getting blood from a stone. Why do you think it is they are eligible for welfare in the first place? It isn't exactly a windfall, but just enough to provide meager subsistence. Thirdly, if given a choice, how many of us would pay for federal prisons? Certainly not the incarcerated. How about the mentally retarded and handicapped? If only the people that benefited from these programs paid for them, then they would be bankrupt within a year because they couldn't afford their share. I've never received unemployment, and I've worked every day of my life since I was 16. I am in the top 2% of income earners and I save 20% of what I earn. I also realize that I am privileged and in the minority. I pay more in taxes than you earn, and I don't complain about it. I am glad that social programs like welfare and unemployment exist. They are very important safety nets for American families earning the median wage who live more or less month to month and can't ride out a storm for very long.

    December 7, 2010 at 4:42 pm | Report abuse |
    • Tim

      Brian,
      Thanks for your response. We all see the picture differently. I too have worked every day of my life since I graduated from high school. Nine years of that was serving in the military. I pay taxes and understand where a lot of it goes. I also see people abuse these programs everyday. I think the idea of the programs are a good idea, but if you don't hold the users of the programs accountable then the abuse will continue.

      Congradulations on your success. If you have a job opening give me a call. I will be happy to work for you.

      December 7, 2010 at 4:47 pm | Report abuse |
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