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. Steven

    Why is the story "he changed his tune?". This is what compromise is. Give and take. Let it be known: Obama is compromising with Republicans.

    December 7, 2010 at 12:25 pm | Report abuse |
    • Bertina

      Exactly, compromise is NOT pretty and the republicans did NOT want unemployment extensions.

      December 7, 2010 at 12:42 pm | Report abuse |
    • Aspen35064

      It's only compromise when you give and get. In this case, it was Republicans saying "I AM GOING TO GET THIS" and Democrats saying "Well I will I give it to you but can I please have that?"

      December 7, 2010 at 12:44 pm | Report abuse |
    • what

      that is not a compromise. thats bending over.

      December 7, 2010 at 1:07 pm | Report abuse |
  2. Jim

    Politics is about compromise. The republicans in the senate have the power to hold hostage the jobless benefits for millions. Blaming them doesn't put food on the table for poor kids. They go hungry, the wealthy still get richer, and you'd be crying about the loss of unemployment bennies. We celebrate elctoral apathy every year in this country with voter turnout in the 60% range when it is really good... 60% is crazy high for us. That's like saying getting asn "F" is a terrific grade. We reap what we sow.

    December 7, 2010 at 12:25 pm | Report abuse |
  3. Dirk the Daring

    Is that the middle finger of the rich on display in the picture of the $100 bill?

    December 7, 2010 at 12:25 pm | Report abuse |
  4. Jennifer

    The problem is that we are broke and no one wants to admit it. The tea party was so, so vocal on what they didn't get from the Democratic Congress. They are adament that they want a decrease in the national debt. But don't tell them that their roads aren't going to be repaved after the winter storm. Don't tell them that they aren't going to get their Social Security check with a cost of living increase, don't tell them that they might have to pay more taxes. Don't tell them that they government is in the recession with us also. People in this country need to wake up and realize that this is reality. If you want a decrease in the national debt, then everyone has to pay to bring it down. I don't remember anyone complaining in 2000 that their tax level was so high that they might not hire more workers or they might lose thier homes. But it seems today that people can't live without the false security of "tax cuts" that we will have to eventually pay for anyway...WITH INTEREST!!!! IDIOTS IS WHAT THEY ARE!!!!

    December 7, 2010 at 12:25 pm | Report abuse |
    • 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 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 1:27 pm | Report abuse |
  5. Tortuga

    It looks like the GOP is calling the tune and Barry is dancing to it.
    Things will get interesting beginning in January!

    December 7, 2010 at 12:26 pm | Report abuse |
  6. Republican

    And what are YOU ALL going to do about it? Nothing. That's right.

    December 7, 2010 at 12:27 pm | Report abuse |
    • Amber

      Yes, you're right. And my a$$ is sore

      December 7, 2010 at 12:28 pm | Report abuse |
  7. Lord Krishna

    what is the point of voting for the democrats if the republican party does what they want to do anyway? The republican party got it wanted, tax for the rich so they can be richer and the rest, well they can go to hell as they don't give as much money to the GOP.

    December 7, 2010 at 12:27 pm | Report abuse |
  8. KJM1968

    Sorry folks, but times are tough and LeBron James needs his $667,000 tax break.

    December 7, 2010 at 12:27 pm | Report abuse |
  9. LeeVA

    I wonder they asked China's permission.

    December 7, 2010 at 12:27 pm | Report abuse |
  10. Amber

    There is exactly zero rational reason for Obama to do this. He alienates the very people who loved him. He gives two years of concessions in exchange for a few months of unemployment benefits, when in two years he probably won't have a job. And doing something this unpopular with his previously supportive liberals will make his defeat more likely in two years. And now everyone is steamed that the deficit is being further bloated so that pretty soon our children will be owned by the Chinese. So, why did he do it, you say? Do you really think he cared that much about the 9% unemployed? Nope.

    I am no conspiracy theorist, but it looks to me like Obama got himself a call on that "special phone" with a gravelly voice telling him, "Make this deal".

    Anyone have even ONE other reason that makes sense?

    December 7, 2010 at 12:27 pm | Report abuse |
    • Jim

      Amber, Santa Clause is not real. Politics is the art of compromise. That 9% unemployed, the START treaty, and keeping the government functioning really are important. He wanted to extend the cuts for 250K and below anyway. To do that, that minority forced him to comptromise. In addition, he got the unemployment benefits and other wheels in motion. If his base abandons him, they will Sarah Palin in 2012. She and Beck and Limbaugh won't make the country better or safer. Don't forget to support your local democrat next year.

      December 7, 2010 at 12:33 pm | Report abuse |
  11. pflatman

    Good gawd. Let them expire FOR EVERYONE! Obviously, I agree that the wealthiest elitists (who essentially pay our politicians to squeak out corporatist BS to the mindless masses) should have theirs rolled back. This won't happen with the Republican obstructionists doing the corporate bidding, however.

    And now our government is impossibly mired in this BS, so let them all expire!

    December 7, 2010 at 12:28 pm | Report abuse |
  12. Jim

    How many of you, who are complainig here, went to your democratic candidate's office and offered to work the phone bank, build signs, give rides to voters, etc.? how many were fired up about the election... not many... far easier to whine on the blogs then get out in the real world and do something.

    December 7, 2010 at 12:28 pm | Report abuse |
  13. guest

    It is called compromising, somothing that the bush bullies knew nothing about

    December 7, 2010 at 12:28 pm | Report abuse |
  14. LeeVA

    I wonder if they asked China for permission.

    December 7, 2010 at 12:29 pm | Report abuse |
  15. philthetruth

    hee, hee, hee, hee, hee, hee, hee, hee. hoax and chains, man, hoax and chains. you cnn'ers will believe anything, try the truth for a change...

    December 7, 2010 at 12:29 pm | Report abuse |
    • Chas

      I would surely go to some neo-right wing news group to get the truth.
      That's the big issue here, lies and deception.
      The Republicans want to maintain a cheap labor force so why not let them support the country. Why should the rich pay taxes, it's their money. Everyone is a capitalist bigot and nobody is carrying the tourch of patriotism and freedom.
      I'm sick of the whole lot of you.

      December 7, 2010 at 12:39 pm | Report abuse |
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