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. just me

    hes basically saying put up or shut up – the repubs threw there tantrum , the prez responded. there move .

    December 7, 2010 at 12:29 pm | Report abuse |
  2. Olaf Big

    The biggest problem for democrats is that they have no backbone, and as James Carville correctly pointed out no balls. They meekly voted for Iraq war almost unanimously because they were afraid to lose seats. Lo and behold! Soon after that vote their suffered a crushing defeat in the elections. Nobody likes opportunism. Now, the democrats still have a majority in both houses and the President abandons his campaign promise and caves in on tax cuts without a fight. He will pay for this dearly in the next elections. He'd better remember that one and only reason he won the last election is that he was seen as anti-Bush. Well, that cloak has certainly worn thin in the last two years. I think, democrats should better start thinking about an alternative presidential candidate in 2012, one with balls even if they are covered by a skirt.

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

      Definitely. The better approach would have been to blame the tax-cut expiration and the Federal Unemployment Benefit expiration on the Republicans, then ihave the Senate introduce a tax refund bill to refund everyone 2.2% of their adjusted gross income up to a max of $5500 (accomplishes same thing a Bush Tax CUts). Then, if the next Congress continued to refuse to reinstate federal unemployment benefits, the Repubs could be blamed for that too.

      December 7, 2010 at 12:36 pm | Report abuse |
  3. 2heels53

    This will hurt us all. I am for bipartisanship but to give up the fight for middle class, this is a major campaign promise from Obama. It looks like he has no will to fight. This should have taken much more negotiations. It looks like he thinks this will be good for reelection in 2012 but who wants a leader who won't or can't lead. I voted for Obama and with this agreement he through out the last campaign promise made. I realize the republicans wanted the tax breaks for the rich, but he didn't fight near hard enough for our rights. My question is their anyone in Washington that will fight for the American people. I am saying legal Americans it is a time to take care of the ones who are here legally. When are our leaders going to make decisions that benefit us not the whole world that doesn't care about us.

    December 7, 2010 at 12:30 pm | Report abuse |
  4. Charlie

    I have been voting democratic since Jimmy Carter. Today I canceled my voter registration. It is obvious that the democrats are laying down for the the GOP. It is obvious that Corporate America is running the country and the survival of the middle class is in there sights. Now the public is hearing republican's spout noise about limiting voting to only people that own property. If this happens the average Joe in this country will have absolutly no say so in politics. With the govt bowing to the rich and this noise about limiting voting to property owners, well let's just say that the american people will not put up with it no matter how much money the republicans throw at it. What the republicans are going to end up with is a second civil war.

    December 7, 2010 at 12:30 pm | Report abuse |
    • dave

      ya–unions are running the country

      December 7, 2010 at 12:44 pm | Report abuse |
  5. Carl

    Obama is so convinced that the left will vote for him no matter what he does because a Republican would be even worse. He's wrong. I'd never vote for a Republican, at least as long as they stick to their backwards beliefs, but Obama is just a couple more moves like this away from getting me to vote 3rd party in 2012.

    December 7, 2010 at 12:30 pm | Report abuse |
    • Jim

      YAY ... PALIN 2012. You Betcha! >wink<

      December 7, 2010 at 12:35 pm | Report abuse |
  6. Obama310

    Blame the right people. Blame those who did not vote democrat or did not think it was crucial to vote. He needed those people who lost in the midterm elections to make the CHANGES.

    December 7, 2010 at 12:30 pm | Report abuse |
    • just me

      absolutely rite now we have to play the compromise game to get anything done – it worked for clinton and it will work again.

      December 7, 2010 at 12:34 pm | Report abuse |
  7. Schniggy VonFlugen

    I find it highly amusing as I watch politicians (Democrats and Republicans alike) flop about attempting to save their cushy, high-paying job wherein they do nothing but fleece the public. The people have made it clear: "You will bow to the will of the people or you will go home". Working for a living is something they will avert at all costs. Say anything....do anything that will keep me in this cushy job.
    Keep it up folks. Be aware of what you'd like to see. Vote out those that go in the opposite direction. It won't happen immediately but this is surely the path to a government that is about governing the people rather than about lining their own pockets.

    December 7, 2010 at 12:30 pm | Report abuse |
  8. charlie

    Obama is so weak hahaha he has not come thru on ANYTHING that he promised. All this talk of change and everything is exactly the same and it is because the idiot liberals elected a man who knows how to talk but in reality has no idea of how things work in government. The Obama experiment failed

    December 7, 2010 at 12:31 pm | Report abuse |
  9. NYC REPUB

    The left, (which i'm apart of) is talking stupidly.........If DEMS wanted to fight for ending the Bush era tax cuts, they should have did that back in April or May of this year......The WH signaled that they wanted this fight, but the DEMS ran chicken on this and other matters i.e health care reform, Wall Street reform and the like........All I have to say is the President is correct to make this deal.......If my taxes, or any working person(s) taxes went up in my first check in January, the President, and all of congress would have had hell to pay!!! I don't mind sacrificing my money for uncle sam, but there must be a grand plan for what the revenues would be for i.e deficit reduction, new infrastructure, more access to health care providers etc.....
    To fight and prove a point that makes sense (yes I agree that the rich should pay more taxes), should be done responsibly. The left wants to act self righteous, but if they would have looked at their first checks in January, and saw extra money missing ($25-$50 bucks or more, it makes a big difference to the working class), they would have still been irate at all parties and the Presidency.......We will make things right....Teire will be a more perfect time for this......
    OBAMA 2012!!!

    December 7, 2010 at 12:31 pm | Report abuse |
  10. Chas

    Obama is showing he has no balls or backbone.
    I will no longer support him, he has sold out America to the rich interests that are running this country into the ground.

    December 7, 2010 at 12:31 pm | Report abuse |
  11. jay

    This is what happens when the GOP gains power, the rich wins and the poor gets screwed, again.

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

    I hear Nancy Pelosi is on a suicide watch since she heard the news. She may try to take her life by swallowing her pearls. Party is over Nance!

    December 7, 2010 at 12:32 pm | Report abuse |
  13. Emily

    If CNN had posted the entire speech, one would clearly see that President Obama has tried to rollback tax cuts for the wealthiest Americans, but was unable to because of the Republican's refusal. As a compromise to insure that taxes don't go up for the middle class (as they are on schedule to do under Bush tax laws) he has made the difficult choice of allowing taxes to stay the same. I think it was an excellent feat under the extreme Republican resistance. I cant imagine trying to get ANYTHING progressive done with that sort of Republican pressure in the White House. So I say good job, President Obama.

    December 7, 2010 at 12:32 pm | Report abuse |
  14. mb2010a

    The American voting public is to blame for the current mess with the tax cuts to the uber rich. If they had not voted the
    Republicans back in control of the House, we would not have the current necessity to compromise with the Republicans.
    You reap what you sow... Obama is just trying to make do with the cards the American people gave him. After January
    when the House is back in Republican control, we will see a lot more compromising if anything is going to get done. Again,
    this is not Obama's fault.

    December 7, 2010 at 12:32 pm | Report abuse |
    • JohnP

      Uber rich? LOL. $250k for a family is not Uber rich! What are the Socialists smiking?

      December 7, 2010 at 12:34 pm | Report abuse |
    • Jim

      $1 million per year is pretty rich, and the Repubs wouldn't raise their taxes either. Yeah, socialists, right. More hyperbole.

      December 7, 2010 at 12:38 pm | Report abuse |
    • David

      Socialism??? Seriously??? WHERE???? You are regurgitating crap you know nothing about because someone else used the word. If we were socialist we would have a pot to p1$$ in!!!

      December 7, 2010 at 1:08 pm | Report abuse |
  15. JAB

    Where do the Republicans think keeping the tax rate for ALL will increase job growth. We've been under the Bush Tax Cut for some time now and have record number job loss. This will sound-whatever-but what about those of us who's children have grown and we no longer get the child tax credit? Make too much for the Earned Income Credit? Are self employed and have been for over 6 years and for the first time in '09 had to PAY IN for Federal? We as Americans HAVE TO stand up to these "politicians" who only care about their OWN bottom line, not ours! No name calling-it makes you look stupid :/

    December 7, 2010 at 12:32 pm | Report abuse |
    • johnnyb52

      We would be of a certainty, be in a another great depression if not for those Bush tax cuts. Do not laugh to hard. Those cuts maintained what economic stability we had, and are allowing for what growth we have now.

      December 7, 2010 at 12:36 pm | Report abuse |
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