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. phoenix

    can obama[chico he looks like a chico] be trusted?

    December 7, 2010 at 12:33 pm | Report abuse |
  2. johnnyb52

    It still blows my mind, when back during the '08 Presidential campaign we heard so much about who voted for the Bush tax cuts for the rich and no one should vote for that person, like the tax cuts were only for the rich, a flat out lie. Now, no one makes the distinction. Now its Bush tax cuts, the middle portion and the wealthy portion. Our current prez was one of those.

    December 7, 2010 at 12:33 pm | Report abuse |
  3. Marie M

    Stop complaining about the tax cuts.If you want to pay more taxes, do it! No one is making you claim every tax exemption at the end of the year. As for the rest of us, rich or not, these tax breaks fuel the economy. It is common sense.

    December 7, 2010 at 12:33 pm | Report abuse |
    • Nick

      Give me 1 example of how "Trickle Down" economics has benefited the economy. The last 8 years serve as great examples of how tax cuts can hurt.

      December 7, 2010 at 12:47 pm | Report abuse |
  4. Samantha

    For the ignorant people who think being confrontational is what we need right now you are brain dead. President Obama is going to have to work out a deal with the Republicans because Democrats did not do their job and vote on Nov 2, 2010. I see you forgot how our party sat back and let the Republicans take over the house and deplete the Senate so the democrats have left him no other option but to negotiate with the devil. Before you point your fingers at him remember he can only work with what the American people give him and in Nov his party our party gave him nothing. So if you didn't vote keep you opinions to yourself. Would you rather see millions of Unemployed Americans lose their benefits for your tax cuts. He is looking our for us and some of you are two stupid to see it.

    December 7, 2010 at 12:33 pm | Report abuse |
  5. Mike

    I don't get the left. They sweep this guy into power with an historic election then complain that he isn't liberal enough. Liberals are mad that he even talks to Republicans at all.
    Would you prefer he stands his ground and tries to push his agenda through with absolutely no bi-partisanship whatsoever? In that scenario absolutely nothing gets done. NOTHING.
    I didn't vote for the guy but he is doing what must be done. He is negotiating and compromising.
    Look the Republicans didn't get everything they wanted either. They had to compromise to get this done.
    Stop complaining and realize that sometimes getting some of what you want is better than getting absolutely nothing.

    December 7, 2010 at 12:34 pm | Report abuse |
  6. Diann

    Why can't they compromise, Like take away the general tax cut for the rich but then give them tax incentives for charitable donations that they make here in the USA. Charities who actually help our own citizens who are in need. Many of these organizations are having trouble helping people, food banks are drying up etc. We need the rich to donate and if a tax incentive would give them a boost to do that it could work.

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

    Why do we have people representing our interest that are only concerned with re-election (when they are elected) and anything promised during the campaigns (sales talk) seem to be forgotten? Why are the rich privileged (lesser criminal sentences, rub shoulders with the big politicians at $500 plate fundraisers, and etc…?) Why is it that the not-so-rich try to understand how to change things, but can’t quite seem to do enough to make a difference? How come corporations are afforded more rights than the citizens? How come the government hides information from us in the name of homeland security, but no proof of anyone dying as a result of it being leaked has been produced? How come I ask so many questions? Because I voted for change and it is not happening.

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

    Everyone wants to tax the rich. These people went to college, worked hard, and either started their own business or worked their way up the ladder. Now I am all for them paying their fair share, but people on this board would like to strip them of everything they worked hard to get so that they themselves can have all the wonderful social programs being talked about. What ever happened to personal responsibility? What ever happened to getting off your own backend and working yourself?

    December 7, 2010 at 12:37 pm | Report abuse |
    • just me

      people who work hard dont make over 250k they make less,the rich inherited there money – your delusional.

      December 7, 2010 at 12:41 pm | Report abuse |
    • Charlie

      Nobody is trying to raise the taxes on the rich. What their trying to do is make the rich pay their fair share. Ever wonder why the stock market is not hurting like the rest of the country's economy? Ever wonder why China and India's economy's are not suffering like ours. It's because of those tax cuts for the rich americans. Those tax cuts for the rich american are being spent in other parts of the world. Not here. You know why. Because the rich in this country do not care about this country. They just care about their wallet and bottom line. Yeppers, I would like to go to college but I don't have a trust fund to pay for an Ivey League education. Ever herd of the Skull and Bones society? Ever wonder why lower income students are not asked to join?

      December 7, 2010 at 1:18 pm | Report abuse |
  9. Philadelphia

    Its tragic that Obama doesn't have the ability to seek compromise. That all his smooth talking to the White House has landed us in some deep s***!
    why not compromise? Raise taxes a little maybe not where he wants them but some! Continue to fund social security, so that one day I (25 year old) will get my money back! And tell those who are so darn greedy to recycle, turn off their lights, walk a little more take their own cars instead of private jets and SAVE some of their money instead of throwing it out the window. How about green energy instead of foreign oil?
    What on earth is he doing in the white house!
    Hillary should have received the job. At least she has some balls.

    December 7, 2010 at 12:37 pm | Report abuse |
    • Mike

      They've tried to do these things. It's so bogus. They've tried to separate the bill but the republicans will not allow it.

      December 7, 2010 at 12:40 pm | Report abuse |
  10. Rich

    What does the tax deal mean for me you ask? NOT A FREAKING THING! I'M A 99ER THAT GOT SCREWED BY MY EMPLOYER AND NOW BY OBAMA!

    December 7, 2010 at 12:37 pm | Report abuse |
    • Matt

      But he wouldn't have to be compromising if he knew how to unite his own party. Now he's stuck with Republican majority in the House and a lot less Dems in the Senate.

      December 7, 2010 at 12:39 pm | Report abuse |
    • get a job

      hay 99er time to get a job dont you think

      December 7, 2010 at 2:12 pm | Report abuse |
  11. Concerned Taxpayer2011

    The republican threat to block all legislation and hold the American public hostage until they get what they want is the same logic used by a terrorist threatening an attack. This country does not negotiate with terrorists, so why are we caving to this Republican attack? Regardless of whether one agrees with the Republican tax demands or not, the kind of legislative war they are waging is not what American democracy is about. Compromise must go both ways.

    December 7, 2010 at 12:37 pm | Report abuse |
    • jkenney1973

      So you're comparing the Republicans to terrorists now? Besides to obvious logical fallacy, here's the problem with your argument. The people voted the Republicans into office, just like they voted Obama into office. In order to be a good President, you need to listen to the will of the people. That's a big part of where Bush messed up.

      December 7, 2010 at 12:47 pm | Report abuse |
  12. Lewy

    All Obama can do is read from the TelePrompter. Without it, he is nothing.

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

      I agree. The 2% tax holiday on social secuirty benefits the wealthy more than the middle class, because the wealthy would not be getting that money back anyway, and the middle class will ultimately be forced to pay for the social security obligation. Who was on Obama's negotiating team, anyway? Mr. Magoo?

      December 7, 2010 at 12:40 pm | Report abuse |

    I am a registered Republican, but CAN NOT believe the Republicans will play games with MY hard earned money just to make the Democrats "look bad". Come on people – YOU ARE PLAYING WITH REAL LIVES HEAR! Come together and pass these tax cuts for everyone – you can fight about it next year!!! It's the holidays – it's already tough for us – give us SOMETHING we can hold on to going into the new year!!! How about focusing on reforming the outragious state pension plans sucking our states and tax payers dry?!

    December 7, 2010 at 12:38 pm | Report abuse |
  14. Joe Hanson

    All the racist comments here... Sad.

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

    When Obama campaigned on CHANGE I did not know it was party affiliation he was planning to change.

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