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. scott54

    unbelievable. Listening to liberals is amazing – you would think the evil Republicans have been in control of everything. All of you realize that the democrats were in complete control for awhile and could pass anything they wanted. They choose to focus on health care instead of focusing on changing the current tax structure or extending unemployment benefits. And what about the democrats leaders like Tom Daschle, John Kerry, Charles Rangel, and Tim Geithner who "forget" to pay taxes or make "mistakes" filling out the forms? At the same time they are making these "honest mistakes" they want others to pay more.

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

    99 weeks of unemployment is beyond absurd! What it is really, is incentive for someone not too work. I realize it sucks for someone who is in an idustry that no longer need, or need less of the kind of position/skills they were doing. That does suck. But it is time to move on, even if you have to start a new career and make less money. It is not right to have the rest of the country pay for 99 weeks for someone to sit there saying "there's no jobs for my kind of skills" If you have to wait tables, work 3 jobs, go back to school or whatever, that is what you have to do. Sitting around watching TV all day feeling "cheated" that the marketplace evolved is not helping anyone.

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

      Relax~ the gov is assuring us that extending the unemployment benefits will stimulate the economy... let's quit our jobs tomorrow, it'll help the economy!

      December 7, 2010 at 12:43 pm | Report abuse |
    • Notarichboy

      I've been laid off for over a year. My field is construction and when I was working I was making $1100.00 a week. So first off drawing my big whopping $275 a week doesn't give me much incentive to sit on the couch and watch tv. Second I have tried to get a job including lower paying jobs, such as at many fast food places, many of which don't even hand out applications and tell you they are not hiring. So when millions of people are having a hard time finding one job how do you suggest they find three?

      December 7, 2010 at 12:49 pm | Report abuse |
    • get a job

      RIGHT ON LEE !!!!!!

      December 7, 2010 at 2:18 pm | Report abuse |
  3. rdc

    things are not always how we hoped or thought they would be....

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

      or how we were told they would be when campaigning.

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

    Had Obama not steamrolled his Health Care bill through congress and maybe worked better with Republicans instead of shoving it down their collective throats for the last 2 years he may have gotten a better compromise. This is what happens when you push your own agenda so hard against the will of the people and now the people decide to fight back.

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

    So instead of 1 program we can’t pay for, the tax extension or the unemployment extension, we are opting for 2 while at the same time screaming about the ballooning deficit. Brilliant leadership!!! So now that everyone gets there way it is time to start blaming either side of the aisle for the fiscal mess we keep kicking to the next generations. Leadership and governing is not giving everyone everything they want. It’s making hard decisions for the greater good. Even if those decisions are at the expense of a few points in the polls.

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

    to those who oppose the extension of current tax rate:
    do you all trust our gov to use the increased revevue wisely if they do revoke the bush tax cut?
    or is it just our hope that the deficit will go down if we raise the tax?
    Just from the track record of last 10 years, I'm reluctant to trust the gov in fiscal responsibility with our money.

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

    To all of those complaining about what President Obama did, first question did you vote in the last elections,did you put the Republicans in power if so stop whining. They said the people had spoken when the republicans regained the house so as the saying goes be careful what you ask for. There are hundreds of people who would have lost their unemployment benfits if this was not done, families would have been worst than they are now with a little coming in to help mke ends meet.

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

    The rich get richer, the poor get poorer. That is the way of the Republican Party.
    But I am not surprised.....the rich bought this election to ensure that this would happen.
    Obama did the right thing by compromising. He had no other choice.

    December 7, 2010 at 12:41 pm | Report abuse |
  9. Notarichboy

    Just further proves what a incompetent leader Obama is. He doesn't know how to take control of anything or stand up for what he believes in. If he caves this easily with Republicans just think how easily he would cave against a foreign country threating us. This is the leadership you get when you elect someone with no experience leading anything. He promised "Change", he just didn't say the change would be being a President with no backbone.

    December 7, 2010 at 12:41 pm | Report abuse |
  10. Alina77

    Idiot. That's not why I was standing in the freaking long line to vote for you. You will devastate our future, because of 2 million unemployed that actually will never remember what you did for them and will vote you out in 2012. Tick- tuck

    December 7, 2010 at 12:41 pm | Report abuse |
  11. Bevans

    For all of you out there that think that extending the tax cuts is bad and that it will hurt the economy, here are two thoughts for you. Why should the top pay for the bottom when all you are really doing is taking money from one party and giving it to another party to spend. And the last thought is that you can always pay more in taxes if you want to, it is an option on every tax form...so when you say you will give up your tax cut for better education, follow up on that promise and pay what you would have paid if the tax cut expired...if all of the progressive left do just that, then there will be more money for your leaders to spend how they see fit...so check that box, stop using deductions and pay what you think is fair...I am sure that your words are just as empty as Obama's.

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

      The top is not paying for the bottom the top is paying what they owe. Why should the middle pay for the bottom and the top? If you want to stop deductions then that should start at the top they take far more deductions than the Average American can afford. Real talk everyone should pay what they owe even the rich. The Republicans are th de rich and they will allow innocent families to go hungry to hold on to their money. Most of them have more money than they would spend in three life times, but they are so greedy all they see is more. There are large amounts of Rich Liberal who have no problem paying what they owe, it the conservative hypocrites who love America as long as they don't have to give up their money that are the problem. They are the reason 8 years we saw a 1.2 trillion dollar deficit and stole this country blind. For the people who can't see it your pitiful.

      December 7, 2010 at 12:54 pm | Report abuse |
    • Nancy

      Amen!

      December 7, 2010 at 12:57 pm | Report abuse |
  12. Mike

    Let them all expire. Screw it. Unlike rich people only worried about themselves, I'm willing to sacrifice for the future of this nation.

    December 7, 2010 at 12:42 pm | Report abuse |
  13. sonny chapman

    You've got to fight a war with the army you have, not with the army that you wish you had. Now Rummy could have waited another 6 plus months to get that army. Saddam wasn't getting stronger.

    December 7, 2010 at 12:42 pm | Report abuse |
  14. Marvin Tillman

    Its a shame that the President had to settle to this. The Republicans all they care about is their rich buddies. Give my buddies a tax break or we will block everyone from getting a break

    December 7, 2010 at 12:42 pm | Report abuse |
  15. Joe

    Honestly, this is what you all get when you vote for someone because you "don't want the other guy to win". Live with your choices... if you don't like the person you vote for, but you like the opponent less... why are you even bothering to vote? Please, hold yourselves accountable for your voting power. Its an incredible thing to have that ability. Don't waste it.

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