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. Bob Camp

    The problem is that there is no definition of "rich". Some say that any family making over $100K is rich, others argue it's over $1 million. The people making $100K to $1 million love to vote and don't consider themselves to be rich. But the Democrats drew their "rich" line at $200K. I think if they had set the line to $1 million mark instead, Republicans would have a much harder time defending that. But by setting the bar so low, especially just after a major recession, the Democrats got themselves into trouble again.

    December 7, 2010 at 12:44 pm | Report abuse |
  2. Samantha

    JAB all of the people who think Bush tax cuts fuel the economy don't make enough money to see just how much they have hurt this country. Like you I make to much for the Earned Income credit, and since i'm divorced I don't qualify for the marriage credit. So i'm paying the same taxes as a single person with no children since Bush did away with the Head of Household credit. So we are the middle Americans who are not rich, but make two much to see any relief. The Republicans are doing what they do looking out for the Rich so all of the dummies who didn't vote in Nov or voted for the 'Republicans you see now they will let your family go hungry so that they can keep their tax cuts.
    @Marie if you think the Bush tax cuts fueled the American economy why in the 8 years Bush was in office we saw unemployment at the level of the great depression. Stop listen to the Republican and think for yourself for a min. We had a surplus after Clinton left office and in 8 years of Bush we were in a 1.2 trillion dollar deficit. What part of the Economy did the Bush Tax cuts fuel. I thought so.

    December 7, 2010 at 12:44 pm | Report abuse |
  3. NoTax

    I don't like poors, they are lazy for me

    December 7, 2010 at 12:44 pm | Report abuse |
  4. tontosh

    What a SPINELESS president Obama turned out to be. He will never get my vote again.

    December 7, 2010 at 12:45 pm | Report abuse |
  5. carlos

    the republiCONS will be laughing at the President for the next two years......NO TAX CUTS FOR THE RICH and NO COMPROMISE.......to hell with the corrupt CONS.

    December 7, 2010 at 12:45 pm | Report abuse |
  6. Bill, PA

    Democrats are all for being fair, unless your are rich, religious or anything that has to do with conservative. If you are any of these, then you are fair game to discriminate against. Oh yeah, the tax holday for social security is a setup. Why would he want to take money out of social security? He is setting us up for a raise in the social security tax, when a commission says it will go default if taxes are not raised. This is his social security fix.

    December 7, 2010 at 12:45 pm | Report abuse |
  7. na na

    Everyone knows the Republicans belong to the Rich and every Republican Politician is a rich as well, so they are just looking out for themselves. Must be nice to get get another tax break so that they can stash it away in some swiss account and take off whenever they want!! Why the American People voted for them again is beyond me. When we find an exodus out of the US due to poor living conditions, you'll know who to why.

    December 7, 2010 at 12:45 pm | Report abuse |
  8. Bill

    LET THEM EXPIRE!!! I am unemployed and could definitely use the extended benefits, but the country can't afford this superfluous and unnecessary tax-break for the rich. Helping the top 1% DOES NOT help the small-biz owner or the middle-class. It means the top 1% will have more money to invest in the market which only benefits them.

    December 7, 2010 at 12:45 pm | Report abuse |
    • Bill

      Ever get a job from a poor man? Me niether.

      December 7, 2010 at 1:06 pm | Report abuse |
  9. NatiGirl101

    What Obama should have done is executive order the unemployment benefits and pony up some of the unused stimulus to pay for them. That removes the bargaining chip from the table. Then put the votes for the middle class tax continuation on the table. Once the votes were blocked for those making a million or more, it would have shown in no uncertain terms the agenda of his enemies. The American public, who voted these people into office, had spoken clearly. Polls showed the vast majority wanted the unemployment extended and NO tax breaks continued for the upper 2%. His speech could then have spoken directly to the people, saying HE was doing what they wanted and the REPUBLICANS were only concerned with their rich friends. The job creation levels of the last 10 years would have born his actions out. If the tax extension expired then he could have blamed the other side for obstinance and going against what the PEOPLE wanted. And his veto pen would have been used in January to prevent the extension for the wealthy 2%, so their house majority would not get their way then, either.
    In a game of chicken, you can't blink. You have to use the advantages you have to shut down the opposition. And in this instance he had the majority of Americans in his corner. He blew this one. One executive order and a strong stand would have given him a great platform for 2012, now, this man will not be reelected.
    If he had manned up, it would have been political suicide for his enemies, and he would have looked like a LEADER!

    December 7, 2010 at 12:46 pm | Report abuse |
  10. Nancy

    It is never too late for someone (Mr Obama) to make things right. He is doing just that. It is better for the country and the economy.

    December 7, 2010 at 12:46 pm | Report abuse |
  11. Anon

    I don't know why the Federal government just doesn't sieze all assets and then disburse them back equally to everyone. We could all get $80-100k/y. That should be more than enough for everyone.

    December 7, 2010 at 12:47 pm | Report abuse |
    • Nancy

      If every dime were divided equally among every citizen, it would not be long before those who were wealthy to begin with, would be the wealthy again, and the poor would be poor again. It is called, hard work. Some people think they deserve everything without ever having to sacrifice in order to earn what they receive.

      December 7, 2010 at 12:53 pm | Report abuse |
    • Bell3000

      Wow – what an amazing concept. In your world, I am sure that all the "rich" never worked for their money and just inherited it from daddy, right? And that you are absolutely financially sound, level-headed, never spend more than you earn, right? Why should someone get something that they have not worked for?

      December 7, 2010 at 1:53 pm | Report abuse |
  12. Lionheart

    Obama, no guts at all. What an disappointment.

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

    Dump this deal Mr. President. Let the cuts expire. We did just fine during the Clinton years without them and I see no benefit flowing from them for the country. Show us the balls you had during the HCR battle.

    December 7, 2010 at 12:48 pm | Report abuse |
  14. Buckwheat19

    Perhaps we should rename 1600 Pennsylvania Avenue the "waffle" house.

    December 7, 2010 at 12:48 pm | Report abuse |
  15. Stryker

    I don't see a point in criticizing Obama at this point. What we Democrats need to do is start organizing now to prevent any chance, however remote, that he might be re-elected. Let's look for the right candidate, and start promoting that person now. Obama has given us one important advantage, it will now be much more difficult for a potential candidate to fool us. It's time the Democrats had their own Tea Party.

    December 7, 2010 at 12:48 pm | Report abuse |
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