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. John

    Regulate the industry so bubbles don't grow and then pop. Simple as that. Better than taxing people into poverty. We will always need an active citizenry to police the industry to keep it in line because if you ignore it the industry will focus obsessively on profit and eventually will take on too much and put everyone at risk.

    December 7, 2010 at 12:54 pm | Report abuse |
  2. Aspen35064

    This was a game of chicken and the Republicans won. I commend President Obama for wanting to find a common ground and be bipartisan, but at some point you HAVE to take off the gloves. The President and the rest of the Democrats are being bullied at every turn and majority of the American citizens are being affected. I love the President's ideals and commend him on being a great person, but we really need someone to meet fire with fire.

    I am tired of Republicans yelling their smear campaigns while Democrats seemingly whisper to the American public the evils of the other party. I understand being mature and taking the high road (which it appears the Democrats are trying), but as long as we have Conservatives slinging mud every chance they get, unchecked and without a strong response, we will continue to have misguided voters.

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

      Obama should not be looking for compromise because he is forced to....should have done it from the start

      December 7, 2010 at 1:01 pm | Report abuse |
    • knez011

      Since you are such a "guided" voter, feel free to vote the "mudslingers" out of power in 2012. It's too bad that the misguided voters like the rest of us outnumber you greatly....

      December 7, 2010 at 1:05 pm | Report abuse |
    • Aspen35064

      @ Steve I think he has been looking for compromise all along. As a matter of fact, I think that he has given too much and has not received enough in return

      @knez011 I will cast my vote in 2012 and I could not agree with you more that the misguided voted so highly. The reason that I say misguided is because there are so many people that are convinced to vote outside of their best interest because they buy into Conservative media personalities that claim that the President is an atheist, the anti-christ, not an American citizen etc. After the misguided buy in, any Conservative idea must be right because it opposes what the evil Democrats want. If you voted Republican because you make over $200,00 or because you agree that Conservatives have a good handle on the economy or foreign affairs etc., this does not apply to you. You're certainly not "misguided" because you made the best decision for you. If you voted Republican because you think President Obama is a socialist, elitist, etc. (especially if you don't know what those words mean) this post is for you.

      December 7, 2010 at 1:26 pm | Report abuse |
  3. tax payer

    I hate it that the Democrats are not strong. They are too wimpy to cave in into the Republicans.

    The Dems should send out for two votes.
    1. Extend unemployment benefit – The Republicans will vote "No" and let them explain to the unemployed people.
    2. Extend the tax cut only for middle class who make 250K or less. Let the Republican vote "No" again.

    Why do people don't get unemployment and tax breaks? Because the Republicans vote No.

    Easy!!!!

    I won't vote for anymore democrats.

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

      Democrats did vote in November so now they have to compromise with the Republicans. Don't blame the president blame the trifling democrats who had other things to do then vote in Nov. The Republicans voted and now they are holding our behinds captive because our party didn't. If you go back and do you history they did the same thing to Clinton in 1994. Either our party is going stand behind the people we elect and vote in every election or we going to continue to be the whining joke that the Republicans can count on to not vote. I voted did you?

      December 7, 2010 at 1:00 pm | Report abuse |
  4. LikesPayingLowerTaxes

    I guess all of the people on here like paying taxes. Or maybe the reason for the one sided nature of these posts is that people commenting are not currently paying taxes.

    I am not extremly wealthy (<50k/yr household income), but I don't want to pay higher taxes next year, and I think that most of america feels the same way. Politically it would be foolish for any party to propose increasing taxes if they want to get re-elected. The spin used to avoid this unpopular truth is that "only very few, super rich poeple will have there taxes raised". Unfortunatly, many people fall for this missleading idea. The extremely wealthy (1% of the population) are already paying more than 99% of the taxes at the present rates. It doesn't seem fair to me that they need to pay even more to help out with the shared defict problem.

    I agree that the deficit one of the greatest issues plaguing this country, and what is best for the country is both tax increase and drastic spending cuts. The problem is that most poeple in the country are unwilling to make personal sacrifice for the greater good. If the social dynamic of this country was more like it was during world war II perhaps a leadr could be frank with teh public and say something akin to "this will be hard, but it's the right thing to do".

    December 7, 2010 at 12:55 pm | Report abuse |
  5. SunnyC

    The deal will present a new set of problems. Republicans will take credit for stopping tax hikes, but pin responsibility for the much larger deficits on Obama. They'll continue to filibuster everything in Washington, including the buffet in the Senate dining room. That's just how they roll

    December 7, 2010 at 12:56 pm | Report abuse |
    • Keish

      thats funny and true!

      December 7, 2010 at 2:33 pm | Report abuse |
  6. krg

    I for one am glad to see a compromise. I certainly don't make near 200,000 a year, but know that a lot of people's bosses do and it makes sense not to raise their taxes for now. I had seen Obama as a "my way or the highway" sort of guy, and I am pleased to see he is trying to meet the Republicans in the middle. Thank you:)

    December 7, 2010 at 12:56 pm | Report abuse |
  7. Frito

    I like money

    December 7, 2010 at 12:56 pm | Report abuse |
  8. Bill

    I won't be voting for Obama in 2012 regardless of who the Republican nominee is. In 2008 I voted for a fighter and a leader. I got neither. Caved in on the tax issue. And with regard to DADT, not much of a fighter or leader there either.

    December 7, 2010 at 12:56 pm | Report abuse |
    • Samantha

      Obama didn't cave his party did by not voting in November. If we had stood behind him and voted to keep the Republicans from taking the House and depleting the Senate he would not have to make compromises. Don't blame Washington blame the Americans who sat on their behinds and did not vote. So vote for who you like but at the end of the day the president can only work with who we vote in and since we caved on him the only people we can blame is the Liberals who don't vote in mid term elections. Wake up and smell the coffee they did the same thing to Clinton in 1994. SO FOR ALL LIBERALS WHO DID NOT VOTE IN NOV YOU HAVE NOTHING TO SAY !!!!!!!

      December 7, 2010 at 1:07 pm | Report abuse |
    • Keish

      you are so right Samantha!

      December 7, 2010 at 2:35 pm | Report abuse |
  9. Bearced

    To all members of the House of Represetatives, Obama doesn't have the spine to do what is right so it is up to you! Play the same game as the replublicans in the Senate are playing. Vote no on the "compromise"!!!!!!

    December 7, 2010 at 12:56 pm | Report abuse |
    • Samantha

      To all of the Liberal Americans who had something better to do then vote in Nov. Man up and stand up for the President you elected it's not President Obama who is spineless it's the so called Liberals who don't vote in Mid term elections. i would like to repeat myself. FOR ALL THE LIBERALS WHO DID NOT VOTE IN NOV DON'T SAY ANYTHING BECAUSE YOUR THE REASON THE REPUBLICANS HAVE THE HOUSE AND DEPLETED THE SENATE. DON'T BLAME THE PRESIDENT BLAME YOURSELF. I'm glad my President is not so heartless that he would allow innocent Americans to go hungry. For all the people who think he caved or spineless I am willing to bet you have a job and not depending on Unemployment to feed your family. I have a job and I have compassion it's not always about me it's about the American people, and if the President had to compromise to keep 1 family from going homeless then I stand by my President.

      December 7, 2010 at 1:15 pm | Report abuse |
  10. Seraphimo

    Damned if he does and damned if he does not!!! Not sure why anyone wants to run for the Presidency.....if he did not do this deal, then unemployment benefits would run out for millions and guess what, he would be criticized for that!! There is nothing 'nice' about politics....it is always dirty.

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

    I hate people who whine about this crap. I think unemployment should be cut. I am sick of paying for welfare and for people to sit on there a$$. I don't think the rich should see the tax cut. But everyone else should see the cuts as Obama wanted. Maybe the Fed should start forcing people on welfare and unemployment to do community service cleaning park toilets and picking up road kill on the interstate. Oh maybe we should impose a Fat tax as well.

    December 7, 2010 at 12:57 pm | Report abuse |
    • Keish

      I would really like to see you if you lost your job today. Wonder if your tone would change about unemployment and how sick you will be of it then when its your only source of income. The majority of these people are not just sitting on their behinds, they are trying to find jobs, there are none. If you are so sick and tired of it then offer a solution and stop being sick and tired!

      December 7, 2010 at 2:38 pm | Report abuse |
  12. dave

    we should learn from what was done in Europe on unemployment. they extended it up to 5 years and the number of people on unemployment stayed the same. The minute they took it away the amount on unemployment started to go down. So it goes, take away the free hand out & they get the message, go get a job.

    December 7, 2010 at 12:58 pm | Report abuse |
  13. TB

    Woe is me the poor person. When listen up poor person. This is the land of opportunity! Rather you like it or not the wealthy create the jobs for the most part in our country. You want the government to take care of you. Grow up get a job and take care of yourself. And yes hope the wealthy throws you some scraps as you say!

    December 7, 2010 at 12:58 pm | Report abuse |
  14. George

    Okay the whole tax break on payroll thing. Thats nonsense. You already know all that is going to happen is the company is going to take the difference. It will not go to the American people at all. Just like none of the $41million dollars in third quarter profits went to pay rate hikes or hiring employees. Thus unemployment grew. Is anyone really paying attention as to what is happening? The republican party allowed big corporate America to hold middle and lower America hostage with threats against hiring. When in fact they had the opportunity to prove they would hire when they reported $41million in 3rd quarter profits. Afterwards the unemployment numbers rose from 9.6% to 9.8%. This is a prime example of how spreading false information highjacks an entire country. This proves that we are not a society of information and research but a true socialist society based on social standards and not educational sense. Otherwise the Bush era tax cuts would have expired for the weealthy and the middle class and lower class would get larger tax breaks. There will come a time when corporate America falls and the people begin to run thier country again. Its to bad that time will only come do to a catastrophic event.

    December 7, 2010 at 12:59 pm | Report abuse |
    • Joe

      You totally do not understand what the payroll tax is. Look at your pay stub, if you have one and if you understand it, you will see there is a FICA tax OASDI that you pay on your gross income. That tax is 6.2% (up to $106,800). Your company also pays 6.2%...so 12.4% total. This tax funds social security. What will happen in 2011 is the tax YOU pay will go down to 4.2% while your employer's tax will remain at 6.2%. So, yes, you will see the tax break (more income) in your paycheck. Your employer cannot keep this from you. Your pay rate does not change so it has nothing to do with that.

      December 7, 2010 at 1:25 pm | Report abuse |
  15. gardsman

    We must forgive the republicans for what they are doing. They are obviously severly brain damaged. Maybe it is a gene defect at birth. How else can you explain these morons voting for a party that is going to try to screw over the entire country, including themselves!. The rich should pay more taxes just like Warren Buffet and other millionaires agreed. Also just because the rich can afford health care does not mean the middle or lower class should be deprived.Obama is doing an outstanding job for the two years in office ,considering how George W. destroyed the United States for 8 years!!!

    December 7, 2010 at 12:59 pm | Report abuse |
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