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. Marat

    "We want our revolution. . . NOW!!!!"

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

    For all of you ignorant/misinformed bloggers; the Democrats still hold the majority, at least until January 2011. You misinformed ignoramuses should not accept everything President NObama says at face value.

    Be informed before you start espousing idiotic comments. President NObama just does not want to admit that even some Democrats favored keeping the so called Bush tax cuts. President NObama was able to fool a bunch of you prior to the 2008 election and apparently he's still able to successfully fool some of you again.

    Oh well...

    December 7, 2010 at 1:00 pm | Report abuse |
  3. shelly

    SHAME on anyone/everyone for being in favor of a Tax CUT for those who make ONE MILLION or more! Their taxes should actually be increasesd for goodness sakes!!!! One other thing, our President wasn't in favor of this, but in fact kept ahold of the idea of Tax Cuts of us poor folks, but in doing so had to EXTEND the tax cuts for the WEALTHY. I'm so frustrated hearing the complaints about our President, quit BLAMING and start DOING something about it yourselves,,,write letters, make phone calls!!!

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

    Obama is selling out the very people who helped put him in office. He's guaranteeing that he'll be a one term president. Hopefully he'll choose not to run for re-election. At least that way we may have a choice of something less bitter.

    December 7, 2010 at 1:00 pm | Report abuse |
  5. VPF

    The last time I sent in a comment it never appeared- here goes again....
    What has happened to Obama is he is being blackmailed. Republicans have stated publicly that they want to bring the governement down. That is sedition in my book. They, with the full support and pay offs from corporate America, have decided that the coup d' etat they started in 2000 must continue until what is left of democracy in Ameirca withers and dies. It is so sad that we let this happen.

    December 7, 2010 at 1:00 pm | Report abuse |
  6. Jamie

    The rich get richer ... and the rest of us don't. Simple. Pretty soon the Democrats will be on leashes, walked around by their Republican masters. And they'll have the unemployed scooping up their droppings.

    December 7, 2010 at 1:01 pm | Report abuse |
  7. JC-VA

    So why did he change his mind..? Mmmhhhh.. that goes to say what a leader we have....

    December 7, 2010 at 1:01 pm | Report abuse |
  8. George

    HOW YOUR REPUBLICAN VOTE JUST GAVE YOUR MONEY TO CORPORATE AMERICA AND THEIR TOP LEVEL EXECUTIVES. Congrats, I hope your job is still there in a few months and not in India, China or Mexico where they can earn higher profits for themselves while paying some poor kid $3000 a year in India, $500 a month in Mexico and $3 a day in China. We are an amazing country.

    December 7, 2010 at 1:02 pm | Report abuse |
  9. Aspen35064

    I really wish the President and all Democrats signed a sheet of paper saying: "We have attempted to make a compromise and extend tax cuts to PERSONAL INCOME that EXCEEDS $500k. In attempt to show that we are willing to COMPROMISE the amount of PERSONAL INCOME was doubled in an attempt to reach some common ground with Republicans. Republicans have REFUSED to agree with these terms OR reach a FEASIBLE agreement/compromise. As a result of the actions or lack of actions by our counterparts, the tax cuts will expire for ALL working Americans on December 31."

    December 7, 2010 at 1:03 pm | Report abuse |
    • KOD

      And I guess you're unemployed and/or not paying taxes at all to make such an idiotic suggestion !!! I don't make anywhere near the $200K income, but I don't want to give up my tax breaks. Read the posts – people who earn under $50K per year pay less than 3% total taxes – those earning over $200K pay a much larger percentage. So before you complain about the rich getting richer (by working, mind you !!!) get off your rear and start working. Then you'll understand that those tax breaks are to help the less-than-wealthy too, and it makes a much bigger difference to us!

      December 7, 2010 at 1:32 pm | Report abuse |
    • Aspen35064

      @KOD I am employed and I make less that 200k. I totally understand that everyone currently gets tax breaks. I also understand that tax rev is needed. Maybe you I didn't dumb down my post enough for you and for that I apologize. Playing chicken is when both parties wait for the other to change their particular course. So by calling the GOP bluff, Dems would force the Republicans to reach a better compromise or completely change their course. And if no course of action is taken, the GOP's move would backfire. They would never let that happen because if the blame is where it should be (on the GOP) voters would respond.

      December 7, 2010 at 3:06 pm | Report abuse |
  10. Jack

    Try voting Independent party at the polls. There is more than just Black and White, Demo and Repub. Don't let the media brainwash you, don't be forced into voting for the lesser of two evils. There are more than two parties in the elections people!

    December 7, 2010 at 1:03 pm | Report abuse |
  11. phoenix

    help out us 99 weekers chico i mean mr. president baby needs some high heels

    December 7, 2010 at 1:03 pm | Report abuse |
  12. PJM

    It is amazing how people throw around the term "fair share" like that is a defined number. What do you think the number should be? How about if we all go to Warren Buffet and Bill Gate's house and take all thier money? This Robin Hood mentality of take from the rich and give to the poor is anti-American. Having a big heart and helping those less fortunate through charitable works IS American. Now I agree we all should pay taxes but, the inefficiency of government is what gets so many people fired up about this tax issue and what started the whole tea party movement.

    December 7, 2010 at 1:04 pm | Report abuse |
  13. Mikedog1969

    Wow, 2% less in payroll withholding. Keep in mind that means less corporations have to pay as well, and fewer pay raises. A corporation isn't going to give a pay raise as big when the employee is already getting a 2% break. More profits for corporations, thus better profits means better stock prices, and thus higher dividends for the supper rich. They make out BIG time with this deal. OH, also keep in mind the republicans will go for this because it also means less money going into social security, so within a couple years the projections for the fund will go into the tank further and that will be an excuse for republicans to say "SEE, government can't do anything right, time to privatize your social security funds." and then Wall Street makes out Huge. It's a + + + for the super rich.

    December 7, 2010 at 1:05 pm | Report abuse |
  14. tet1953

    The older I get, the less it makes sense. No money for extending unemployment? No problem, keep all the tax cuts and make the debt bigger, and we'll go along. Problem with Social Security coming in the future? No problem, we'll just start collecting less, it'll be fine. Am I missing something?

    December 7, 2010 at 1:05 pm | Report abuse |
  15. Common Sense

    The man just lost 60+ Congressional seats and almost countless state level posts to the GOP.

    Can you blame him for making a quick, frantic run for the "political middle"?

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