What does tax deal mean to you?
The plan extends tax cuts, including the estate tax and the child tax credit. It also cuts payroll taxes. The unemployed and businesses would benefit, too.
President Barack Obama and Congress reached a tentative deal Monday on a plan to keep the tax cuts enacted by former president George W. Bush in effect for another two years. The proposal also would preserve extended unemployment benefits and make some additional tax changes.
The details are still being negotiated, but Martin Vaughan of The Wall Street Journal provided this explanation of what's under discussion:
- The core of the proposal is a two-year, across-the-board extension of tax cuts enacted under former President George W. Bush. Mr. Obama said in his remarks Monday evening that he didn't favor extending tax cuts for top earners, but compromised to keep tax breaks for the middle class.
- A 2% rollback of individuals' payroll taxes that are used to fund Social Security. The White House said the cost of this one-year measure is $120 billion and that it wouldn't affect Social Security's solvency.
- The pact also includes a child tax credit, earned income tax credit and a credit to help students afford college. These are aimed at the middle class and favored by the White House.
- The estate tax would be reinstated for two years at 35% only for estates over $5 million. This provision is favored by Republicans. Obama called the provision more generous than is "wise or warranted."
- The pact would preserve extended jobless benefits, also known as unemployment insurance, for 13 months. It is something Obama said he fought hard for. The White House estimates a 13-month extension would cost $56 billion. Republicans had balked at extending jobless benefits, saying they wanted it to be paid for either through costs cuts or new tax revenue. The White House has said paying for the unemployment-insurance extension, rather than borrowing the money for it, would limit its impact.
- The pact would allow all businesses to expense 100% of their investments in 2011. The write-off would be retroactive to September 2010, when Mr. Obama originally made the proposals to help shore up support from the private sector. The U.S. Treasury Department has said this expensing provision could generate more than $50 billion in additional investment in the U.S. in 2011.
- The agreement includes a 2-year extension of the research-and-development tax credit and other tax incentives to support business expansion.
- Senior Obama administration officials said in a conference call with reporters Monday that they didn't know the overall cost of the package. The White House has said the provisions in the deal wouldn't worsen the medium and long-term deficit. In the short term, the plan is likely to increase the deficit.
- The unemployment insurance and payroll tax holiday, when combined, would cost an estimated $176 billion.
- A two-year extension of the Bush-era tax cuts would cost $314.9 billion, according to a Dec. 3 study from the nonpartisan Congressional Research Service, which does studies for lawmakers.
- It is unclear if a final deal will include other tax incentives and credits, such as an ethanol tax credit.
- Senior administration officials said the deal didn't settle all Republican-White House disputes. The two sides still need to resolve disagreements over an arms-reduction treaty with Russia, called START, and the military's "don't ask, don't tell" policy.
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