Obama Tax Cut Plan Highlights: Payroll Tax Holiday and More

It looks like the President and the Republicans in the Congress have reached a deal to neither permanently renew Bush-era tax cuts for all taxpayers, which is set to expire at the end of the year, nor cut taxes only for middle class American, as the President has campaigned for years. Instead, the deal calls for a temporary two -year extension of the tax cuts at all income levels.

Cut taxes

According to reports in The New York Times and The Wall Street Journal, the tax cut deal, as part of a package that was reached on Monday night and has yet to be approved by Congressional Democrats, would

  • Extend Bush-era tax cuts to all Americans, including couples making $250,000 or more and singles $200,000 or more a year
  • Extend current tax rates on capital gains and dividends for two years, which will remain at 15%
  • Extend unemployment benefits for 13 months for who have been laid off for more than 26 weeks and less than 99 weeks
  • Cut Social Security taxes for workers for one year from 6.2% to 4.2%
  • Set estate tax at 35% for estates over $5  million only
  • Adjust alternative minimum tax
  • Continue a college-tuition tax credit for some families,
  • Expand the earned-income tax credit
  • Allow businesses to write off the cost of certain equipment purchases

According the NYT, the total cost of the package would be $900 billion over the next two years, funded entirely by adding to the national debt, even when the Republicans made the nation’s mounting deficit one of the major campaign issues against the Democrats in the mid-term election last month.

By reaching the tax cut deal, it seems that the President has given up quite a lot to the Republicans. Got to face the reality, right?

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