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What Exactly Is In Obama's Tax Cut/Unemployment Extension Compromise?

December 6, 2010 - by Donny Shaw

President Obama on Monday announced the “framework” of a deal with congressional Republicans for dealing with the looming expiration of the Bush tax cuts. It’s a two-year deal, and it includes a bunch of other stuff, all at a cost about $900 billion. None of it is offset, so this will be a direct increase in the deficit. Let’s take a look at the specifics of what’s included:

1. Two-year extension of all Bush tax cuts — Income taxes will stay right where they are at least until January 2013, even for the wealthiest Americans. Obama seems to think that having this tax debate again in 2012 will be good politics for his re-election.

2. Two-year estate tax cut — Bush’s 2001 tax bill gradually scaled back the estate tax, a federal assessment on inherited wealth, to 0% in 2010. But because it was done using budget reconciliation, the bill sunsets after ten years (just like the income taxes) and the rate is scheduled to go back up on January 1st to the pre-Bush rate — 55%, with the first $675,000 being exempt. Obama’s proposal would lower this significantly for 2011 and 2012 — the first $5 million would be exempt and the rest would be taxed at 35%. This compromise is taken directly from a Sen. Blanche Lincoln [D, AR] amendment that was added to the 2010 budget resolution by a vote of 51-48.

3. 13-month extension of federal unemployment programs — The filing deadline for federal unemployment insurance that provides benefits for people who run out of their 26 weeks of state-provided benefits without finding a job would be extended until January 2012. Essentially, this will make it possible for people who became unemployed in the past 99 weeks and still haven’t found a job to collect benefits for the same length of time as people who lost their job more than 99 weeks ago. This would not add additional weeks of benefits — 99 weeks would still be the maximum amount of time that anybody could receive benefits.

4. One-year payroll tax holiday — Social security payroll taxes, which, under current law, are split equally between employees and employers, would be reduced from 6.2% to 4.2% with all of the benefits of the reduction going to the employees. For the average U.S. salary of $50,000, this would mean tax savings of about $1,000 next year. Obama originally wanted to include an extension of his “Making Work Pay” tax credit, which provides workers up to $400 annually for all workers, but Republicans objected and the payroll tax holiday was included instead. Reducing payroll taxes is generally considered the most stimulative form of supply-side policy.

5. Two years of 100% business expensing — Businesses will be able to immediately write off 100% of the costs of new equipment purchases until 2013. Typically, the costs of equipment purchases are deducted over the life of their use. This proposal is designed to free up now money for businesses that would normally be spread over multiples years in order to encourage more hiring and investing.

6. Miscellaneous stimulus bill tax cut extensions — The lower earning threshold for the child tax credit would be extended for two years. The expanded earned income tax credit would be extended. And the American opportunity tax credit, which provides college students with a $4,000 credit in exchange for community service, would be extended.

Now, this is far from a done deal. This package is designed to get 60 votes in the Senate, but it may not pass muster in the House. The House Democratic caucus, which is generally more progressive than their Senate counterpart, is reserving the option to revolt. And Tea Party Republicans are threatening to vote “no” because of the unemployment insurance extension that is attached.

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Comments

Displaying 31-60 of 108 total comments.

  • widget02us 12/07/2010 5:50am

    CNN says no 5th tier and so does whitehouse.gov…..so there we have it. We don’t matter.

  • ExGOP 12/07/2010 5:54am

    This past Sunday on 60 minutes, Bernanke stated that the American job crisis will not improve for another 4-5 YEARS!!! Yet the 99ers get nothing, the 26-99 weekers get 13 months, and the rich get 24 months of a 5% income tax break (35% vs. 40% tax bracket). UNBELIEVABLE!!! If the President is going to cave, the Democrats need to come up with AND fight for a better (more equal) package. For example, the tax break should only be for 13 months and the 13 month UI should include “ALL” unemployed (the 99ers are also Americans, and GROWING).

    This Republican Congress makes me sick. They’re nothing but a bunch of fat cat hypocrites!!! Prior to this so-called compromise everything had to be pay-go EXCEPT when it comes to themselves and their super rich friends. It’s hard for me to believe that they’re able to convince the majority of Americans (98%) to vote Republican. It’s a sad day when average Americans can’t see through their lies and their greed. God bless America … we need it.

  • Comm_reply
    Abaratarrr 12/07/2010 6:32am

    “he 26-99 weekers get 13 months”
    false

    This bill simply extensds the deadline to sign up for the current teir, no one gets beyond 99weeks.

    This should be called a dealine extension not an unemployment extension.

    Obama never even asked for a tier 5 it was never debated!!!

  • Comm_reply
    ExGOP 12/07/2010 6:47am

    My bad. I understand, but was not clear in my post. The unemployed over 26 weeks get 52 weeks (13mo. × 4wk.), but no more than 99 weeks. If I confused anyone, my apologies.

  • Comm_reply
    530i 12/07/2010 6:39am

    It is amazing how you understand so well the part about unemployment benefits, but have no understanding of the tax deal that was made. No one is getting a tax “break” or a reduction in their taxes. The deal would only maintain the tax brackets as they stand now. This deal would stop the major tax hike that would automatically go into effect at the end of this year. Higher taxes would kill any chance of private sector job growth.

    Also, I don’t understand the 99ers talk of needing more extensions. Is applying for welfare benefits not an option for people with no job or income? I understand many job markets (like construction) have just evaporated, but after nearly 2 years of unemployment benefits, we are at the limit of what the program was designed to do. Welfare was designed for longer term economic problems. What am I missing? Are these dual income families with only one person unemployed, so welfare is not an option?

  • Comm_reply
    ExGOP 12/07/2010 7:06am

    I understand taxes perfectly … do you? I have a Masters in Taxation, so don’t talk to me about something you no nothing about. FYI, a 5% tax increase is NOT a major tax hike and it will not kill private sector job growth. Are you even old enough to remember when tax rates were at 70%? Do you believe it can’t happen again? I think most people would prefer a 40% tax rather than 70%.

  • Comm_reply
    530i 12/07/2010 7:36am

    You make no sense at all. So because 40% is less than 70% we are supposed to be glad for such a small tax hike?

    The Private sector creates jobs and the more we are taxed, the fewer jobs there will be. Until people have enough money to be willing to risk a some of it to start a business and hire people, no new jobs will be created. Poor people do not hire anyone. People on unemployment and welfare do not hire anyone. People who have enough money to meet their needs and still have some left over DO hire people.

    Bad government policies created a real-estate bubble so everyone thought they had lots of extra money. The economy boomed based on false valuations. Now people need to rebuild their wealth so sustainable growth can occur. The only way this will happen is if people have money in their pockets. Or we can keep pursuing failed Keynesian policy until we are all on welfare. It seems clear what you would like to happen.

  • Comm_reply
    ExGOP 12/07/2010 8:26am

    I’m not surprised that I make no sense to you (the tax code is complicated for most people). Your argument has no basis. The Bush tax cuts have been in effect for approximately 10 years, and it’s NOT creating jobs!

    Do you understand that we have a “marginal tax bracket” system?

    Do you understand that unlike employees, businesses pay taxes on NET income rather than GROSS revenue? Do you even understand the difference between NET and GROSS?

    It’s quite clear that you must be a business owner who’s NET income (NOT GROSS REVENUE) is over $373,650 per year. As proposed, the Bush tax cuts will sunset (expire) and the top marginal tax rate will be back at 40%, rather than 35%, however there’s no guarantee that Congress won’t increase that 40% tax rate.

    If I netted $1,000,000 annually, I would be happy to take home $600,000 vs. $300,000. So yes, be glad for such a small tax hike.

  • Comm_reply
    530i 12/07/2010 9:05am

    I would think that as a tax man you would know that as soon as people know the tax rates are going to go up in the next 3-5 years, business owners make plans to avoid paying the taxes. One of the reasons hiring has declined, and the effect of the tax cuts have worn off, is that companies have been preparing themselves for higher taxes. If they get to keep less, they have to cut costs or shut down. Obama’s/Democrats anti-business policies have FROZEN business growth. Not just because of tax rates but because of bailouts, and general market uncertainty. I’m sure you have seen the graph that shows government tax receipts over time and various tax rates. The receipts stay approximately the same REGARDLESS of the tax rates. Higher taxes do not create higher revenues to the govt, they only weaken business.

  • Comm_reply
    ExGOP 12/07/2010 9:17am

    In “your own” worthless opinion. Back up your statements with proof, otherwise stop bothering me.

    P.S. It sounds like you need to hire a CPA to take advantage of all those loopholes the tax code has to unfairly offer businesses.

  • Comm_reply
    530i 12/07/2010 9:25am

    Here you go:
    http://blogs.marketwatch.com/fundmastery/2010/07/02/does-hiking-tax-rates-raise-more-revenue/

  • Comm_reply
    ExGOP 12/07/2010 9:42am

    Warren Buffett says tax the rich video. Listen carefully 530i (or should I call you Last Word Freak)?

    http://www.care2.com/causes/politics/blog/warren-buffett-says-tax-the-rich-video/

    Now, are you going to have the nerve to tell me that Warren Buffett doesn’t know what he’s talking about?

  • Comm_reply
    530i 12/07/2010 10:09am

    Sure, Buffet knows what he is talking about. He was a major donor to Obama and the Democrats. He agrees with their agenda. I don’t. He wants government to grow so it can solve the problems of poverty. I want freedom and and small government so we can solve our own problems. Nothing is preventing Warren from paying as much money as he wants to the IRS, so his message is for PR value. He is just furthering the growth of government.

  • Comm_reply
    ExGOP 12/07/2010 7:17am

    These millionaires’ are smart. They rather pay 40% than 70+% any day.

    http://www.fiscalstrength.com/

  • Comm_reply
    530i 12/07/2010 9:12am

    Ha ha. “we are eager to do our fair share” This has always been a code word for socialist government wealth redistribution. The government will make it all fair and equal. No winners or losers, just a nice managed economy like China.

  • Comm_reply
    seanurse 12/07/2010 7:17am

    yes that is the problem. I’m 51 and widowed. I don’t qualify for welfare as i have no children living with me. It’s my age bracket thats getting the shaft. I expect alot of deaths and suicides over this holiday season. so many of us 99ers have bveen so stressed for 2 years. we have all used up our 401ks, savings and i’v got a car thaTS 22 YEARS OLD, NOT GOOD IN WINTER. I don’t know what else to do. I will be evicted soon. first time in my life. what did our president do for us. nothing. everyone write him an email today on the white house site top right side of screen. please help the 99ers. GOD WE NEED YOUR HELP AND GUIDANCE FOR THE PRESIDENT TO HELP US.

  • Comm_reply
    Abaratarrr 12/07/2010 8:06am

    you can not get welfare if you have a house or a car or any assets worth more then $2,000, to get welfare you have to sell your house, have it forclosed and sale your car, you have to be homeless and without a car and have spent all the money from those assets sold.

    the 99ers are former middle class with kids in school they can not exactly move there children onto the streets until they are accepted into public housing.

  • Comm_reply
    rocky2007 12/07/2010 2:45pm

    In Ohio , your home is not considered to be part of your assets so it is not true that you have to be homeless. I know this as a fact because a man I as dating is single and owns his house (no mortage) and he was collecting food stamps

  • Comm_reply
    Abaratarrr 12/07/2010 4:10pm

    that is the best news i have heard all day, most chicks won’t date a guy that doesn’t have a job, so what kind of stuff are you into? do you like scary movies?

  • Comm_reply
    Bunnie1978 12/08/2010 10:39am

    You obviously have no idea how welfare works. In Tennessee, welfare for myself and my toddler is $149 per MONTH, with the added requirement that I spend 30 hours a week at a government designated job search firm looking for work. We do also get food stamps (almost $400/month) so that $149 at least doesn’t have to be spent on groceries. Here’s the butt of it though, that 30 hours a week at a job search firm means that I have to put my son in daycare, which costs about $150 per WEEK, so it would actually COST me $450 per month to BE ON WELFARE. Suitable solution? I think not.

    I’m all for keeping the size of government reasonable, and people working hard to earn a living, but the fact is, our country has spiraled into a society where children are undervalued and class boundaries are virtually inpenatrable. Poor people stay poor and American students are stupid when compared to their international peers. In an international economy, it’s no wonder America is in a depression.

  • seanurse 12/07/2010 6:05am

    wow donny I hope your wrong about the 99ers not being part of this package deal. If you are right I will not vote for this president again. wow some change he gave us. sold us out for rich assholes. I can’t believe that a president of this great country would have 99ers behind him in a speech to the voters of this country and not help them. What do we do now. did you hear of all the people who died from exposure and homeless. even kids are dying. come on president put your balls back on and be the president. I thought our country didn’t give in to terrosist. Our republicans are terrorist. Time to jail up some assholes.

  • Comm_reply
    Abaratarrr 12/07/2010 6:34am

    Danny Shaw, is almost never wrong, and he is not wrong about this. This bill is not an unemployment extension, it just extends the deadline to sign up for the current extension.

  • DGalanteNJ 12/07/2010 6:25am

    I am so disappointed in the President, I don’t understand how he can turn his back on us 99er’s. ABC recanted the story they did last night and said it was a mistake, there is nothing for the 99ers. Never a truer word has been said, there is nothing for us. I voted for Obama thinking and hoping he would make the country better again, I voted Dem across the board in the last senate election, it seems the only ones who give a damn about us were the Dem’s (Well most of them anyways) and soon they will be gone from Congress. We want to work, I want to work, none of us want a free handout, but thanks to our goverment we have no jobs….but Wall St got their big bailouts not long ago and the rich got their tax cuts now, what did we get??? A big foot right up our a$$‘s. With my 401K gone there is no $ for medicine, food, heat, taxes and mortage. God help us cause our country won’t.

  • Abaratarrr 12/07/2010 6:58am

    they didn’t bother trying to help us. THE SUBJECT OF 99ERS NEVER CAME UP IN THEIR NEGOTIATIONS!!!!

    “No Tier 5 extension was asked for or debated upon. "

    http://www.rantrave.com/Rant/99ers-Shafted-in-Obama-Rollover-on-Unemployment-Extensions.aspx

    Obama didn’t even ask if we can have a tier 5!!

  • saturnsc2 12/07/2010 7:10am

    you guys think they don’t know who the 99ers are? sure they do! they just play dumb. ovbiously it’s cheaper to just extend the filing deadline than to help the 6 million or so current 99ers & future 99ers. we were sold out plain & simple.

  • Abaratarrr 12/07/2010 7:13am

    looks like Obama is having a press conference at 2 to better explain the tax cut bill, Please stay on the phones people we are getting their attention.

  • Comm_reply
    seanurse 12/07/2010 7:42am

    WHERE IS HE HOLDING IT ON NATIONAL STATIONS OR C-SPAN AND MY TIME IS 12:40 NOW WHAT TIME THEN? I WOULD LIKE TO SEE HIM TALK ABOUT THIS. I HAVE EMAILED AND CALLED POLITICIANS AND PRESIDENT OBHAMA IN THE LAST TWO HOURS. EVERYONE DO THE SAME.

  • Comm_reply
    widget02us 12/07/2010 7:53am

    This is what it says on the cspan website under the heading
    “In Washington”: Pres. Obama News conf: C-SPAN3 at 2:20pm ET

  • Comm_reply
    seanurse 12/07/2010 8:00am

    THANKS FOR THE INFO. I WILL WATCH.

  • eavina30 12/07/2010 7:23am

    As a fellow 99er I declare a No Vote for 2012, count me in…..

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