Obama strikes tentative deal to extend tax cuts, unemployment compensation

President Barack Obama announced on Monday a compromise with Republican congressional leaders to extend the Bush-era income tax rates for all taxpayers for two years, extend unemployment compensation for thirteen months, and cut payroll taxes for one year.

The agreement incorporates a new estate tax rate, tax breaks for individuals and businesses, and a fix for the alternative minimum tax.
 
Democrats had tried unsuccessfully to extend the Bush-era tax rates for all except high income taxpayers, and many expressed dismay with the deal agreed to by the president. If no agreement is reached by December 31, taxes will go up for all Americans.
 
The agreement also calls for temporary reinstatement of the estate tax rate of 35 percent for estates worth more than $5 million, considered by many to be a victory for Republicans. There is no estate tax for 2010, but under current law it would rise to 55 percent in 2011.
 
The payroll tax proposal will reduce the 6.2 percent Social Security payroll tax on all wage earners to 4.2 percent for one year. This proposal will give wage earners a tax break comparable to the Making Work Pay credit which is expiring.
 
The deal will expand the earned income tax credit and extend individual tax credits including:
  • tuition tax credits for some families
  • the refundable child care tax credit
  • the 15 percent tax rate on most capital gains and dividends
 
Businesses will get a two-year retroactive extension of the expired research and development credit and will be allowed to depreciate 100 percent of the cost of new equipment.
 
The Office of Management and Budget said it doesn’t yet have an estimated cost estimate for the package, spokeswoman Meg Reilly told Bloomberg.com.
 
“I know there are some people in my own party and in the other party who would rather prolong this battle, even if we can’t reach a compromise,” Obama said regarding the agreement on tax cuts and unemployment benefits. “But I’m not willing to let working families across this country become collateral damage for political warfare here in Washington.”
 

Related articles:

You may like these other stories...

Truckers and other owners of heavy highway vehicles take note: Your next federal highway use tax return is due on September 2.The September 2 due date, which was pushed back two days because the normal August 31 deadline...
The head of the IRS has a message for taxpayers and tax preparers who have endured long wait times while on the phone with the tax agency: Call your member of Congress.During his keynote speech at the 69th Annual Meeting of...
Regulators struggle with conflicts in credit ratings and auditsThe Public Company Accounting Oversight Board (PCAOB), which was created by the Sarbanes-Oxley Act in 2002, released its third annual report on audits of...

Already a member? log in here.

Upcoming CPE Webinars

Aug 26
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.