Monday, December 6, 2010

Compromise Reached on Tax Package?

The most pertinent points are as follows; Bush Tax Cuts stay the same for everyone for another two years, Unemployment Benefits extended for another 13 months, and Estate Tax (Death Tax) set at 35% (scheduled to jump from 0% this year to 55% next year if no action taken) for estates larger then $5M for the next two years.

Overall this should be seen as a two-fold win for the Republicans. While all of the policies may not be idea for the Republicans, they are certainly closer to what the Republicans were pushing for then what the Democrats wanted. The second part is that this debate takes place in the next election cycle. This is a losing argument for the Democrats; it helped the Republicans win this time around. If the Democrats think talking about raising people's taxes is going to help them get elected they should get some new advisers.

The interesting question here is if this is a transition for Obama. Either he is taking a turn toward the center, or he is trying to under cut the Republicans before veering back to the left. I doubt we will have to wait to long to see which trend line he is now following.

Video embedded below.

"President Barack Obama reached agreement Monday with Republican leaders in Congress on a broad tax package that would extend the Bush-era income tax cuts for two years, reduce worker payroll taxes for one year and give more favorable treatment to business investments.
The deal would extend a raft of business tax breaks, including credit for spending on research. It would extend current tax rates on capital gains and dividends for two years, including for higher earners. It would also maintain protection for middle-class families from the alternative minimum tax.

As part of the deal, the White House is proposing a provision to encourage more investment in plant and equipment, by letting companies claim deductions on 100% of most kinds of investment.

Under the agreement between the White House and congressional Republicans, the estate tax rate would be set at 35% for two years and would apply only to estates over $5 million. Under current law, the estate tax has lapsed for 2010 and is set to spring next year to 55%.

A program of extended benefits for the long-term unemployed, which lapsed last month, would be revived for 13 months, the White House said. The jobless benefits would be financed by federal borrowing rather than by spending cuts.
The payroll-tax reduction under discussion now would cut the 6.2% Social Security tax levied on a worker's wages to 4.2%. A worker making $40,000 a year would save $800, and some economists say that could help stimulate demand at a time when the economy remains relatively weak.

The employer's half of the tax—also 6.2%—wouldn't be affected under the White House proposal, and thus the cost of hiring new workers wouldn't be directly affected.

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