Income and Estate Tax Deal Heating Up

12/07/2010

On Monday, December 6, 2010, President Obama announced a tenative deal with Republicans regarding the Bush-era tax cuts, estate taxes and unemployment insurance benefits.

Although the devil is always in the details and the details are still sketchy, it looks like the framework for the "bipartisan agreement" will include:

  1. A two-year extension of all of the Bush-era tax cuts for all taxpayers, no matter what their income level.
  2. A 13-month extension of unemployment insurance benefits.
  3. A two-year extension of the estate tax (for 2011 and 2012) with the highest rate being 35% and a credit of 5 million dollars.  Remember, without this change, the estate tax was scheduled to have a high rate of 55% and a credit of only 1 million dollars.
  4. A 2% cut in payroll tax.

Apparently, President Obama still needs to convince Democrats to support the compromise, which was negotiated behind closed doors with Senate Republicans. He potentially faces strong resistance from his own party, many of whom have slammed the potential deal as a sellout.  In fact, the President  acknowledged the anger of many Democrats on Monday, saying he is “sympathetic to those who prefer a fight over a compromise.”    Obama repeated that he opposes extending the high-end tax cuts, but said it is "abundantly clear ... that Republicans" would block an extension for only the middle-class cuts.

Looks like we may be getting close to some type of deal.

Stay tuned.