Obama Announces Agreement on Bush Tax Cuts - Political Hotsheet - CBS News
President Obama on Monday announced that the White House and Democratic and Republican lawmakers have worked out a plan to extend the Bush-era tax cuts for all Americans for two years.
Mr. Obama said that while he strongly prefers not to extend the cuts for all, he had no choice because Republicans were blocking efforts to extend the cuts for all but the top two percent, which meant that everyone could have their taxes incrased next year. "As sympathetic I am to those who prefer a fight over compromise...it would be the wrong thing to do," Mr. Obama said.
In something of a surprise, the plan includes a one-year employee payroll tax cut that would reduce employee contributions from 6.2 percent to 4.2 percent. The payroll tax cut, which is designed to spur hiring, replaces the "Making Work Pay" tax credit in the stimulus bill, which Mr. Obama had wanted extended for another year. The payroll tax, which pays for Social Security, would be reduced from 12.4 percent to 10.4 percent overall, since employers pay in 6.2 percent as well.
The White House says that for a family of four making $75,000 per year, the payroll tax cut means a reduction og $1,500 in yearly taxes. An administration officials says this "will have more than twice the economic impact next year as a one-year extension of Making Work Pay." The cut also will be more noticed than the "Making Work Pay" tax credit from the stimulus package, which many Americans did not realize they had received.
The agreement temporarily sets the estate tax, which was zero this year, at 35 percent on estate transactions of more than $5 million. (Mr. Obama made clear in his remarks that he opposed that part of the agreement.) It also maintains a Child Tax Credit and the Earned Income Tax Credit and includes Alternative Minimum Tax relief and a Research & Development business tax credit.