President Obama and Congressional leaders have apparently reached agreement on a variety of pressing tax issues. In a statement, the President announced that legislators "have arrived at a framework for a bipartisan agreement" that outlines what the next tax legislation will look like. This framework will likely form the core of the tax bills to be debated in Congress.
The following details were specifically mentioned in the President's statement:
- The current tax rates from 10% to 35% will remain intact for 2011 and 2012, instead of allowing the tax rates to revert to Clinton-era rates from 15% to 39.6%.
- The child tax credit (worth up to $1,000) will be extended instead of reverting back to $500.
- The earned income credit, which was expanded in 2009 to provide tax credits for a third dependent, will be extended instead of reverting back to a two dependent max.
- The American opportunity credit for college expenses will be extended.
- The employee-portion of Social Security taxes will be reduced from 6.2% to 4.2%.
- Super-expensing provision for businesses "to completely write off their investments next year"
- Unemployment insurance benefits will be extended for 13 months.
Additional details of the tax package have emerged in the press:
The estate tax will be reinstated with "a 35 percent rate on estates worth more than $5 million for individuals and $10 million for couples," reports the Washington Post.
"The top rate of 15 percent on capital gains and dividends would remain in place for two years, and the alternative minimum tax would be adjusted so that as many as 21 million households would not be hit by it," reports the New York Times.
There are, as yet, no official estimates for the cost of the tax deal. News organizations are reporting a variety of cost figures: the tax cuts could cost the government "more than $700 billion" (Washington Post), "worth some $800 billion" (The Economist), or "about $900 billion" (New York Times).
The agreement on tax breaks still needs to be introduced as legislation, voted on and sent to the President for signature. So the final legislation could be different than the proposals outlined here or could contain additional changes.
Update: the White House released a fact sheet outlining various tax incentives.