Obama’s proposed tax deal
You might have heard phrases like “Bush era tax cuts” and “Obama’s tax deal” uttered in your presence the past couple days. If you haven’t been paying attention, President Obama recently reached a tentative deal with Congress which would extend the same tax rates individuals have been paying in recent years. Many Democrats are unhappy because they wanted to single out the so-called “wealthy” households and offer the tax cuts to everyone EXCEPT them.
Republicans for the most part like the lack of change but dislike some other suggestions. In short, Obama tried to compromise in a way that wouldn’t completely alienate himself from his own party while offering enough to Republicans so these proposals will get passed. With unemployment still frighteningly high, the President wasn’t ready to tell people that taxes will increase and certain benefits will disappear come January 1st, so he elected to maintain the status quo. This quote from the Washington Post sums it up nicely:
“The package would add more than $700 billion to the rising national debt, said congressional sources who were briefed on the deal. But with the unemployment rate at 9.8 percent, the White House was focused on winning a compromise that could boost the fragile recovery while preventing the economic damage that could result from letting the expiring tax breaks affect paychecks next month.”1
Other changes to note in case you start talking taxes at dinner:
- The very large estate tax (also called the inheritance tax) is back in play, but only affecting those estates worth more than $5 million. Democrats wanted it lowered to $3.5 million.
- One reduction affecting the whole workforce is a drop in the Social Security tax from 6.2% to 4.2%. Employees will obviously see more money in their paychecks while the government will be left figuring out what to so with the increased shortfall in the Social Security account.2
Read on:
msnbc.com – Democrats blast Obama-GOP deal
(chart above from savingtoinvest.com)
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