In addition to keeping the current tax rates for all Americans, President Obama announced a compromise plan with the Republican leadership that would extend aid for the long-term unemployed for another 13 months. Other taxes that will be implemented or remain unchanged as part of the compromise include:
- The payroll tax, which funds Social Security and Medicare, would also be cut by 2% points during 2011 to help spur hiring
- Estate tax would be set at a top rate of 35%, which applies after a $5 million tax-free allowance per individual
- Full deduction for equipment purchases that currently must be deducted over time (accelerate depreciation proposed in small business jobs bill). The proposal would accelerate $200 billion in tax savings for companies in the first year and benefit 1.5 million companies and several million individuals who run businesses, according to White House estimates
- Dividend and capital gains rates would remain capped at 15%, rather than at higher or marginal income tax rates
Mr. Obama justified his compromise with Republicans and shift from his original stance by saying the Bush tax cuts stalemate in Congress threatened to punish middle-class Americans, while unemployed workers risked seeing their benefits cease. “I’m not willing to let working families across this country become collateral damage for political warfare here in Washington….The American people didn’t send us here to wage symbolic battles or win symbolic victories. They would much rather have the comfort of knowing that when they open their first pay check in January of 2011, it won’t be smaller than it was before, all because Washington decided they preferred to have a fight and failed to act.”
The above plan still needs to pass Congress and I will provide updates as more information comes to hand and encourage you to subscribe free via RSS or Email to get the updates.