Last night the House passed the Obama-GOP tax law compromise to extend both the Bush tax cuts and unemployment benefits. The bill passed 277-148 on a bipartisan vote with 139 Democrats and 138 Republicans voting yes, and 112 Democrats and 36 Republicans voting no. President Obama will sign the tax bill today at 3:50 p.m. EST. “I am absolutely convinced that this tax cut plan, while not perfect, will help grow our economy and create jobs in the private sector,” the president said this week.
The bipartisan nature of the compromise augurs the increased influence of Republican lawmakers who will take over the House and make significant gains in the Senate come January.
After nearly a year of uncertainty, the Obama-GOP tax law gives businesses and individuals the assurance necessary to invest in growth. The tax-cut deal, along with November gains in U.S. retail sales, prompted economists to raise forecasts for gross domestic product and consumer spending. These figures account for about 70 percent of the total U.S. economy.
The Obama-GOP tax law:
- extends income tax rates for all income groups
- extends capital gains and dividends tax rates
- repeals some limitations on deductions for high-earning individuals
- extends the $2,500 annual college tax credit
- extends the $1,000 child tax credit for low and middle income groups
- increases the earned income tax credit for low income groups
- establishes an estate tax exemption amount of $5m with top tax rate of 35%
- sets a 35% rate for gift and generation skipping transfer taxes
- grants portability so that the unused estate tax exclusion amount from the first deceased spouse automatically passes to surviving spouse
- extends long-term unemployment insurance for 13 months (usually, unemployment benefits expire after 6 months, but since the recession, benefits have been extended for up to 99 weeks)
- indexes the alternative minimum tax to to inflation, which narrows the scope to exclude middle income groups that are not the intended target of the tax
- expedites business write-offs for 2011
- allows companies to write off 100% of capital investments for a year
- lowers payroll tax rate (which funds Social Security) for workers from 6.2% to 4.2%
- extends a 45-cent tax credit on ethanol for one year
- extends a 54-cent tariff on imported ethanol
- revives for 2010 and extends through 2011 a R&D tax credit
To see how much money the tax deal will save you next year, use the Washington Post’s calculator here.
- Federal Estate Tax Law May Change Soon — Bush Tax Cut Extension Likely (legallyeasy.rocketlawyer.com)
- What the New Tax Bill Deal Means for You (dailyfinance.com)
- Tax deal is a done deal (washingtonmonthly.com)