The deal to extend the Bush-era tax cuts for two years includes a bevy of additional credits and deductions that will reduce the burden on nearly all households.

But the tax benefits will flow most heavily to the highest earners, just as the original cuts did when they were passed in 2001 and 2003. At least a quarter of the tax savings will go to the wealthiest 1 percent of the population.

The tentative deal includes a two-year patch for the alternative minimum tax, a reduction in the payroll tax and a plan to reinstate the estate tax with lower rates and higher exemptions than in 2009 — all of which will offer far more savings for high earners than those in the low- or middle-income bracket.

The wealthiest Americans will also reap tax savings from the proposal’s plan to keep the cap on dividend and capital gains taxes at 15 percent, well below the highest rates on ordinary income.

And negotiators have agreed that the estimated $900 billion cost of the cuts will simply be added to the deficit — not covered by reductions in spending or increases in other taxes. That is good news for hedge fund managers and private equity investors, who appear to have withstood an effort to get them to pay more by eliminating a quirk in the tax code that allows most of their income to be taxed at just 15 percent.

In fact, the only groups likely to face a tax increase are those near the bottom of the income scale — individuals who make less than $20,000 and families with earnings below $40,000.

“It’s going to look like the rich are getting richer again,” said Anne Mathias, an analyst for MF Global Inc.

In the agreement, which breaks a campaign pledge to eliminate some tax breaks for the top 2 percent of American earners, President Obama won a few concessions from Republicans, including a 13-month extension in government benefits for the long-term unemployed. After several extensions, the maximum has been 99 weeks.

The administration also succeeded in extending several of the tax credits in last year’s stimulus plan to aid low- and moderate-income Americans: the earned-income tax credit, the child credit, the child and dependent-care credit and the tuition deduction.

As a result, families with an income near the median of $55,000 would owe about $2,700 less in taxes than if the Bush-era cuts had been allowed to expire.

A two-income couple earning $146,000 would owe about $7,000 less than if the tax cuts were allowed to expire, and about $3,400 less than they did in 2009.

The proposal does not include an extension of Mr. Obama’s signature tax cut, the Making Work Pay credit, which provided a credit of up to $400 for individuals and $800 for families of low and moderate income. Instead, the plan creates a one-year reduction in Social Security payroll taxes, which are generally levied on the first $106,800 of income. For an individual earning $110,000, that provision would reduce payroll taxes by $2,136.

Although the $120 billion payroll tax reduction offers nearly twice the tax savings of the credit it replaces, it will nonetheless lead to higher tax bills for individuals with incomes below $20,000 and families that make less than $40,000. That is because their payroll tax savings are less than the $400 or $800 they will lose from the Making Work Pay credit.

“It will come to a few dollars a week,” said Roberton Williams, an analyst at the nonpartisan Tax Policy Center, “but it is an increase.”

To the wealthiest Americans, however, an assortment of breaks is available.

The plan includes a two-year “patch” for the alternative minimum tax, which is now paid by about 4 million taxpayers with income in the mid- to high six figures. Without the patch, more than 20 million additional taxpayers would have been liable for that tax.

The estate tax — which was allowed to lapse this year and was scheduled to resume at a rate of 55 percent on most assets above $1 million — will be reinstated under less onerous terms. Estates over $5 million will be subject to a 35 percent tax.

The proposal will also maintain the current rates on dividends and capital gains, averting scheduled increases to ordinary income and 20 percent, respectively.

The marginal tax rate on high incomes will also remain unchanged. The top brackets had been scheduled to increase to 36 percent and 39.6 percent, from 33 percent and 35 percent.

Under Mr. Obama’s failed proposal, which would have raised the rates on income over $250,000 for families and $200,000 for individuals, the taxpayers at the top 1 percent of the income scale — those with incomes above $564,000 — would have received an average tax break of $28,000. Under the agreement reached with Republicans, the top 1 percent will receive breaks of about $70,000.

Frazzled wrote:Raising taxes in the middle of the worst recession since the Great Depression is contraindicated. Anyone espousing such frankly is falling into the same trap that happened with FDR.

Frazzled wrote:Raising taxes in the middle of the worst recession since the Great Depression is contraindicated. Anyone espousing such frankly is falling into the same trap that happened with FDR.

Ahtman wrote:

Frazzled wrote:Raising taxes in the middle of the worst recession since the Great Depression is contraindicated. Anyone espousing such frankly is falling into the same trap that happened with FDR.

Is that how he got polio?

ShumaGorath wrote:Says the guy whining like a baby every time anyone brings up debt statistics while blaming the dems for "outrageous spending". That KoolAid must of had some LSD in it.

agroszkiewicz wrote:Obama....another talking head of a president. At least he has worked to patch up our international relations, but his campaign promises of change and real transparency were just that. Campaign promises.

WarOne wrote:

agroszkiewicz wrote:Obama....another talking head of a president. At least he has worked to patch up our international relations, but his campaign promises of change and real transparency were just that. Campaign promises.

Well, you could actually go out on a limb and say that Obama hurt us in the opposite direction for international relationships by not appearing as strong on the international stage as Bush projected. Of course, domestic conservative media could be the only ones saying Obama is an apologetic coward.

Da Boss wrote:It seems to be particularly left wing people that have trouble with this, and will turn on their representatives viciously if they don't live up to frankly unatainable standards. But by the same token, they won't get up off their arses and vote unless those unatainable things are promised.

Da Boss wrote:He got some concessions, they're in the article. I will admit, the republicans seem to be much better negotiators than the democrats, and as a party, much more disciplined, which makes them more effective.

Da Boss wrote:I'm gradually getting more and more frustrated with people who seem to fail to understand that governing requires compromise. It seems to be particularly left wing people that have trouble with this, and will turn on their representatives viciously if they don't live up to frankly unatainable standards.

ShumaGorath wrote:Sebster had a great quote about the republicans being a great and effective party thats utterly insane and the democrats being an ineffective and confused party that is reasonable.

Da Boss wrote:That will be fun . . .

Manchu wrote:

ShumaGorath wrote:Sebster had a great quote about the republicans being a great and effective party thats utterly insane and the democrats being an ineffective and confused party that is reasonable.

Authoritarians are usually well-organized.


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Da Boss wrote:That will be fun . . .

No it won't, as an Irishman in 2010 knows better than most.

warpcrafter wrote: like how the government is just a front for the global elites.

sexiest_hero wrote:@ Da Boss. This isn't a compromise. The health care bill was (no universal care or abortion care). giving up on the climate bill was also. The was one side getting everything they want and the other giving everything they have.

All that talk about the debt ruining our nation, then they turn around and pile more on. Hell we haven't even closed Gitmo. People on the left are angry that all the hard work done to elect BO amounted to nothing. Hell did Bush give the Democrats everything? No, the man lacked a lot of things, but one thing he had was a back bone.

Manchu wrote:Said no to what?

Manchu wrote:Ah. So was that a rhetorical question or do you really think that the electorate is happy with anything as intensely and expensively opposed as the healthcare bill?