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Obama and Republicans agree on extending tax cuts

07 December 2010 08:08 (UTC +04:00)

Baku - APA-Economics. President Barack Obama announced a tentative deal with congressional Republicans on Monday to extend the Bush-era tax cuts at all income levels for two years, Kansas City Star reported.

The compromise was part of a package that would also keep benefits flowing to the long-term unemployed, cut payroll taxes for all workers for a year and take other steps to bolster the economy.

The deal appeared to resolve the first major standoff since the midterm elections between the White House and newly empowered Republicans on Capitol Hill. But it also highlighted the strains Obama faces in his own party as he navigates between a desire to get things done and a retreat from his own positions and the principles of many liberals.

Congressional Democrats pointedly noted they had yet to agree to any deal, even as many Republicans signaled that they would go along.

Obama said he did not like some elements of the framework, but he had agreed to it to avoid having taxes increase for middle-class Americans at the end of the year. He said that in return for agreeing to Republican demands that income tax rates not go up on upper-income brackets, he had secured substantial assistance to lower- and middle-income workers as well as the unemployed.

The package would cost about $900 billion over the next two years, to be financed entirely by adding to the national debt, at a time when both parties are professing a desire to begin addressing the nationâ€™s long-term fiscal imbalances.

It would reduce the 6.2 percent Social Security payroll tax on all wage earners by 2 percentage points for one year, putting more money in the paychecks of workers. For a family earning $50,000 a year, it would amount to a savings of $1,000.

The deal also includes continuation of a college-tuition tax credit for some families, an expansion of the earned-income tax credit and a provision to allow businesses to write off the cost of certain equipment purchases. 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 affected by it.