President Obama on Monday announced a “framework” compromise on extending the Bush tax cuts for two years, in exchange for a 13-month extension of unemployment benefits and a series of other tax extensions.
“I have no doubt that everybody will find something in this compromise that they don’t like,” Obama said, announcing the deal a few hours after it was first reported by The Daily Caller.
Obama said there were things he didn’t like in the deal, such as extending the current tax rates for individuals making more than $200,000 a year and families making more than $250,000 a year, and setting the estate tax at 35 percent instead of the 55 percent it was set to go up to.
But, Obama said, the fierce debate over the issue threatened to turn middle class families into “collateral damage.”
“Allowing taxes to go up on all Americans would have raised taxes by $3,000 for a typical American family, and that could cost our economy well over a million jobs,” Obama said.
He added that the package, which was denounced by many on the left as the news came out Monday afternoon, will “add momentum that our economy badly needs,” and put pressure on congressional leaders in his own party, who have signaled unhappiness with a number of items in the package.
“Building on that momentum is what I’m focused on. It’s what members of Congress should be focused on,” Obama said.
In addition to the tax cut and unemployment insurance extensions, there are a host of other measures in the proposal, most of which were also reported first by TheDC:
- a one-year “payroll tax holiday,” a lowering of two percentage points from 12.4 percent to 10.4 percent, to replace the “Making Work Pay” tax credit included in the 2009 stimulus
- a 35 percent estate tax for two years, with estates under $5 million exempted
- a two-year extension of the Child Tax Credit, the Earned Income Tax Credit, and American Opportunity Tax Credit
- 100 percent tax deduction of equipment purchases and other investments for businesses
- maintains the capital gains and dividends taxes at 15 percent for two years
The agreement still needs to be approved by Congress. House Speaker Nancy Pelosi will talk it over with her caucus Tuesday night at a full meeting.
If such an agreement stands, the tax cut issue will again come to the fore in the months leading up to the 2012 presidential election, with maintaining rates for the top brackets and the estate tax being the most contentious aspects.
Both Republicans and Democrats believe they can win that debate.
“It will become apparent that we cannot extend those tax cuts any longer,” Obama said.
The immediate reaction from Republicans was positive.
“I appreciate the determined efforts of the President and Vice President in working with Republicans on a bipartisan plan to prevent a tax hike on any American and in creating incentives for economic growth,” said Senate Minority Leader Mitch McConnell, Kentucky Republican.
The proposal, McConnell said, showed “a growing bipartisan belief that a new direction is needed if we are to revive the economy and help put millions of Americans back to work.”
“Members of the Senate and House will review this bipartisan agreement, but I am optimistic that Democrats in Congress will show the same openness to preventing tax hikes the administration has already shown,” he said.
House Minority Leader John Boehner, Ohio Republican, said it was “encouraging that the White House is now willing to stop all of the job-killing tax hikes scheduled for January 1.”