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insistence of Republicans, the $5 million threshold would rise each year with inflation.
Much or all of the revenue to be raised through higher taxes on the wealthy would help hold down the amount paid to the Internal Revenue Service by the middle class.
Details of tentative deal averting ‘fiscal cliff’
Highlights of a tentative agreement Monday between the White House and Senate Minority Leader Mitch McConnell.
Income tax rates: Extends decade-old tax cuts on incomes up to $400,000 for individuals, $450,000 for couples. Earnings above those amounts would be taxed at a rate of 39.6 percent, up from the current 35 percent. Extends Clinton-era caps on itemized deductions and the phase-out of the personal exemption for individuals making more than $250,000 and couples earning more than $300,000.
Estate tax: Estates would be taxed at a top rate of 40 percent, with the first $5 million in value exempted for individual estates and $10 million for family estates. In 2012, such estates were subject to a top rate of 35 percent.
Capital gains, dividends: Taxes on capital gains and dividend income exceeding $400,000 for individuals and $450,000 for families would increase from 15 percent to 20 percent.
Alternative minimum tax: Permanently addresses the alternative minimum tax and indexes it for inflation to prevent nearly 30 million middle- and upper-middle income taxpayers from being hit with higher tax bills averaging almost $3,000. The tax was originally designed to ensure that the wealthy did not avoid owing taxes by using loopholes.
Other tax changes: Extends for five years Obama-sought expansions of the child tax credit, earned income tax credit, and an up to $2,500 tax credit for college tuition. Also extends for one year accelerated “bonus” depreciation of business investments in new property and equipment, a tax credit for research and development costs and a tax credit for renewable energy such as wind-generated electricity.
Unemployment benefits: Extends jobless benefits for the long-term unemployed for one year.
Cuts in Medicare reimbursements to doctors: Blocks a 27 percent cut in Medicare payments to doctors for one year. The cut is the product of an obsolete 1997 budget formula.
Social Security payroll tax cut: Allows a 2 percentage point cut in the payroll tax first enacted two years ago to lapse, which restores the payroll tax to 6.2 percent.
Across-the-board cuts: Delays for two months $109 billion worth of across-the-board spending cuts set to start striking the Pentagon and domestic agencies this week. Cost of $24 billion is divided between spending cuts and new revenues from rules changes on converting traditional individual retirement accounts into Roth IRAs.
The Associated Press
In addition to preventing higher rates for most, the agreement would retain existing breaks for families with children, for low-earning taxpayers and for those with a child in college. Also, the two sides agreed to prevent the alternative minimum tax from expanding to affect an estimated 28 million households for the first time in 2013, with an average increase of more than $3,000. The law originally was designed to make sure millionaires did not escape taxes, but inflation has gradually exposed more and more households with lower earnings to its impact.
The legislation leaves untouched a scheduled 2 percentage point increase in the payroll tax, ending a temporary reduction enacted two years ago to help revive the economy.
Officials said the White House had succeeded in gaining a one-year extension of long-term unemployment benefits about to expire on an estimated two million jobless.
It was unclear whether the legislation would prevent a 27 percent cut in fees for doctors who treat Medicare patients was unknown.
Also included is a provision to prevent a threatened spike in milk prices after the first of the year.
Even as time was running out, partisan agendas were evident.
Obama used his appearance not only to chastise Congress, but also to lay down a marker for the next round of negotiations early in 2013, when Republicans intend to seek spending cuts in exchange for letting the Treasury to borrow above the current debt limit of $16.4 trillion.
"Now, if Republicans think that I will finish the job of deficit reduction through spending cuts alone — and you hear that sometimes coming from them ... then they’ve got another think coming. ... That’s not how it’s going to work at least as long as I’m president," he said.
"And I’m going to be president for the next four years, I think," he added.
Obama’s remarks irritated some Republicans.
Sen. John McCain of Arizona they would "clearly antagonize members of the House."
Associated Press writers Julie Pace, Andrew Taylor, Alan Fram and Ben Feller contributed to this report.
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