President Barack Obama and Congressional Republicans came to a compromise today involving tax break extensions for wealthier Americans and unemployment insurance extensions for working class families.
Negotiators for the administration and Republican leadership reached a deal that would cut payroll taxes by 2 percent, extend all Bush era tax cuts for two years, and extend unemployment insurance for an additional 13 months.
Obama also said that temporarily, the deal will provide a 'more generous treatment of the estate tax than I think is wise or warranted.
Everyone will find something [with this] that they don't like, he said. It's not perfect but this compromise is essential on the road to recovery.
Obama said what became abundantly clear was that Republicans would block a permanent tax cut for the middle class unless they also got a permanent tax cut for the wealthiest Americans, regardless of the cost or impact on the deficit.
The framework agreement reached through discussions with top administration officials and members of Congress, must still be approved in both the House and Senate.
Obama said that in addition to extending the Bush tax cuts for those earning less than $250,000 and more than that amount, other tax cuts for families and students would be included such as Earned Income Tax Credit for low income families, the Child Tax Credit, and the American Opportunity Tax Credit for students and their families.
Obama said allowing taxes to go up on all Americans would have raised taxes by $3,000 for a typical American family and would have cost the loss of over a million jobs.
The unemployment insurance extension would provide relief for 2 million Americans faced with losing the benefits at the end of the year, he said.
The 2 percent Social Security payroll tax cut from the current 6.2 percent rate would give a $120 billion boost to the economy next year, a senior White House official said in a conference call after the announcement.
A worker earning $40,000 would get $800 in tax relief while one earning $70,000 would get $1,400 in relief under the plan, officials said. The move would not affect the Social Security trust fund.
The agreement on the estate tax would result in a $5 million exemption per person and a maximum rate of 35 percent, officials said.