The White House and Republicans have reached an agreement on the Bush tax cuts, and it's a whopper. Republicans get their tax cuts. Democrats get their second stimulus -- albeit, much of it in the form of another tax cut.
Here's a six-point outline of the compromise, via Jake Tapper, much of it confirmed by the president in a Monday speech:
1. The entire Bush tax cut law is extended for two years.
2. A one-year, two-percentage point reduction in the payroll tax replaces the Making Work Pay tax credit from the Recovery Act. This $100+ billion stimulus will leave more money in the pockets of
both employers and employees, since the payroll tax is divided evenly between boss and worker. [*Treasury emails to update: The tax cut is two percentage points on the employee side only. That brings payroll taxes down to 4.2 percent, from 6.2 percent, on wages up to about $107,000 -- a significant tax break that especially benefits middle- and upper-middle class workers.]
3. A de-clawed estate tax reemerges in 2011, after a one-year hiatus. In 2010, estates larger than $5 million will fork over up 35 percent of dollars above that ceiling. Without congressional action, the estate tax would be restored for estates worth more than $1 million with rates rising to 55 percent.