WASHINGTON — With the Senate poised to hold a key vote on Monday on the tax cut deal between President Obama and Republicans, the political jousting has focused on what the agreement does for the wealthy by extending all of the Bush-era tax rates, and for the unemployed, by continuing jobless aid.
But a hefty portion of the $858 billion tax package will benefit middle- and upper-middle-income Americans — precisely the demographic that felt neglected the last two years as the White House and Congress focused on the major health care law and on helping the unemployed and people facing foreclosure.
These new tax breaks are in addition to the cuts Mr. Obama had always planned to maintain on all but the highest incomes, and they could pay big political dividends to Mr. Obama and other Democrats in 2012 — a point that the president and some senior advisers are counting on, and one reason that they were willing to give in to Republican demands to extend all Bush-era tax rates.
Austan Goolsbee, the chairman the White House Council of Economic Advisers, appearing Sunday on “Meet the Press” on NBC, said Mr. Obama was still convinced there was no economic benefit to continuing lower tax rates for the highest earners.
“That’s a bitter pill to have to deal with,” Mr. Goolsbee said. “But it’s a compromise, and by giving that one piece we were able to get a series of things that I think make a big difference to the middle class and working families.”
The full scope of those goodies is fully discernible only by poring over the bill and its head-spinning array of provisions
The single most expensive component of the package — other than the continuation of all of the marginal rates — is a two-year adjustment of the alternative minimum tax, to prevent it from hitting millions more households. This would insulate couples with income up to $72,450 in 2010 and $74,450 in 2011 at a cost of $137 billion, according to a detailed cost analysis by the Congressional Joint Committee on Taxation.
Middle- and upper-middle-income Americans will also benefit most from the one-year payroll tax cut, which will reduce the Social Security tax on income up to $106,800 to 4.2 percent from 6.2 percent. For couples with two incomes, each above the maximum, the tax savings will be $4,272. That provision will cost $112 billion.
The extension of jobless benefits, by contrast, will cost just under $57 billion, according to the joint tax committee.
And other provisions that benefit the middle class have gotten virtually no attention, including a temporary repeal of a limit on itemized deductions and repeal of the phaseout for personal exemptions. Together, those tax breaks will cost nearly $21 billion.
Mr. Goolsbee said the White House was betting that after a two-year extension of tax policies of President George W. Bush, it would be far harder for Republicans to defend the tax cuts for the wealthy in 2012, when the economy is expected to be stronger, thereby weakening their argument that allowing tax rates to rise for the rich would hamper the recovery.
The rest of the article is here...
http://www.nytimes.com/2010/12/13/us/politics/13tax.html?_r=3&pagewanted=print
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