It appears that President Obama and the GOP agreed on Monday to extend the Bush tax cuts for the next two years.
Included in the deal is the extension of the 15% rate on dividends and capital gains, an additional 13 months of jobless benefits, and a 2% employee payroll tax cut. (Payroll tax is another word for the FICA/Social Security withholding.) For a family earning $50,000, the savings is $1000, someone earning the maximum income subject to withholding, $106,800 in 2011, the savings is $2,136, double that for a high earning dual income couple. I don’t know how this slipped in, never caught that it was part of any discussion. I suppose I shouldn’t look a gift horse in the mouth, but it’s money the social security system will be in worse shape for the lacking it.
Last, the estate tax will return with a $5M exemption and 35% rate after that. Wow, that’s not bad, but let’s hope it’s made more lasting than an annual negotiation. The larger issue with the estate tax is less about the numbers, per se, and more about the moving target. If it’s kept at $5M (or even the $3.5M we had in 2009) with a provision for increasing with inflation, it would be easier to plan one’s affairs long term.
What do you think? Are you glad this is behind us, or do you feel these concessions will only worsen the financial crisis?