Congressional Republican leaders are near to a deal with President Obama to extend the Bush tax cuts for all Americans.
The Republicans have used their leverage from the landslide Midterm Elections to force the Democrats in the lame-duck Congress and White House to keep tax rates at current levels.
“We’ve got to make sure that we’re coming up with a solution, even if it’s not a hundred percent of what I want or what the Republicans want,” conceded Obama on Tuesday.
Republican leaders want to permanently extend the lower tax rates, but offered a minimum two-year extension as a compromise position.
The so-called “Bush tax cuts” have been the tax rates since 2001 and 2003, but are set to rise automatically on January 1 to the levels before President Bush and Congressional Republicans cut taxes.
“I would prefer to do it permanently,” said Senate Minority Leader Mitch McConnell on Sunday on NBC. “I think the current tax rate is appropriate for our country; it’s been in place for 10 years. Obviously, the President won’t sign a permanent extension of the current tax rates, so we’re going to have some kind of an extension. I would like one as long as possible.”
In January, the Republicans will control the House and have a larger margin in the Senate. The GOP has fought against Speaker of the House Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-N.V.), who have shoved partial tax hike bills through Congress in the past week. The Democratic Congressional leaders want a tax hike on those making over $250,000, many of whom are small business owners filing individual tax forms.
The GOP leaders insisted that a tax hike on job creators would make the current 9.8% unemployment rate go up even higher and further weaken the bad economy. So while the crippled Democrat leaders in Congress continue to play politics with American’s tax rates, the President is negotiating directly with the Republican leaders.
In exchange for the tax cuts, Obama would get an extension of federal unemployment benefits up to an additional year for those who have been jobless for 99 weeks. The GOP and Obama are still negotiating how long to extend the unemployment benefits and how to pay for the additional government spending.
McConnell said that he expects the Senate will vote to extend unemployment compensation, but has had “vigorous debates” with the White House about how to pay for it “as opposed to adding it to the deficit.”
In addition, the White House and GOP leaders are continuing to negotiate the estate tax, which will go from 0% to 55% on January 1. Congressional Republicans want to make permanent the elimination of the estate tax, also known as the death tax.
“The estate tax is the trickiest moving piece,” said a Republican House aide, who is knowledgeable with the negotations. “We suspect it’s going to be one of the last pieces to be agreed upon.”
In the Senate, McConnell offered a middle-ground position in which individuals with assets up to $5 million would not pay any death tax, and those above that amount would pay 35% in taxes. McConnell’s plan is bipartisan and co-sponsored by outgoing Sen. Blanche Lincoln (D-Ark.).
Also, the Alternative Minimum Tax (AMT) is being negotiated as part of a tax package. The Democrat-controlled Congress did not adjust the AMT limits for inflation this year. As a result, the AMT could put an extra $2,000 tax on up to 26 million families, up from four million last year, most of which are middle class.
The AMT cannot be adjusted retroactively, so the adjustment must be signed into law by the end of the year to prevent a tax hike on middle-class families. “AMT will definitely be a part of any final agreement,” said the House GOP aide.
The final deal between Congressional Republicans and the White House is expected in the next two days, and the vote would be before the end of next week.
In the wake of the Midterm Elections, the American people’s voices were heard loud and clear in Washington. And, fingers crossed, they can rest assured that their tax won’t get hiked in three weeks.