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Obama and Republicans come to an agreement on taxes

Marketplace Staff Dec 7, 2010

Obama and Republicans come to an agreement on taxes

Marketplace Staff Dec 7, 2010


JEREMY HOBSON: Last night, President Obama announced he’s brokered a deal with Republican leaders on taxes. The deal will keep the Bush-era tax rates the same for all Americans for two years, in exchange for a handful of credits and cuts the President wanted.

In a statement President Obama defended himself against critics who say he should have put up more of a fight.

BARACK OBAMA: So sympathetic as I am to those who prefer a fight over compromise, as much as the political wisdom may dictate, fighting over solving problems, it would be the wrong thing to do.

OK, we’ve got the politics out of the way. Let’s get the details of this deal with Marketplace’s David Gura. He’s with us live now from in Washington. Good morning David.

DAVID GURA: Hi Jeremy.

HOBSON: So walk us through the package that’s been agreed on.

GURA: Well, in part, it’s what we’ve heard talked about for so long. We got a temporary extension of the the Bush-era tax cuts for two years. And in exchange, Congress would extend emergency jobless benefits for thirteen months. That’s for people who have been unemployed the longest. Now, here’s what’s new, or what we haven’t heard a lot about: several tax credits that were part of the economic stimulus won’t go away — the child tax credit, the earned income tax credit, to name just a couple. And there will be a two percent payroll tax cut for every American in 2011.

HOBSON: A payroll tax cut. What does that mean?

GURA: OK. This is on payroll taxes used to fund social security. So, basically on individuals who are making up to $106,000 a year. They haven’t found a way to pay for this yet, and that’s probably going to concern some who worry about the size of the deficit. This proposal would cost about a $120 billion. Leaders may have taken a cue from the president’s deficit commission. That group made its recommendations last week. One of its members, economist Alice Rivlin, was hoping for a payroll tax holiday.

ALICE RIVLIN: We need to find something right away that will put money in people’s pockets. And a payroll tax holiday would mean money for everybody who earns wages — and their employers.

So, not a tax holiay here, but a significant cut to the payroll tax.

HOBSON: Marketplace’s David Gura in Washington. Thank you David.

GURA: Thank you.

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