Tax Cut Extension Bill Passes Congress

President Obama recently negotiated an agreement on the looming expiration of the 2001 and 2003 tax cuts with Republican leaders in Congress. This agreement that is anticipated to cost $858 billion has passed both the House and Senate.

The agreement extends the 2001 and 2003 tax cuts, also sometimes referred to as the “Bush tax cuts,” for two years. The largest point of contention was whether to extend the tax cuts for those individuals making over $250,000 per year.

All of the provisions and costs associated with each can be found here on the Joint Committee on Taxation website.

In addition to holding tax rates at their current level,  the legislation includes other provisions as well. The White House released the following list of “several key victories – victories that will give the average American family assurance that there will be more money to pay the bills each month.”  

    • An Employee-Side Payroll Tax Cut of Approximately 2percent: The agreement includes an employee-side payroll tax cut for over 155 million workers – providing tax relief of about $112 billion next year.

    • 100 Percent Expensing: The agreement includes the President’s proposal to temporarily allow businesses to expense 100% of their investments in 2011, potentially generating more than $50 billion in additional investment in 2011, which will fuel job creation.

    • Extension of Unemployment Benefits: The agreement extends emergency unemployment benefits at their current level for 13 months, preventing an estimated seven million workers from losing their benefits over the next year as they search for jobs.

    • The Child Tax Credit: The $3,000 refundability threshold established in the Recovery Act for the Child Tax Credit will be extended under the agreement, ensuring an ongoing tax cut to 10.5 million lower-income families with 18 million children.

    • The American Opportunity Tax Credit: The new American Opportunity Tax Credit – a partially refundable tax credit that helps more than Eight million students and their families afford the cost of college – would be continued under the agreement.