Bush-era Tax Cuts Deal Extended

Over the objections of liberal wing of the Democratic Party, a measure hashed out by Vice President Joe Biden and Senate Minority leader Mitch McConnell, R-Ky. that would extend all Bush-era tax cuts for two years passed the muster in Senate (81-19) on December 15, 2010 and House (277-148) on December 16, 2010. The landmark deal was first unveiled by President Barack Obama on December 6, 2010. The price tag is estimated at $858 billion. In exchange for extending all Bush-era tax cuts for two years, White House exacted Republican nod on quite a few popular components such as an one-year extension of unemployment benefit for long-term unemployed. The salient features of the measure, signed by President Barack Obama on December 17, 2010, include:

* Lower rates for taxpayers at every income level ($186.8 billion)
* More generous itemized deductions for high-income households ($20.7 billion)
* More generous $1,000 child tax credit ($71.7 billion)
* Standard deduction ($18 billion)
* More generous earned income tax credit for low-income families ($ 15.7 billion)
* Tax breaks for students and their families ($3.3 billion)
* Deductions for tuitions and related expenses ($1.2 billion)
* Tax credits of up to $2,500 for higher education expenses ($17.6 billion). The tax credits measure, known as American Opportunity Tax Credit, was passed as part of 2009 stimulus bill and is set to expire this year. The tax credits extend to students who are also enrolled in for-profit institutions. In 2009, 8.3 million people received the credit, averaging $1,700 per applicant.
* Keeping top capital gains tax rate at 15% ($25.9 billion)
* Keeping top tax rate on dividends ($27.3 billion)
* Extension of jobless benefits for long-term unemployed for one year ($56.5 billion)
* Deduction of $250 for out-of-pocket classroom expenses ($390 million)
* Retaining federal deductions on state and local sales taxes in seven states (Texas, Florida, Nevada, South Dakota, Tennessee, Washington and Wyoming) that don't have sales taxes ($5.5 billion). When federal tax code was simplified in 1986, deductions for state sales taxes were eliminated. However, they were again restored in 2004, but Congress never made the measure permanent.
* Tax-free withdrawal of up to $100,000 a year by older Americans from IRA to donate to certain public charities ($979 million)
* Business tax credits for research and experimentation expenses ($13.3 billion)
* Capital improvements to restaurants and other retail buildings ($3.6 billion)
* Tax breaks to active investors in foreign-based banking, securities and insurance firms ($9.2 billion)
* Increase in depreciation and expensing for capital investments by businesses ($21.8 billion)
* Exemption from estate taxes for two years for $5 million for individual and an additional $5 million for spouse, and taxing the balance at 35% tax rate ($68 billion)
* Social Security tax cut for all wage earners from 6.2% to 4.2% for one year ($112 billion)

Source: Joint Committee on Taxation; The Dallas Morning News