The Big Winners From the Obama Tax Dealhttp://www.fool.com/how-to-invest/personal-finance/taxes/2010/12/07/the-big-winners-from-the-obama-tax-deal.aspx Dan Caplinger
December 7, 2010
Throughout the year, all the uncertainty about what would happen to tax laws next year has made it next to impossible to plan a reasonable investing strategy for the future. But if early reports actually result in anything more than just trial balloons, then there will be some definite winners from a proposed compromise between congressional Republicans and the Obama administration.
Where we've been
Proposals on what to do in 2011 and beyond have been front and center within political debates since before the 2008 elections. The administration originally sought to let tax cuts lapse on high-income taxpayers while retaining the new low rates and other tax breaks for those in the low- and middle-income brackets.
But according to The Associated Press, President Obama and Republican leaders in Congress have now come to a compromise on what to do about the looming expiration of the Bush tax cuts. Under the proposal, the tax cuts would be extended for two years. Estate taxes would be reinstated, but at the lower rate of 35%, and would apply only for estates of $5 million or more. In addition, a new payroll tax reduction would cut two percentage points off Social Security taxes. Finally, popular breaks like the Earned Income Tax Credit and child tax credits would be extended along with the current tax brackets.
So who would benefit the most from the proposed law changes? Let's do a quick rundown:
The same old same-old for taxpayers
Low-income taxpayers see the status quo continue, letting them keep collecting credits that often give them refunds without paying much if any tax. Middle-income taxpayers benefit, since the break on payroll taxes can be worth more than $2,000 per individual, depending on your wage level. And high-income taxpayers reap the windfall of somewhat unexpected continuation of lower brackets.
No backlash for stocks