What the Tax Cut Extension Means For You

by Jason on December 8, 2010

The White House issued a fact sheet that explained the benefits of the tax cut extension in more detail.

Here’s a broad overview of the four main benefits as outlined by the White House:

1. Payroll Tax Cut for Workers

This would include a 2% payroll tax cut for employees, which would result in tax relief of an estimated $120 billion for workers.

This means you’ll get more in your pocket with each paycheck, which lawmakers hope you will go out and spend to spur consumption, growth, and get the economy humming again.

Here’s a line from the release:

This tax cut will have a major impact on jobs and growth – creating substantial numbers of jobs. It is widely recognized by economists across the political spectrum as a high bang for the buck way to boost growth and was cited by both major deficit reduction commissions as consistent with long term fiscal discipline.

2. High Impact Credits for Workers

Here’s a very interesting quote from the release:

Economic studies consistently find that lower-income households are the most likely to spend additional money, creating jobs and helping overall growth. That’s why the Congressional Budget Office, for instance, has concluded that “policies aimed at lower-income households tend to have greater stimulative effects.

So, lets give the cuts to lower-income families because they’ll go out and spend the money…those rich folk will just save it! 

What they are proposing:

  1. Child Tax Credit – extend the $1,000 child credit for two years.
  2. Earned Income Tax Credit – extend the extra $600 in tax relief for qualifying families with three or more children.
  3. American Opportunity Tax Credit – extend the (up to) $2,500 tax credit for families with students who qualify.

3. Unemployment Benefits Extension

The bill would extend the unemployment benefits for another 13 months, through the end of 2011.  This would provide relief for those still looking or work.

4. Business Tax Cuts to Spur Growth

Here’s what the release states:

In September, the President called for temporarily allowing businesses to expense all of their investments in 2011. This growth-oriented tax cut was included in the framework agreement.

  •  
    • According to the Treasury Department, complete expensing could generate more than $50 billion in additional investment in the U.S. in 2011.
    • The provision will provide a crucial incentive to 2 million businesses to invest and create jobs in the U.S and would be the largest temporary investment incentive in American history.
    • The framework agreement also includes a 2-year extension of the R&D tax credit and other tax incentives to support business expansion

Another deduction to consider is the 2011 home improvement tax credit, which provides a max up to $500 for home improvements.

What Are Your Thoughts?

Do you like the proposal? 

What would you add or take away?

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{ 2 comments… read them below or add one }

The Yakezie December 8, 2010 at 4:26 pm

Very pumped about this!

Anonymous December 8, 2010 at 5:53 pm

Absolutely! That’s a nice break.

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