Fiscal Cliff

Once again at the 12th hour a deal is reached. Over the next several days we will get more details on this deal. Here’s what I think that we have:

Bush tax cuts: The deal would extend all of the Bush tax cuts for incomes below $400,000 for individuals and $450,000 for families, while reinstating the Clinton-era 39.6 percent tax rate for income above those thresholds. It will also push the capital gains rate on investment income back to 20 percent for income above $400,000 for individuals and $450,000 for families. President Obama had asked for an extension of rates only for incomes below $250,000.

Stimulus tax credits: Three tax credits expanded as part of the stimulus will be extended for one year as part of the compromise. The America’s Opportunity Tax Credit, Child Tax Credit, and Earned Income Tax Credit collectively benefitnearly 20 million Americans each year, and extending them was a priority for Obama and Democrats. Republicans allowed all three to expire in tax legislation earlier this year.

Payroll tax cut: The payroll tax cut would expire as part of this compromise. The payroll tax cut, which benefits all wage-earning workers, is the most damaging piece of the “fiscal cliff” according to the Congressional Budget Office. Republicans have opposed extending the payroll tax cut in the past; many Democrats opposed its extension over fears that it would undermine Social Security, which it helps fund.

Unemployment insurance: The federal unemployment insurance program would be extended for one year under this deal. Without an extension, more than 2 million would lose benefits at the beginning of 2013, while another million would lose them in the early part of the year.

Estate tax: The estate tax was set to revert to its Clinton-era levels, where it was taxed at 55 percent after a $1 million exemption. This deal would set the exemption at $5 million and tax at a 40 percent rate after that — at a cost of$375 billion over 10 years compared to the Clinton level.

Other provisions: The deal would also include a permanent fix to the Alternative Minimum Tax and a one-year “doc fix,” which would prevent cuts in provider payments through Medicare. It also extends certain corporate tax provisions for another year.

The New York Times reports a tentative deal has been struck: “Senate Republicans said negotiators also agreed to put off $110 billion in across-the-board cuts to military and domestic programs for two months while broader deficit reduction talks continue.” Also the $5 million estate tax exemption will be indexed to inflation.