Details of the tentative agreement between the White House and Senate minority Leader Mitch McConnell emerged today.
The measure would raise taxes by about 600 billion dollars over 10 years compared with tax policies that expired at midnight. It would also delay for two months across-the-board spending cuts otherwise set to begin slashing the budgets of the Pentagon and numerous domestic agencies.
Here are highlights of the deal.
INCOME TAX RATES: Extends decade-old tax cuts on incomes up to 400,000 dollars for individuals, 450,000 for couples. Earnings above those amounts would be taxed at a rate of 39.6%, up from the current 35%. Extends Clinton-era caps on itemised deductions and the phase-out of the personal exemption for individuals making more than 250,000 dollars and couples earning more than 300,000.
ESTATE TAX: Estates would be taxed at a top rate of 40%, with the first five million dollars in value exempted for individual estates and 10 million for family estates. In 2012, such estates were subject to a top rate of 35%.
CAPITAL GAINS, DIVIDENDS: Taxes on capital gains and dividend income exceeding 400,000 dollars for individuals and 450,000 for families would increase from 15% to 20%.
ALTERNATIVE MINIMUM TAX: Permanently addresses the alternative minimum tax and indexes it for inflation to prevent nearly 30 million middle and upper-middle income taxpayers from being hit with higher tax bills averaging almost 3,000 dollars. The tax was originally designed to ensure that the wealthy did not avoid owing taxes by using loopholes.
OTHER TAX CHANGES: Extends for five years Obama-sought expansions of the child tax credit, earned income tax credit, and an up-to 2,500-dollar tax credit for college tuition. Also extends for one year accelerated "bonus" depreciation of business investments in new property and equipment, a tax credit for research and development costs, and a tax credit for renewable energy such as wind-generated electricity.
UNEMPLOYMENT BENEFITS: Extends jobless benefits for the long-term unemployed for one year.
CUTS IN MEDICARE REIMBURSEMENTS TO DOCTORS: Blocks a 27% cut in Medicare payments to doctors for one year. The cut is the product of an obsolete 1997 budget formula. Medicare is the government programme that provides health care coverage to the elderly.
SOCIAL SECURITY PAYROLL TAX CUT: Allows a two percentage-point cut in the payroll tax first enacted two years ago to lapse, which restores the payroll tax to 6.2%.
ACROSS-THE-BOARD CUTS: Delays for two months 109 billion dollars' worth of across-the-board spending cuts set to start affecting the Pentagon and domestic agencies this week.