President Barack Obama signed the compromise tax plan Friday afternoon that the House of Representatives passed late Thursday night.
The final vote in the House of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was postponed for hours on Thursday by procedural maneuverings and by a failed amendment on the estate tax by Democrats, but was eventually passed by a vote of 277 to 148: 139 Democrats and 138 Republicans voted "aye" on the tax bill, while 112 Democrats and 36 Republicans voted against.
Its provisions include extensions for two years of former President George W. Bush’s JGTRRA and EGTRRA long-term but temporary tax reductions on income, capital gains and dividends, sets new exclusions and tax rates on the expired Federal estate tax, and institutes several new tax measures, including a one-year reduction, or “tax holiday,” on employees’ payroll contributions to Social Security. It also institutes two-year special treatment of some business investments in plant and other equipment.
As part of a compromise Obama worked out with the Republican leadership, the bill also would extend for another 13 months Federal support for certain long-term unemployment insurance.
The Congressional Budget Office estimates that the “cost” of the bill to the Treasury will be a total $858 billion.
For advisors, much of the anticipation about the bill centered around the Federal estate tax, sometimes called the “death tax,” which under Bush-era tax legislation expired at the end of 2009, but would have returned to a 55% top tax rate, with only a $1 million exclusion, absent congressional action, on Jan. 1, 2011. Under the new bill, the top estate tax rate will be 35% with a $5 million exclusion for an individual taxpayer, and $10 million for a couple.
(See a new AdvisorOne analysis of the soon-to-be law’s impact on estate planning in 2011, and how estate planners are advising the heirs of those who died in 2010—some retroactive actions may be called for.)
The amendment challenging the compromise bill’s estate tax provisions was floated by Rep. Earl Pomeroy (D-N.D.), but failed by a vote of 233 to 194 prior to the complete bill’s passage.
In a statement before the vote, the new House Majority Leader, Steny Hoyer (D-Md.), said, "This bill, the president of the United States believes and I believe, will have a positive effect on the economy."
Obama administration officials Thursday night hailed the bill's passage. Treasury Secretary Timothy Geithner said in a statement, "We had a responsibility to protect middle class families from a tax increase that would have hit their paychecks and harmed the recovery.”
Referring to the compromise nature of the final legislation, Geithner, who earlier in the day testified on the state of Troubled Asset Relief Program (TARP), noted that “while we do not agree on everything in this legislation,” it nevertheless is “good for growth, good for jobs, good for working and middle class families, and good for businesses looking to invest and expand their workforce."