Bush Tax Cuts: Obama Sees Compromise Tied to Jobless Benefits

Robert Fishbein, VP and corporate counsel in Prudential Financial’s tax practice, says that the buzz on Capitol Hill is that “the Administration and Congress are close to a deal that would involve the lower [Bush] tax rates being extended for some period of time” as well as an extension on unemployment benefits. For planning purposes for clients, he says, “it would be great to know where tax rates are by year-end.” Fishbein says it’s unclear whether a deal on the estate tax would be part of any compromise, however, he says, an Alternative Minimum Tax (AMT) fix will likely be part of “the grand compromise.”

David Kelly, chief market strategist for JPMorgan Funds, says that the likely structure of a deal between the Administration and Congress, being “a temporary extension of the tax cuts for everyone in return for an extension of unemployment benefits, might allow both sides to claim some victory.” Such a compromise, he says, “would be tilted towards more economic stimulus and higher debt, and so should be positive for stocks and negative for Treasuries.”