President Obama has agreed to work with Republican leaders on a tax proposal that apparently could set the individual estate tax exemption at $5 million and the estate tax rate at 35%.
Obama announced the agreement Monday, during a brief, televised speech. He said the agreement calls for all Americans, including the wealthiest, to keep the Bush tax cuts for the next 2 years. He and the White House did not give details about treatment of the estate tax, but many publications have published the $5 million exemption and 35% rate figures, citing unnamed White House sources. The agreement also calls for extending unemployment insurance for 13 months and reducing the 2011 payroll tax by 2%.
Many Democrats have been calling for taxes on most taxpayers to stay the same or fall, and for taxes on high-income taxpayers to rise. Republicans have been insisting that the government should eliminate extended unemployment insurance benefits and hold taxes steady or lower them for all taxpayers, including the wealthiest 2%.
“I completely disagree with this,” Obama said. “A permanent extension of these tax cuts would cost us $700 billion at a time when we need to start focusing on bringing down our deficit. And economists from all across the political spectrum agree that giving tax cuts to millionaires and billionaires does very little to actually grow our economy. “
Obama said he himself dislikes the agreement provisions for the “extension of the tax cuts for the wealthiest Americans and the wealthiest estates… The Republicans have asked for more generous treatment of the estate tax than I think is wise or warranted.”
“But these tax cuts will expire in 2 years,” Obama said. ” And I’m confident that as we make tough choices about bringing our deficit down, as I engage in a conversation with the American people about the hard choices we’re going to have to make to secure our future and our children’s future and our grandchildren’s future, it will become apparent that we cannot afford to extend those tax cuts any longer.”
Many Democrats have blasted reports that an agreement was in the works, and some analysts are suggesting that Obama may have a harder time persuading Democrats to go along with the deal than to line up Republican support.
Obama said he felt he had to act now, in opposition to many in his own party who would prefer to keep the battle going, to keep taxes on a typical American family from increasing by about $3,000 per year starting in 2011.
“I’m not willing to let working families across this country become collateral damage for political warfare here in Washington,” Obama said. “I’m not willing to see 2 million Americans who stand to lose their unemployment insurance at the end of this month be put in a situation where they might lose their home or their car or suffer some additional economic catastrophe.”
U.S. Senate Minority Leader Mitch McConnell, R-Ky., has welcomed the deal announcement.
The efforts of Obama and Vice President Joseph Biden to negotiate “reflect a growing bipartisan belief that a new direction is needed if we are to revive the economy and help put millions of Americans back to work,” McConnell says in a statement. “Members of the Senate and House will review this bipartisan agreement, but I am optimistic that Democrats in Congress will show the same openness to preventing tax hikes the administration has already shown.”
Senate Majority Leader Harry Reid, D-Nev., says he will be discussing the proposal with his caucus Tuesday.