President Obama closed in on a deal with Congressional Republicans on Monday to extend the Bush-era tax cuts at all income levels for two years as part of a package that would extend jobless aid for long-term unemployed, cut payroll taxes for all workers for a year and take other steps to bolster the economy, an administration official said.
In announcing the preliminary deal, Mr. Obama said Democrats were holding firm against what he portrayed as Republican attempts to only grant tax cuts to the wealthiest Americans.
“Make no mistake, allowing taxes to go up on all Americans would have raised taxes by $3,000 for a typical American family and that could cost our economy well over a million jobs,” Mr. Obama said at the White House.
The package would cost about $900 billion over the next two years. The deal includes reducing the 6.2 percent Social Security payroll tax on employees by two percentage points for a year, putting more money in the paychecks of workers. That tax cut would replace the central tax break for middle and low-income Americans included in last year’s economic stimulus measure, White House officials said.
It also includes continuation of a college-tuition tax credit for some families, an expansion of the earned income tax credit and a provision to allow businesses to write off the cost of certain equipment purchases.
The deal, which is not yet finalized, would include a 13-month extension of jobless aid for the long-term unemployed. Benefits have already started to run out for some people, and as many as 7 million people would potentially lose assistance within the next year, administration officials said.
Administration officials sought to cast the deal in a positive light, saying many of the new provisions would do more to accelerate the economic recovery than the tax cuts at high income levels.
But Congressional Democrats have expressed increasing anger that the payroll tax cut and the jobless aide, which Mr. Obama demanded in exchange for continuing the Bush-era tax rates for the highest-income Americans, were not enough in return for such a big concession.
The payroll tax cut would put about $120 billion back in the pockets of workers and the unemployment benefits would cost about $60 billion, officials said. Continuing the lowered tax rates for the highest-earners, by contrast, would cost the government $700 billion in lost revenue over the next 10 years, according to budget analysts.
The White House was also said to have agreed to Republican demands on the estate tax that would result in an exemption of $5 million per person and a maximum rate of 35 percent. Some Democratic aides said that concession alone was reason enough for Democratic lawmakers to oppose the deal when it comes up for votes in the House and Senate.
Some Democrats expressed wariness about the emerging deal. But it was clear that Republicans were happier with the results.
“Nothing has been finalized yet,” Senator John Barasso, Republican of Wyoming said in a television interview. Still he said, “I am encouraging Democrats to get on board.” He added, “They good news is it doesn’t raise taxes on anyone in this country.”