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Louis Jacobson
By Louis Jacobson January 2, 2013
Molly Moorhead
By Molly Moorhead January 2, 2013

Lower rates are permanent, thanks to fiscal cliff

The first time President Barack Obama tried to revise the tax cuts passed under President George W. Bush, he had to settle for a compromise with Republicans in Congress. Obama wanted to extend the rates for lower incomes and repeal them for the wealthy. Republicans wanted to extend them for everybody.

Obama relented in December 2010, agreeing to a two-year extension of all rates. That timetable ran out as the nation neared the fiscal cliff. On Jan. 1, 2013, Congress passed and Obama signed a law permanently extending the Bush-era rates on incomes below $450,000 for families and $400,000 for individuals.  

That income threshold is higher than Obama wanted -- he sought limits of $250,000 and $200,000 respectively -- but the effect is the same for middle- and lower-income Americans: their lower tax rates are permanent. We rate this a Promise Kept.

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Angie Drobnic Holan
By Angie Drobnic Holan December 20, 2010

Obama gets extension for the middle-class tax rates

In the debate over taxes during 2010, both parties agreed that the tax rates for the middle class should be continued. The tax rates, passed during President George W. Bush's administration, had an end-of-the-year expiration date and were set to go up in 2011.

Yet getting the tax rates continued proved surprisingly contentious. President Barack Obama said Republicans were holding tax cuts for the middle-class "hostage" to get tax rates for higher earners continued. So Obama agreed to continue the current tax rates for everyone, regardless of income. Additionally, Obama won another year of unemployment benefits for workers who qualified, and he won a one-year reduction of Social Security taxes that would put 2 percent of pay back into workers' paychecks.

Here, we're rating Obama's promise to continue the same tax rates for couples who make less than $250,000 and individuals who make less than $200,000. The legislation Obama signed on Dec. 17, 2010, continues the current rates for everyone for another two years. We'll check back on this promise in 2012, but for now we're rating this Promise Kept.

Angie Drobnic Holan
By Angie Drobnic Holan March 5, 2009

Below $250,000 will keep current tax rates

President Obama has said he would roll back the Bush tax cuts on higher incomes, meaning $200,000 in income for singles and $250,000 for couples. But he intends to leave in place the Bush tax cuts for people who make less than that.

When the tax cuts were first enacted in 2001 and again in 2003, the legislation came with "sunsets," or scheduled expiration dates. Without further action, tax rates will go up for everyone in 2011; at the time it was considered a way to rein in future deficit projections. So new legislation is required to keep in place current tax rates for the lower incomes.

Making the tax cuts permanent are part of the budget outline Obama presented on Feb. 26, 2009.

Obama's budget outline doesn't precisely break out how much it will cost to keep the current income tax rates for lower incomes. But an analysis by the nonpartisan Tax Policy Center found it would cost about $850 billion over 10 years.

His budget does say how much he expects to gain from raising the rates on the higher incomes. Over 10 years, it's $338 billion in additional income taxes, and another $298 billion from reducing exemptions and deductions and increasing capital gains and dividends taxes.

Congress still needs approve Obama's budget, and there will likely be arguments over many things in it. But little opposition is expected to making the tax rates permanent for the lower incomes. So for now, we're rating this promise In the Works.

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