Senate Republican Leader Mitch McConnell and Vice President Joe Biden work to craft last-minute agreement to prevent tax hikes.
Talks between Senate Republican Leader Mitch McConnell and Vice President Joe Biden have resulted in key tax provisions as the two worked to finish a compromise that would avert the fiscal cliff of tax hikes and drastic spending cuts poised to hit economy starting Jan. 1:
- Income tax rates would go up to Clinton-era rates on individuals making more than $400,000 and families making more than $450,000. The Bush-era tax cuts would be made permanent for everyone under that threshold. Those below the threshold would see a permanent 15 percent capital gains and dividends rate, and those above the rate would pay 20 percent.
- The estate tax would be exempted on the first $5 million, and assets over that amount would be taxed at 40 percent. Current law exempts the first $5 million and taxes the rest at 35 percent, but that expires today and reverts to 55 percent tax rates on assets more than $1 million on Jan. 1.
- A permanent "patch" for the Alternative Minimum Tax, which was meant to make sure millionaires paid their fair share of taxes, but which has increasingly ensnared the middle class.
- A five-year extension on the American Opportunity Tax Credit, Child Tax Credit, and Earned Income Tax Credit.
Democrats and Republicans are still working on how to prevent across-the-board spending cuts that begin next year.
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