The McConnell-Biden plan

A last-minute deal, forged between the Senate minority leader, Mitch McConnell, and Vice President Joe Biden, passed in the Senate in the early hours of New Year’s Day and in the House Tuesday night. The legislation would prevent hundreds of billions of dollars in tax increases set to kick in for the majority of Americans and temporarily suspend scheduled automatic spending cuts.

What was included

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Income tax rates: Maintains current rates on income below $400,000 for singles and $450,000 for couples. Would permanently increase tax rates on income above that to 39.6 percent from 35 percent.

Dividends and capital gains: Permanently increases tax rates to 20 percent from 15 percent for single people with income over $400,000 and couples over $450,000.

Exemptions and deductions: Reinstates provisions that phase out personal exemptions and deductions for incomes over $250,000 for singles and $300,000 for couples.

Alternative minimum tax: Permanently indexes the alternative minimum tax for inflation, preventing millions of taxpayers from being affected.

Estate tax: Permanently increases tax rates to 40 percent from 35 percent on the value of estates over $5 million.

Tax credits: Extends cuts in the 2009 stimulus law for five years, including a child credit, an expanded earned income credit, and a refundable credit for college tuition. Extends some business tax credits for one year.

Payroll tax increase: Allows payroll taxes to rise on Tuesday to 6.2 percent from 4.2 percent on workers’ first $113,700.

Unemployment insurance: Extends expansion of unemployment insurance for a year.

Medicare provider payments: Prevents a 27 percent reduction in payments to Medicare providers for one year.

Automatic spending cuts: The two sides came to a deal to pause for two months the $110 billion in automatic spending cuts set to go into effect in 2013, paid for with unspecified spending cuts elsewhere.

Farm bill extension: Extends for nine months portions of the current farm bill, including provisions that would prevent milk prices from increasing.

What was left out

Debt ceiling: The country hit its debt limit Monday, and the Treasury is taking measures to put off default. If Congress does not raise the ceiling by late February or early March, the Treasury will not be able to pay all of its bills.

Additional deficit reduction: Earlier proposals by President Obama and House Speaker John A. Boehner included hundreds of billions more in deficit reduction, with Obama favoring increased taxes on the wealthy and Boehner favoring spending cuts.

SOURCE: The New York Times