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Obama And Republicans Agree On Tax Cut Extension

President Barack Obama gives a statement on a bipartisan plan to prevent tax cuts from expiring. (Mandel Ngan/Getty Images)
President Barack Obama gives a statement on a bipartisan plan to prevent tax cuts from expiring. (Mandel Ngan/Getty Images)

President Barack Obama lost a game of chicken over tax cut extensions, and had to compromise when Republicans called his bluff.

Obama and the Democrats wanted to extend tax cuts only for middle income earners, while the GOP in Congress were willing to let the cuts expire at the end of the year if those for the wealthy did.

Monday night, Obama announced agreement with Republicans to extend tax cuts for all Americans, renew jobless benefits and grant a one-year reduction in Social Security taxes for millions.

The emerging agreement also includes tax breaks for businesses that the president said would contribute to the economy's recovery from the worst recession in eight decades.

Obama said there were elements of the deal he personally opposed, including an extension of expiring income tax cuts at upper income levels and a more generous deal on estates. But he said he decided that an agreement with Republicans was more important that a stalemate that would have resulted in higher income taxes at all income levels on Jan. 1.

"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,'' he said at the White House.

Senate Majority Leader Harry Reid, D-NV, reacted curtly to the president's announcement.

"Now that the president has outlined his proposal, Senator Reid plans on discussing it with his caucus tomorrow,'' his spokesman, Jim Manley, said in a written statement.

One top Republican, Rep. Dave Camp of Michigan, was more positive. "This framework will allow us to extend all current tax rates and give economic recovery and job creation a chance,'' he said.

Democrats have repeatedly raised objections to including the upper-income in any plan to extend tax cuts enacted in 2001 and 2003 when George W. Bush was president. The Democratic-controlled House recently passed legislation to let the cuts lapse on incomes over $200,000 for individuals and $250,000 for couples. On Saturday, Republicans blocked an attempt by Senate Democrats to do the same.

NPR's Scott Horsley contributed to this report, which includes material from The Associated Press

Copyright NPR 2022.

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