Obama announces accord on taxes

President Obama announced Monday night that he has reached a deal with congressional leaders on a  tax-cut plan. 

Less than a week after House and Senate leaders met with Obama and other White House officials, the president announced a "framework for a bipartisan agreement " that includes a two-year extension of the Bush-era tax cuts for all taxpayers, a 13-month extension of unemployment benefits, a 35 percent estate tax with a $5 million exemption and a 2 percent across-the-board payroll tax cut. 

"Rather than prolong the battle I'm not willing to let working families become collateral damage," Obama said tonight in an address. 

He said it became clear that Republicans wouldn't consider any plan that didn't extend tax cuts for those in higher income brackets, he wanted to ensure a deal was done before the 2001 and 2003 tax cuts expired at the end of the month. 

This deal is "significantly stronger for creating jobs than most would have thought possible before this negotiation started," one White House official said. 

Senate Majority Leader Harry Reid (D-Nev.) said he would speak to his caucus on Tuesday after the plan before responding to its contents. 

White House officials in a conference call with reporters didn't have a price tag yet on the package although estimates there were wide-ranging estimates between $500 billion and $800 billion. 

The 2 percent payroll tax cut -- cutting Social Security taxes from 6.2 percent to 4.2 percent -- is estimated to cost $120 billion, senior White House officials said. The payroll tax cut takes the place of the Making Work Pay tax credit that was included in stimulus and is expected to provide workers will with a larger tax cut next year, senior administration officials said. 

The cut applies to all workers and would give someone making $40,000 a year, $800 in tax relief in 2011, officials said. 

Other funds will be shifted into the Social Security trust fund to ensure its solvency, officials said. 

The unemployment benefits extension -- one of the most comprehensive plans put forth by any administration -- is estimated to cost $56.4 billion. 

The compromise plan also provides incentives to businesses who will be able to write off 100 percent of their expenses next year, providing about $150 billion in tax cuts for businesses, stepping down to bonus depreciation in 2012, officials said. 

Republicans pushed for two-year estate tax at a 35 percent rate with a $5 million exemption. Senate Finance Chairman Max Baucus had proposed a 45 percent rate for estates at $3.5 million and higher. Officials didn't have cost estimates of tax on Monday night. 

All of the tax extenders in the package -- including the research and development tax credit -- have a duration of two years -- retroactive back to 2010 and running through next year. 

The measure also includes a two-year patch of the alternative minimum tax. 

Not included in the package is a repeal of the 1099 requirement for business, although congressional leaders in both parties differ on the pay-fors not on the need to eliminate the tax-filing requirement.