Obama Tax Cuts: Winners and Losers

Last Updated Dec 17, 2010 9:40 AM EST

The Obama tax cut framework hasn't yet been signed into law, but here's an early scorecard of winners and losers:

Winners
  • Republicans: They got everything they wanted--extension of all Bush-era tax cuts; payroll tax reduction; estate tax exemption level at $5 million. I wouldn't really count the extension of unemployment benefits as a give, because after last week's employment report, there was no way that even the staunchest of Republicans could vote against that in the end...
  • Top Wage Earners: Not only do they get an extension of the Bush-era tax cuts that benefited them far more than the middle or lower class, they also will see a reduction of payroll taxes that will amount to an extra $2,136 next year
  • Wealthy and Retired: The biggest concerns of this group have always been the tax on capital gains/dividends and the estate tax--chalk up wins in both categories. The top rate on capital gains and dividends will be capped at 15 percent and the estate tax is a bonanza--the exemption limit rises to $5 million per person (it was set to decrease to $1 million as of January 1) and the tax rate will drop to 35 percent from the 55 percent that would have occurred on New Year's Day
  • Middle Income Taxpayers: Tax rates stay the same and the two percent decrease in payroll tax will save a $50,000 wage earner approximately $1,000 a year. Throw in the college and child tax credits, plus changes to the AMT, and the middle does pretty well
  • Some Unemployed workers: The 13-month extension of unemployment benefits will not help the "99ers," but it will extend the qualification dates for existing tiers
  • Businesses: Companies can expense 100 percent of new investments, including plant and equipment expenditures
  • Stock Market: Investors like certainty, especially in the form of low capital gains and dividend income tax rates. Expect to see a drop-off in year-end tax selling now that rates are locked in at low levels for another two years
Losers
  • Deficit Hawks: At a two-year cost of nearly $900 billion, those who stay up at night worrying about the nation's debt problems will need to grab the Ambien.
  • Liberal Base of Democratic Party: Bitterness, betrayal and disbelief were the early descriptions. It's going to be a long two years for this group...
  • Bond Market: If the economy grows a little bit more as a result of the tax cuts, bonds will likely suffer. Then again, most would probably vote for a growing economy vs. low yields
  • All taxpayers (eventually): Remember that deficit commission? Down the road, we can all kiss these tax breaks goodbye
  • Estate Tax Attorneys: There just aren't that many estates that are valued over $5 million. It looks like the standard will, power of attorney and health care proxy are all the documents necessary for most American families
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    View all articles by Jill Schlesinger on CBS MoneyWatch »
    Jill Schlesinger, CFP®, is the Editor-at-Large for CBS MoneyWatch. She covers the economy, markets, investing or anything else with a dollar sign. Prior to the launch of MoneyWatch in 2009, Jill was the chief investment officer for an independent investment advisory firm. In her infancy, she was an options trader on the Commodities Exchange of New York.

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