The U.S. House of Representatives gave final approval late Thursday night to the $858 billion tax deal (CNN) struck by the Obama administration and Senate Republican leaders. The president is scheduled to sign the bill late this afternoon. The bulk of the package will provide a two-year extension to the Bush-era tax cuts set to expire at the end of the year, and will extend unemployment benefits for an additional thirteen months. Other provisions include a reduction in the payroll tax of two percentage points for one year and a decrease in the estate tax.
The White House and Republicans praised the deal as a bipartisan success (NYT) and a possible model for future cooperation when the parties begin to share power in 2011. Some Republican detractors wanted a permanent extension of the tax-cuts, but a looming deficit crisis swayed many critics to compromise. With the reduction in payroll tax and an increased level of economic certainty, some observers predict the stimulus could add up to one percentage point of growth next year (FT). However, some critics suggest that the bill does not go far enough to instill financial confidence in U.S. corporations, citing the short-term nature (WSJ) of the extensions.
Bill House writes on TheAtlantic.com that the tax deal represents a refreshing new brand of D.C. politics but falls short of substantial policy.
Laura Saunders of the Wall Street Journal discusses the financial winners and losers of the new tax legislation.
This CFR Analysis Brief examines the ongoing debate about potential tradeoffs between tackling U.S. debt and bolstering the U.S. economic recovery.