The basic concepts of the agreement are as follows:
Extended for 13 months:
- Unemployment benefits at current levels
Extended for 2 years:
- Existing income tax rates
- R&D tax credit
- Child Tax Credit of $1,000
- Earned Income Tax Credit of $600
- American Opportunity Tax Credit (for college tuition) of $2,500
Provisions for 2011:
- Businesses would be allowed to expense investments (similar to the section 179 which now allows small businesses to write off up to $500,000 annually)
- Employee payroll tax for social security would be reduced from 7.65% to 5.65%
While the business expensing provision is not likely to benefit small businesses (which already are allowed to write-off up to $500,000 annually), this provision should have an overall stimulative effect on business investment. We also have been a steady supporter for permanently extending the R&D tax credit. So, while this agreement extends the credit for only two years, this action should likewise have a positive effect on development of new technologies.
There is still some possibility that the 1099 repeal provision could find its way into this legislation, the text of which has yet to be released. However, because this provision does not go into effect until 2012, some speculate its repeal will linger into the next Congress.
