Factbox: Key components of Senate tax legislation
(Reuters) - President Barack Obama's Republican-backed tax deal is headed for a vote in the U.S. Senate next week, where it is expected to pass.
It will then move to the House of Representatives where it will face a tougher fight.
Obama agreed to extend all Bush-era tax cuts for two years, a policy he long opposed, in exchange for a 13-month extension of long-term jobless benefits and tax credits.
All tax cuts enacted by former President George W. Bush expire December 31.
Most Democrats favor extending the lower rates for household income of up to $250,000 only. Republicans want to retain the cuts for everyone including wealthier Americans.
Following are key components of the Senate bill, headed for procedural test vote on Monday. All cost estimates are from the congressional Joint Committee on Taxation and for a 10-year period unless noted.
INDIVIDUAL INCOME, INVESTMENT TAXES
* Extends tax rates for all income groups, including the wealthiest top 2 percent, which Obama had originally opposed.
Cost of keeping tax rates for the middle and lower income groups: $127 billion. Cost to retain the top two income tax rates Obama originally opposed: $61 billion.
* Keeps capital gains and dividends taxed at a top rate of 15 percent. Obama and Democrats had sought a 20 percent top rate. Cost: $54 billion.
* Repeals certain limitations on deductions for high-earning individuals. Cost: $21 billion.
* Extends a $2,500 annual college tax credit, favored by Obama, for two years. Cost: $18 billion.
* Extends a $1,000 child tax credit, which phases out at higher incomes, for two years. Cost: $72 billion
* Boosts earned income tax credit, which benefits low-earning working individuals. Cost: $12 billion
* Obama conceded to Republican demands on the estate tax, by proposing a 35 percent tax with a $5 million individual exemption.
* That level was originally pitched by Republican Senator Jon Kyl. Obama and Democrats had wanted to renew the tax at 2009 levels of 45 percent rate with a $3.5 million exemption level. The estate tax expired this year. Cost: $68 billion.
* The deal extends long-term unemployment insurance for 13 months, without a requirement that it be paid for immediately as Republicans have demanded.
* Two million people by the end of the year will lose their benefits if the benefits are not extended, according to the National Employment Law Project, a workers' rights group.
* Jobless benefits usually expire after six months, but since the recession took hold in 2007 Congress has voted to extend them for up to 99 weeks.
Cost: $57 billion, according to the Congressional Budget Office.
ALTERNATIVE MINIMUM TAX
* The plan amends the alternative minimum tax by indexing it to inflation to prevent more than 20 million middle-class taxpayers from getting hit with the tax, intended to ensure the wealthy pay some income taxes.
Cost: $137 billion.
EXPENSING FOR BUSINESS
* Lets businesses of all sizes to write off investments faster in 2011. This benefits capital-intensive companies the most.
Cost: $21 billion.
PAYROLL TAX CREDIT
* Employers and workers each pay a 6.2 percent payroll tax, which funds Social Security. Under the proposal, workers get a 2 percent cut in their share for one year.
* The Social Security Trust Fund would be paid back by a transfer of general funds.
Cost: $111 billion
ADDITIONAL INDUSTRY TAX BREAKS
* Extends a 45-cent-per gallon tax credit for ethanol for one year and a 54-cent tariff on imported ethanol. Cost: $7 billion.
* Revives for 2010 and extends a research and development tax credit to 2011. Cost: $13 billion for two years.
(Editing by Xavier Briand)
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