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The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Pub.L. 111–312 (html) (pdf), H.R. 4853, 124 Stat. 3296, enacted December 17, 2010), also known as the 2010 Tax Relief Act, was passed by the United States Congress on December 16, 2010, and signed into law by President Barack Obama on December 17, 2010.[2]

The Act centers on a temporary, two-year reprieve from the sunset provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), together known as the "Bush tax cuts." Income taxes would have returned to Clinton administration-era rates in 2011 had Congress not passed this law. The Act also extends some provisions from the American Recovery and Reinvestment Act of 2009 (ARRA or 'the Stimulus'). The act also includes several other tax- and economy-related measures intended to have a new stimulatory effect, mostly notably an extension of unemployment benefits and a one-year reduction in the FICA payroll tax, as part of a compromise agreement between Obama and Congressional Republicans. The overall monetary impact of the measure has been placed at $858 billion.[3]

The law was also known, during its earlier formulation in the House of Representatives, as the Middle Class Tax Relief Act of 2010. The package has been referred to as the "Obama-GOP tax deal" as well as the "Obama tax cuts".[4][5][6]

President Obama signs the law into effect, on December 17, 2010, as members of Congress and others look on.

On December 15, the Senate passed the compromise package with an 81–19 vote, with large majorities of both Democrats and Republicans supporting it.[32] Near midnight of December 16, the House passed it 277–148, with it getting only a modest majority among Democrats and a large majority among Republicans (of the 148 votes against the bill in the House, 112 were cast by Democrats and only 36 by Republicans).[6][33] Before that, an amendment put forward by Democratic Representative Earl Pomeroy and the progressives among the Democratic caucus to raise the estate tax – the ultimate sticking point of the deal for them and the cause of a minor revolt among those against it – had failed on a 194–233 vote.<

The bill was opposed by some of the most conservative members of the Republican Party as well as by talk radio hosts such as Rush Limbaugh and some groups in the Tea Party movement.[27][28] It was also opposed by several leading potential candidates for the Republican nomination in the 2012 presidential election, including Sarah Palin and Mitt Romney,[27] typically on the grounds that it did not make the Bush tax cuts permanent and that it would overall increase the national deficit.[29]

The cut of the FICA payroll tax in the agreement was for one year only at a two percent reduction.[3] This tax holiday was intended as an economic stimulus by Obama and the Democrats,[3] with the value of boosting the disposable income of American families.[3] It would not worsen the Social Security program's financial strength, as the shortfall would be made up from general revenues. Some Republicans thus criticized the idea for increasing the national deficit. Some Democrats were also wary of the notion, either because they thought the return to the normal rate one year hence would be characterized as a politically unpalatable "tax hike", or because they feared that reductions in the payroll tax would undermine the basic model that Social Security was based on.[30][31]

On December 15, the Senate passed the compromise package with an 81–19 vote, with large majorities of both Democrats and Republicans supporting it.[32] Near midnight of December 16, the House passed it 277–148, with it getting only a modest majority among Democrats and a large majority among Republicans (of the 148 votes against the bill in the House, 112 were cast by Democrats and only 36 by Republicans).[6][33] Before that, an amendment put forward by Democratic Representative Earl Pomeroy and the progressives among the Democratic caucus to raise the estate tax – the ultimate sticking point of the deal for them and the cause of a minor revolt among those against it – had failed on a 194–233 vote.[6][27][34] The Washington Post called the approved deal "the most significant tax bill in nearly a decade".[33]

Obama signed the bill into law on December 17, 2010.[3] Much of the Democratic Congressional leadership was absent from the signing ceremony, indicating their ongoing unhappiness with the law.[13] Washington Post writer Dan Balz asserted that Obama's ability to win passage for the law indicated a "resilience of the occupant of the Oval Office" and a possible course he would take during the next Congress.[13]

Legislative voting breakdown

Final Senate vote:

ImplementationThe passage of the law so close to the new year caused a scramble for many parties involved.

Employers had to modify payroll systems to the new lower deduction for the FICA payroll tax. The Internal Revenue Service (IRS) allowed employers until January 31, 2011, to do so.[35] While companies that specialize in payroll processing could adapt to the change quickly, smaller companies that do their own payrolls could take longer.[35] It was possible that employees would have to wait for up to three paychecks to see the reduction take place.Internal Revenue Service (IRS) allowed employers until January 31, 2011, to do so.[35] While companies that specialize in payroll processing could adapt to the change quickly, smaller companies that do their own payrolls could take longer.[35] It was possible that employees would have to wait for up to three paychecks to see the reduction take place.[36]

The IRS had to reprogram its processing systems for some of the provisions in the law, and said that those who file their tax returns early would need to wait until at least the middle of February if they itemize deductions or take certain other deductions.[37] Any refunds coming to taxpayers would be similarly delayed.[38] Vendors of tax preparation software also had to modify their applications and get the updates to customers; Intuit, the vendor of Turbo Tax said they were ready and would hold affected returns until the IRS was ready to process them.[38]