As the New York Times noted this morning, most households will receive a tax cut under the proposed tax deal between President Obama and Congressional Republicans. In fact, “the only groups likely to face a tax increase are those near the bottom of the income scale — individuals who make less than $20,000 and families with earnings below $40,000.”

The reason that the working poor will be subjected to a tax increase is because Obama agreed to swap his Making Work Pay (MWP) tax credit (which was created as part of the 2009 Recovery Act) for a one-year, two-percentage point cut in the payroll tax. As the Tax Policy Center detailed, while low-income workers were able to reap the full benefit of Making Work Pay, they don’t earn enough to gain the same benefit from the payroll tax cut:

The MWP credit gave as much as $400 to each single worker and up to $800 to couples. If you’re single and earned at least $6,452 (and less than $75,000) in 2010, you got $400. Married couples with earnings over $12,903 (and less than $150,000) got $800.

But you won’t get $400 from the payroll tax cut until your earnings reach $20,000; earnings have to be twice that high to yield the $800 that MWP gave to couples. So single taxpayers who earn less than $20,000 and married couples earning less than $40,000 will pay more in taxes under the payroll tax cut than under MWP (see graph). Like everyone else, those folks will keep their Bush-era tax cuts and everything else that would continue from 2010 into 2011. But because no other provisions would cut their 2011 taxes relatively to 2010, those taxpayers are unequivocally worse off under the compromise in 2011 than under the tax law we have this year.

This translates into about $200 in higher taxes for an individual or $300 in higher taxes for a couple at the very low-end of the income scale. As the Tax Policy Center’s Bob Williams wrote, “the agreement turns on its head his repeated argument that we need to give more to the poor and ask more of the wealthy. No wonder Democrats in Congress are mad.”

Indeed, House Democrats are threatening to alter the tax package before voting on it, if they support it at all. If they do change the deal — in addition to trying to rectify placing a tax increase on the working poor while delivering a windfall to the rich — House Democrats might want to see if they can include a reauthorization of the TANF Emergency Fund, which helps create jobs for low-income workers and has won the praise of Republican governors like Gov. Haley Barbour (R-MS).

One facet of the tax deal negotiated between President Obama and Congressional Republicans that has earned Obama significant ire from his own party in the House is the proposed two-year cut in the estate tax.

The cut — which was crafted by Sens. Jon Kyl (R-AZ) and Blanche Lincoln (D-AR) — will bring the estate tax down to 35 percent with a $5 million exemption (meaning that the first $5 million of an estate can be passed on tax-free). At the moment, the estate tax is expired, but it is scheduled to come back in 2011 at a 55 percent rate with a $1 million exemption. Prior to striking a deal with Republicans, Obama had proposed setting the tax at 45 percent with a $3.5 million exemption.

House Speaker Nancy Pelosi (D-CA) said that the inclusion of the estate tax cut in the tax deal “add[s] insult to injury.” And if the tax deal is approved, the estate tax in 2011 and 2012 will be at its second lowest level since 1931, when it was 20 percent. The only reason that the Lincoln-Kyl cut doesn’t set an 80 year record is due to the tax’s complete expiration this year.

According to Ezra Klein, “a number of sources with direct knowledge of the negotiations have fingered the estate tax as the major player in the size of the deal.” “Republicans were extremely eager to get benefits for the top tenth of a percent of Americans,” one administration official said.

Just so we have some perspective on how few estates we’re talking about here, look at these details from the Congressional Research Service:

According to the Congressional Research Service, the Kyl- Lincoln approach would subject just 0.14 percent of U.S. estates to a tax and would generate $11.2 billion in revenue next year. By contrast, the 55 percent top rate, with a $1-million-per- person exclusion, would affect 1.76 percent of estates and would generate $34.4 billion in revenue, the CRS said. Obama had previously backed, and House Democrats in 2009 passed, a 45 percent rate and a $3.5 million tax-free allowance. If applied for 2011, those parameters would subject 0.25 percent of U.S. estates to a tax and would generate $18.1 billion in revenue next year, the CRS said.

So even at the 2001 level, which was never really on the table, fewer than two percent of estates would have conceivably been subjected to the estate tax. Obama, to his credit, said in his statement announcing the tax deal that the cut was a “more generous treatment of the estate tax than I think is wise or warranted.” That this cut is in a package ostensibly focused on boosting the economy — when it’s impact on job creation is “negligible” — is a testament to how deeply Republicans desire lower tax rates on the super-wealthy.

Our guest blogger is Tony Carrk, Policy Director for Progressive Media.

Last week, Sen. Lamar Alexander (R-TN) admitted on the Senate floor that a proposal to extend tax cuts for families with incomes below $1 million would entail a tax increase for “just a small number of people, most of whom live on Wall Street and in New York.” This bout of honesty made it painstakingly clear that President Obama was correct yesterday when he called tax cuts for the wealthy the “holy grail” of conservative economic theory

In striking a tax deal with Obama, Republicans insisted that the price of extending middle-class tax cuts and unemployment benefits for middle-class families (along other initiatives to boost the economy) would be extending the Bush tax cuts for the rich and slashing the estate tax. As Pat Garofalo and Michael Linden noted yesterday, the GOP’s priorities would cost $133 billion to benefit fewer than 5 million people, whereas the Democratic priorities cost $214 billion, but would help 156 million people.

The chart below highlights these lopsided priorities. On average, states represented by Republican Senators have more than four times the number of unemployed people as they do households earning more than $200,000. (And under President Obama’s plan to extend tax cuts only for those making less than $250,000 per year, some of these households would have still avoided a tax increase.) Yet, Republicans held unemployment benefits hostage to tax cuts for the wealthy:

This chart does not include Ohio, as Sen. George Voinovich (R-OH) has said that he will vote against any bill that extends any of the Bush tax cuts without paying for them. Senate Minority Leader Mitch McConnell (R-KY) predicted yesterday that the “vast majority” of the Senate Republican caucus will ultimately support the tax deal.

As part of his tax deal with Congressional Republicans, President Obama managed to wring out of the GOP a 13 month extension of unemployment benefits. For months, Republicans have made each extension of benefits a protracted, drawn-out fight, even with unemployment above nine percent and five unemployed job-seekers for every job opening. Sen. Jim Bunning (R-KY) even stayed on the Senate floor until late in the evening to personally block extending benefits, telling those asking him to relent “tough sh*t.”

Senate Minority Leader Mitch McConnell (R-KY) said yesterday that the “vast majority” of Republican senators would support the tax deal. But one who has come out with vocal opposition is Sen. Jim DeMint (R-SC), who takes exception to the fact that the jobless benefits extension is unpaid for. “I don’t think we need to extend unemployment any further without paying for it,” he told conservative talk radio host Hugh Hewitt yesterday.

Of course, DeMint has proposed permanently extending all of the Bush tax cuts without paying for a dime of it, adding $4 trillion in deficits over the next ten years alone. But according to DeMint, the problem with unemployment benefits is that they amount to “paying people to stay home,” as he told South Carolina’s News 13:

The senator also said extending unemployment benefits that aren’t paid for isn’t helping add new jobs. “We can’t just keep paying people to stay at home,” said DeMint. “We’ve got to create economic activity to allow businesses to grow so they can hire people.”

Watch it:

DeMint is hardly alone amongst his GOP colleagues in perpetuating the myth that jobless benefits encourage people to stay out of work. In the past year, the GOP has characterized the unemployed as, among other things, lazy, drug-addicted “hobos.” But research by the San Francisco Federal Reserve has found that workers who qualify for UI benefits stay unemployed just 1.6 weeks longer than those who do not qualify for such benefits.

Unemployment benefits are providing a vital lifeline to millions of Americans struggling in a weak economy, but DeMint would cut them off, while lavishing tax breaks on the wealthy. And it seems that DeMint would find some sympathetic ears amongst House Republicans, as a handful of them have said that they will oppose the tax deal because it has too few tax cuts and too much help for the jobless.