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Bam ‘cuts’ tax deal with GOP

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WASHINGTON — Finally, change you can believe in!

President Obama and congressional Republicans yesterday reached a deal to temporarily extend the Bush tax cuts for everyone at all income levels, continue unemployment-insurance benefits, and — in a surprise development — dramatically slash payroll taxes paid by all workers for one year.

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EDITORIAL: A DEAL ON TAXES

The emerging agreement also includes tax breaks for businesses the president said would contribute to the economy’s recovery from the worst recession in eight decades.

“This compromise is an essential step in the road to recovery,” Obama said last night, shortly after the White House reached the “framework” of a compromise with the GOP.

“We cannot allow this moment to pass.”

The deal includes:

* An unexpected measure that slashes the 6.2 percent Social Security payroll tax to 4.2 percent for one year.

* Preserving the Bush-era tax cuts for everyone by extending them for two years. Those cuts are now set to expire Dec. 31.

* A 13-month extension of federal jobless benefits. Unemployment payments, which had already been extended by Congress for up to 99 weeks from a traditional 26 weeks, expire this month for 2 million Americans whose benefits have run out.

* Reinstatement of the lapsed estate tax — dubbed the “death tax” by critics — at 35 percent, with the first $5 million of an estate exempt. That’s much more generous than what Obama had backed during his presidential campaign two years ago.

* Continuation of a college-tuition tax credit for some families, an expansion of the earned-income tax credit, and a provision to allow businesses to write off the cost of certain equipment purchases.

Obama called the write-offs provision “something identified back in September as a way to help American businesses create jobs.”

“For now, I believe this bipartisan plan is the right thing to do,” the president said.

“It’s the right thing to do for jobs. It’s the right thing to do for the middle class. It is the right thing to do for business. And it’s the right thing to do for our economy. It offers us an opportunity that we need to seize.”

Yesterday’s agreement — estimated to cost about $900 billion over two years — was a major victory for Republicans, who won control of the House and picked up Senate seats in last month’s elections partly on promises not to allow any tax hikes.

Since then, Republicans in Congress — as well as some Democrats — have steadfastly opposed any partial extension of the Bush cuts if it meant raising taxes on the rich.

Democrats in the House and Senate haven’t signed off on the deal, and plan to discuss it today.

But in a sign of Democratic discontent, Senate Majority Leader Harry Reid (Nev.) reacted curtly to the Obama’s announcement.

“Now that the president has outlined his proposal, Senator Reid plans on discussing it with his caucus tomorrow,” his spokesman, Jim Manley, said in a written statement.

Obama last night made clear that he wasn’t happy about extending the tax cuts for millionaires — something he has been speaking against for months — but said he realized he had no choice.

“Ever since I started running for this office, I’ve said that we should only extend the tax cuts for the middle class,” Obama said.

“These are the Americans who’ve taken the biggest hit, not only from this recession but from nearly a decade of costs that have gone up while their paychecks have not.

“It would be a grave injustice to let taxes increase for these Americans right now. And it would deal a serious blow to our economic recovery.”

Obama also acknowledged many of his most ardent supporters on the left are adamant that he and Democratic leaders continue the fight.

“As sympathetic as I am to those who prefer a fight over compromise, as much as the political wisdom may dictate fighting over solving problems, it would be the wrong thing to do,” he said.

“The American people didn’t send us here to wage symbolic battles,” he said, adding, “I’m not willing to let working families across this country become collateral damage for political warfare here in Washington.”

For months, Democrats have repeatedly tried to exclude the rich from any plan to extend tax cuts enacted in 2001 and 2003, when George W. Bush was president.

The Democratic-controlled House recently passed legislation to let the cuts lapse on incomes over $200,000 for individuals and $250,000 for couples. On Saturday, Republicans blocked an attempt by Senate Democrats to do the same.

And although the president said he personally opposed elements of the deal, he explained that he decided an agreement with Republicans was a better option than a stalemate that would have resulted in higher income taxes at all levels on Jan. 1.

“Make no mistake, allowing taxes to go up on all Americans would have raised taxes by $3,000 for a typical American family, and that could cost our economy well over a million jobs,” he said at the White House.

In his announcement, Obama said he had agreed on a bipartisan framework and wanted Congress to approve it before lawmakers adjourn for the year later this month.

In a telling sign that the White House recognizes the extent of Democratic opposition, officials said they would prefer the Senate vote first.

The deal illustrates the Obama administration recognizes a new political reality.

Although newly elected Republicans to the House and Senate won’t take their seats until January, the president has already treated their leaders with far more deference than he had so far in his term.

churt@nypost.com