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Fiscal Cliff Agreement Nearing On Capital Gains And Dividends Rate Hikes: Sources

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WASHINGTON -- Fiscal cliff negotiators are coalescing around an agreement on high capital gains and dividends tax rates, according to both Democratic and Republican sources involved with the talks. The higher rates would apply to income above a certain level, with the White House pushing for $250,000 as the threshold and Republicans putting it at $1 million.

The new rates would be set at 20 percent for both dividends and capital gains. Health care reform will add another 3.8 percent surcharge on top of the 20 percent, giving the Treasury a substantial boost in revenue. The New York Times' Paul Krugman reported earlier Tuesday that he had been told by a senior administration official that the White House expected movement on capital gains and dividends rates.

"As I understand it -- the reporting is weirdly silent on this, but it's what I got from my own conversation with an SAO -- is that taxes on unearned income are going back to pre-Bush levels: capital gains at 20 instead of 15 percent, dividends taxed as ordinary income," he wrote.

The position about which Krugman had been told represented the one for which the White House had previously been pushing. Senate Democrats had urged instead to do 20 percent for dividends and capital gains.

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