President Barack Obama announced late Monday that Democrats and Republicans had finally reached common ground on year-end legislation to extend expiring tax cuts and renew jobless benefits.
The bipartisan agreement also includes tax breaks for businesses that the president said would help aid economic recovery.
The deal forced President Obama to break a pledge he made on the campaign trail to end the Bush-era tax cuts for the wealthiest Americans.
He explained his about-face by saying Monday's agreement called for a temporary, two-year extension of cuts at all income levels, but not the permanent renewal that Republicans wanted.
Americans have been looking toward Washington, D.C. for an idea about what their tax rates will look like for 2010 and with about three weeks left for the year, they're finally getting a clue.
"I think it's pretty clear now taxes are not going up on anybody in the middle of this recession," Sen. Mitch McConnell, R-Ky., said on NBC's "Meet the Press" Sunday. "I'm optimistic we'll be able to come together.
"I think that most folks believe that the recipe would include at least an extension of unemployment benefits for those who are unemployed, and an extension of all of the tax rates for all Americans for some period of time," Sen. Jon Kyl, R-Ariz., said on CBS' "Face the Nation" Sunday.
Democrats consider the deal "Plan B."
"I am very disappointed that the Senate did not pass legislation that had already passed the House of Representatives to make middle-class tax cuts permanent," Obama said.
"Plan A" for the Democrats was extending
the tax cuts only for the middle class and low-income earners. Democrats had argued that allowing them to continue for high income earners would cost the government too much.
"They are demanding that the wealthiest Americans get a tax cut that is a thousand times the size of the average American," Sen. Byron Dorgan, D-N.D., said.
However, Republicans wouldn't budge, demanding the tax cuts extend across all income levels -- and pointing to what they describe as the real issue.
"Ultimately, the cost of government is what it spends, not what it taxes," said Rep. Jeb Henserling, R-Texas. "We have a spending problem in Washington."
If both sides can't agree by the end of the year, American workers would face the possibility of seeing their taxes increase -- a move analysts agree would hurt the frail economy.
The agreement also comes with something Democrats want -- an extension on unemployment benefits for millions of out-of-work Americans whose checks recently ran out or will run out by the end of the month.
It's still unclear whether the tax cuts will extend to capital gains, the estate tax or others. Congress is expected to reach a deal this week.