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It's up to the House: fiscal cliff faces Republican-controlled territory
Source:
cnn.com
- Jan 1, 2013
(CNN) -- If a Senate deal to avert the fiscal cliff becomes law, all but a sliver of the U.S. population will avoid higher tax rates, some key issues will be put off for two months, and all sides in the battle will emerge with a mixed record: winning key points, while ceding ground on others.
The deal, which passed the Democratic-controlled Senate in an overwhelming 89-8 vote in the early hours of Tuesday, would maintain tax cuts for individuals earning less than $400,000 and couples earning less than $450,000. Technically, it would reinstate cuts that expired at midnight.
It would raise tax rates for those over those levels -- marking the first time in two decades the rates jump for the wealthiest Americans.
The bill faces an uncertain future in the Republican-controlled House where GOP members gathered Tuesday afternoon.
"The purpose of this meeting is to review what the Senate has passed, discuss potential options, and seek member feedback. No decision on the path forward is expected before another member meeting that will be held later today," one GOP leadership aide said.
Vice President Joe Biden, meanwhile, met with House Democrats. A longtime senator, he helped broker the Senate deal.
The House faces a deadline. On Thursday at noon, a new Congress will be sworn in. A bill passed by the previous Senate would no longer apply, so both chambers would have to start from scratch.
Some Republican lawmakers, including Reps. Phil Gingrey of Georgia and Tim Huelskamp of Kansas, told CNN they would not support the bill as written.
"It's taxing, and still taxing, small businessmen and women, and I don't like that at all," Gingrey said, referring to some small business owners who would be among those whose tax rates rise.
It's the opposite argument of some Democrats who oppose the bill. Sen. Tom Harkin, D-Iowa, complained that the deal "makes tax benefits for high-income earners permanent, while tax benefits designed to help those of modest means and the middle class are only extended for five years."
The bill temporarily extends certain tax breaks, such as the one for college tuition, while making new tax rates permanent.
While the deal gives President Barack Obama bragging rights for raising taxes on the wealthiest Americans, it also leaves him breaking a promise.
Obama had vowed to raise tax rates for the top-earning 2% of Americans, including those with household income above $250,000, and individuals earning more than $200,000.
"What I'm not going to do is to extend Bush tax cuts for the wealthiest 2% that we can't afford and, according to economists, will have the least positive impact on our economy," the president said at a news conference in November, after being asked by CNN why Americans should believe he would not "cave again this time" by allowing those Bush-era tax cuts to be extended.
When asked whether closing loopholes instead of raising rates would be satisfactory, the president responded, "when it comes to the top 2%, what I'm not going to do is to extend further a tax cut for folks who don't need it, which would cost close to a trillion dollars. And it's very difficult to see how you make up that trillion dollars, if we're serious about deficit reduction, just by closing loopholes in deductions. You know, the math tends not to work."
The deal passed by the Senate would cap itemized deductions for individuals making $250,000 and for married couples making $300,000.
Raising the threshold for higher tax rates to $400,000 shrinks the number of Americans affected. While nearly 2% of filers have adjusted gross incomes over $250,000, only 0.6% have incomes above $500,000, according to the Tax Policy Center.
Still, in a written statement early Tuesday, the president held on to the 98% figure he has so often touted.
The deal "protects 98% of Americans and 97% of small business owners from a middle class tax hike," he said. "While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country and the House should pass it without delay."
The president also acknowledged, "There's more work to do to reduce our deficits, and I'm willing to do it. But tonight's agreement ensures that, going forward, we will continue to reduce the deficit through a combination of new spending cuts and new revenues from the wealthiest Americans."
However, many Americans are still likely to see their paychecks shrink somewhat, due to a separate battle over payroll taxes.
Senate vote 'sends a strong message'
"Glad it's over," said Senate Majority Leader Harry Reid, D-Nevada, after the vote on the fiscal cliff deal, just a couple of hours after the East Coast rang in the new year. "We'll see if the Republicans in the House can become functional instead of dysfunctional."
Sen. Reid: We've reached agreement
McConnell: 'We've done some good'
A statement from House leadership made no promises.
"Decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members -- and the American people -- have been able to review the legislation," the statement said.
Sen. John Hoeven, R-North Dakota, was hopeful the House will follow suit.
"The vote was 89 to 8. Bipartisan vote. 89 votes," he said. "I think it sends a strong message and I think it will be approved by the House."
What the package proposes
Under the Senate package:
-- Taxes would stay the same for most Americans. But they will increase for individuals making more than $400,000 and couples making more than $450,000. For them, it will go from the current 35% to the Clinton-era rate of 39.6%.
-- Itemized deductions would be capped for those making $250,000 and for married couples making $300,000.
-- Taxes on inherited estates will go up to 40% from 35%.
-- Unemployment insurance would be extended for a year for 2 million people.
-- The alternative minimum tax -- a perennial issue -- would be permanently adjusted for inflation.
-- Child care, tuition and research and development tax credits would be renewed.
-- The "Doc Fix" -- reimbursements for doctors who take Medicare patients -- will continue, but it won't be paid for out of the Obama administration's signature health care law.
-- A spike in milk prices will be avoided. Agriculture Secretary Tom Vilsack said milk prices would have doubled to $7 a gallon because a separate agriculture bill had expired.
What's not addressed
While the package provides some short-term certainty, it leaves a range of big issues unaddressed.
READ MORE:
http://www.cnn.com/2013/01/01/politics/fiscal-cliff/index.html?hpt=hp_t1
Category: General Business
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