WASHINGTON, D.C. (CBS) – Congress has started its climb back up the “fiscal cliff.”
After House Republicans finally relented to the Senate’s “far from perfect” plan (as many members put it), the House Tuesday night passed the bill 257-167 with GOP and Democratic support.
The bill received 85 Republican votes, after GOP lawmakers huddled for hours Tuesday, wringing their hands over the lack of spending cuts in the bill. House leaders considered holding a vote on an amendment to add a $323 billion package of spending cuts, but the Democratic-led Senate said it wouldn’t accept an amended bill. Democrats, while also expressing concerns about the deal, largely supported the measure with just 16 voting against it.
The deal came together after marathon talks between Vice President Joe Biden and Senate Minority Leader Mitch McConnell, R-Ky., over the weekend. The Senate passed the bill by a vote of 89-8 in the early morning hours of the New Year.
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The deal protects most Americans from an income tax hike and extends long-term unemployment insurance, among other things. The details of the bill are as follows:
- Tax rates: Current tax rates will be extended for all wage earners making below $400,000 and couples making below $450,000.
This was a key concession for both Republicans and Democrats. Democrats wanted the threshold for tax increases to rest at $250,000 and Republicans didn’t want marginal tax rates to increase for anyone.
- The estate tax: It was set to increase from rom 35 percent to 55 percent in 2013. Instead, the compromise sets the new rate at 40 percent with the first $5 million worth of property exempt from being taxed.
- Capital gains tax: Capital gains and dividend tax rates will increase from 15 to 20 percent.
- Alternative Minimum Tax: A permanent fix to the tax that would hit middle class families
- “Doc Fix”: Doctors will be shielded from a massive reimbursement gap for treating Medicare patients.
- Unemployment benefits: Unemployed workers will receive their benefits which expired over the weekend.
- Renewable energy tax credit: The tax credit for renewable energy companies will be extended for another year.
- “Milk cliff” avoided: Subsidies for milk are extended, averting looming price hikes.
- Congressional pay freeze: a scheduled salary bump for members of Congress is halted.
many House Republicans, prompting even House Majority Leader Eric Cantor to declare his opposition to the deal and ultimately vote against it.
Another major concern for both Republicans and Democrats was the bill’s treatment of the so-called “sequester” cuts — across-the-board spending cuts amounting to $1.2 trillion over 10 years (and about $109 billion this year alone) that were set to hit both the Pentagon and domestic programs starting this week. The deal passed in Congress allocates $24 billion in spending cuts and new revenues to defer the “sequester” cuts for two months, ensuring Congress will have to debate the issue once again within a matter of weeks.
Adding to the urgency of the next expected fiscal showdown, the deal also failed to raise the debt ceiling (the nation’s legal borrowing limit). The Treasury Department is expected to exhaust its borrowing capacity around mid-February, just around the time Congress will have to do something about the sequester.
While the deal does extend the Bush-era tax rates for the middle class, most Americans will still see a tax hike this year. That’s because both Democrats and Republicans agreed to let the payroll tax holiday enacted two years ago to expire, meaning payroll taxes will go up to 6.2 percent from 4.2 percent.
President Obama and House Speaker John Boehner, R-Ohio, were, in early December, negotiating over a more comprehensive economic package, but leaders sought a more limited deal after those talks fell apart. The final deal came together after a negotiating session that started Friday with an offer from Senate Republican leader McConnell. McConnell and Vice President Biden worked through Sunday night with White House and congressional staffs to finalize the deal.