Senate OKs deal to avert ‘fiscal cliff’ tax hikes, spending cuts
BY LYNN SWEET Twitter: @lynnsweet December 31, 2012 11:03PM
U.S. Vice President Joe Biden leaves a closed-door meeting late Monday with Senate Democrats after urging them to support a tentative deal on taxes and spending cuts on Capitol Hill. | Drew Angerer~Getty Images
SENATE GOP DEAL
Highlights of a tentative agreement Monday between the White House and Senate Minority Leader Mitch McConnell (R-Ky.):
◆ Income tax rates: Extends decade-old tax cuts on incomes up to $400,000 for individuals, $450,000 for couples. Earnings above those amounts would be taxed at a rate of 39.6 percent, up from the current 35 percent. Extends Clinton-era caps on itemized deductions and the phase-out of the personal exemption for individuals making more than $250,000 and couples earning more than $300,000.
◆ Estate tax: Estates would be taxed at a top rate of 40 percent, with the first $5 million in value exempted for individual estates and $10 million for family estates. In 2012, such estates were subject to a top rate of 35 percent.
◆ Capital gains, dividends: Taxes on capital gains and dividend income exceeding $400,000 for individuals and $450,000 for families would increase from 15 percent to 20 percent.
◆ Alternative minimum tax: Permanently addresses the alternative minimum tax and indexes it for inflation to prevent nearly 30 million middle- and upper-middle income taxpayers from being hit with higher tax bills averaging almost $3,000.
- BREAKING: Biden returns to Capitol New Year's morning
- White House fact sheet on fiscal cliff, farm bill deal
- Live blog: the latest on the fiscal cliff talks
Updated: February 9, 2014 9:18PM
WASHINGTON — The Senate voted 89-9 to approve a fiscal cliff deal early Tuesday morning in an unusual New Year’s Eve session, sending the measure to an uncertain fate in the House.
“This historic vote protects working families from an income tax increase and spares our economy from a devastating political disaster,” Sen. Dick Durbin (D-Ill.) said. “We now turn to the House and ask them to act with dispatch to prove our government can truly respond in a bipartisan way in the best interests of the people we represent.”
The Senate voted just before 2 a.m. EST as Congress missed the Dec. 31 fiscal cliff deadline.
“This shouldn’t be the model for how to do things around here,” Minority Leader Mitch McConnell said from the Senate floor after a marathon series of negotiations. “But I think we can say we’ve done some good for the country. We’ve taken care of the revenue side of this debate.
“Now it’s time to get serious about reducing Washington’s out-of-control spending,” he said. “That’s a debate the American people want. It’s the debate we’ll have next. And it’s a debate Republicans are ready for.”
President Barack Obama said in a statement, “Leaders from both parties in the Senate came together to reach an agreement that passed with overwhelming bipartisan support today that protects 98 percent of Americans and 97 percent of small business owners from a middle class tax hike. 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.
“. . . 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,” Obama said.
Voting no were Senators Tom Harkin (D-Iowa), Tom Carper (D-Dela.), Mike Lee (R-Utah), Richard Shelby (R-Ala.), Ron Paul (R-Ky.), Michael Bennet (D-Colo.) , Chuck Grassley (R-Iowa) and Marco Rubio (R-Fla.)
Earlier on Monday, Vice President Joe Biden rushed to the Capitol to huddle with Senate Democrats, with less than three hours to go before the fiscal cliff deadline.
Biden negotiated the deal with McConnell. It will raise tax rates on household incomes of $450,000, keep tax breaks for those making less than that, extend unemployment benefits while at the same time kick decisions over spending cuts down the road a bit.
While Obama got the wealthy to pay more, it was not at the $250,000 household income level he called for during the campaign. But during these weeks of negotiations Obama said he could go higher.
The two biggest sticking points were over the estate tax and the automatic spending cuts due to sock the Pentagon and other domestic programs starting on Tuesday with the full impact spread over years.
Republicans compromised by agreeing to delay those automatic cuts for two months. Democrats yielded on the estate tax rates.
The vice president hurried to the Capitol to meet with some Democrats who were worried he was giving up too much ground.
“Don’t you all enjoy being here New Year’s Eve?” Biden said to the throng of reporters spending New Year’s Eve covering the unfolding fiscal cliff drama in the Capitol.
Biden tossed out the chipper greeting at 9:18 p.m. Eastern time as he went into a meeting that lasted for about 45 minutes.
The GOP controlled House — waiting for the Senate to act first — returns to work on Tuesday. It adjourned Monday when it was obvious the Senate vote would be coming late.
While lawmakers missed their self-imposed deadline, any deep damage to the economy will be minimal if the House and Senate reach a tax and budget deal before the new Congress is sworn in at noon Thursday.
McConnell implored Biden on Sunday to take over direct negotiations, with McConnell preferring his former Senate colleague to Senate Minority Harry Reid (D-Nev.), thinking, I was told by an informed observer, that he could get a better deal.
“I needed a dance partner, so I reached out to the vice president in an effort to get things done,” an upbeat McConnell said from the Senate floor on Monday. “And I’m happy to report that the effort has been a successful one.”
The House is another matter. House Speaker John Boehner (R-Ohio) has officially kept a distance from the Senate dealings.
“This is all about McConnell and the Democrats,” Boehner spokesman Brendan Buck told me earlier Monday.
The House is poised to deal with the Senate legislation with expedited procedures. But it’s not clear at all that House Republicans will go along with the Senate.
“We made one commitment,” Buck reminded me. “Once the Senate passes something, then we will take action.”
None of this last-minute stuff speaks well of Congress. This historic New Year’s Eve session is not a proud night under the dome.
I asked Sen. Barbara Boxer (D-Calif.) what she thought of this deadline wrangling as she entered the meeting with Biden.
“I’m speechless,” she said. “We could have done this a long time ago.”