'Fiscal cliff' averted by House vote
President Barack Obama makes remarks after the House of Representatives acted on legislation intended to avoid the "fiscal cliff" on Tuesday. (REUTERS/Jonathan Ernst)
Key points in bill passed by Congress to avert 'fiscal cliff'The U.S. House of Representatives approved a Senate bill on Tuesday night to avert $600 billion in automatic tax increases and spending cuts known as the "fiscal cliff." Here are details:
-- Postpones the first installment of automatic spending cuts for two months while Congress works on a plan replace them.
-- Raises $620 billion in revenue over 10 years through a series of tax increases on wealthier Americans.
-- Permanently extends tax cuts enacted in 2001 under former Republican President George W. Bush for income below $400,000 per individual, or $450,000 per family. Income above that level would be taxed at 39.6 percent, up from the current top rate of 35 percent.
-- Above that income threshold, capital gains and dividends tax rates would return to 20 percent, from 15 percent.
-- Caps personal exemptions and itemized deductions for income above $250,000, or $300,000 per household.
-- Raises estate tax rate to 40 percent for estates of more than $10 million per couple, up from the current level of 35 percent.
-- Includes a permanent fix for the alternative minimum tax.
-- Extends unemployment insurance benefits for one year for 2 million people.
-- Extends child tax credit, earned income tax credit, and tuition tax credit for five years.
-- Extends research and experimentation tax credit, and the wind production tax credit through the end of 2013. Extends 50 percent bonus depreciation for one year.
-- Avoids a cut in payments to doctors treating patients on Medicare - the "doc fix."
A months-long battle ended late Tuesday night as the House approved a deal to avert the "fiscal cliff" crisis.
Republicans had threatened throughout the day to halt the bill, approved 89 to 8 by the Senate early Tuesday, because of concerns that it didn't cut spending enough or take serious steps to dent the national debt. Their fury was fueled further by a new report from the nonpartisan Congressional Budget Office that the package would add $3.97 trillion to deficits over the next decade.
If Congress had not acted, tax rates would have jumped for all Americans and automatic spending cuts would have kicked in today. The House approved the bill 257 to 167; President Obama is expected to sign it into law shortly.
Republican Frank Guinta was the only member of the New Hampshire delegation to vote against the measure. Second District Rep. Charles Bass, also a Republican, voted for it.
Click here to view the roll call vote on H.R. 8
"This bill ultimately added $4 trillion to the debt and had no serious spending reductions or reforms," Guinta said. "I think this bill ultimately fell short."
Both Guinta and Bass lost their bids for re-election in November and will be leaving office later this week.
After Tuesday's Senate vote, New Hampshire Republican Kelly Ayotte said: "While the President was insistent on raising taxes, I voted to spare as many Americans as possible from getting hit by tax increases. Now it's time for the President and Congress to cut spending and come up with real reforms to get us out of our crippling $16 trillion debt."
After the vote, Obama said the "fiscal cliff" deal is just one step in a broader effort to strengthen the economy.
Speaking shortly after the vote, Obama said he hoped future deals would "not scare the heck out of folks quite as much." At the same time, he told Republicans that he expected them to approve an increase in the nation's borrowing authority without the brinksmanship that has marked other showdowns.
"While I will negotiate over many things, I will not have another debate with this Congress about whether or not they should pay the bills they have already racked up," he said.
The vote means spending cuts will be postponed two months, and Bush-era tax rates will prevail for all individuals making up to $250,000 and families making up to $300,000.
Taxpayers making more than that will pay higher taxes on capital gains and dividends. Individuals making more than $400,000 - $450,000 for families - will pay a top income tax rate of 39.6 percent, up from the current 35 percent.
The plan also ties the alternative minimum tax to inflation, a big relief for an estimated 30 million taxpayers who could have been hit with higher bills.
Other measures include an extension of jobless benefits for the long-term unemployed and avoiding a huge cut in Medicare payments to doctors for a year.
However, workers will see up to $2,000 more taken out of their paychecks annually with the expiration of a temporary payroll tax cut.
The call to vote in the House came after a day of furious closed-door lobbying - and arm-twisting. Vice President Joe Biden met for two hours with House Democrats. While he did not find overwhelming enthusiasm, Minority Leader Nancy Pelosi, D-Calif., tweeted that the measure would get a "strong majority" from her party.
At the same time, Republicans met privately twice, for a total of nearly three hours. They heard opposition from House Majority Leader Eric Cantor, R-Va., who has a strong following among conservatives. "There was a lot of discontent in that room," said Rep. Steven LaTourette, R-Ohio.
"This does nothing about getting the $16.4 trillion debt under control, said Rep. Steve Chabot, R-Ohio.
Republicans made a last-ditch effort to pass more spending cuts, offering to consider the same package of $328 billion in cuts that passed on a party-line vote Dec. 20, but could not muster enough support Tuesday.
"We've gone as far as we can go and I think people are ready to bring it to a conclusion," Republican Representative Jack Kingston of Georgia said. "We fought the fight."
Tuesday's vote was a reversal for House Republicans, who were in disarray despite winning deep spending cuts in earlier budget fights. But they saw their leverage slip away this time when they were unable to unite behind any alternative to Obama's proposal.
House Speaker John Boehner and other Republican House leaders stayed silent during the debate on the House floor, an unusual move for a major vote. Boehner backed the deal, but many of his top lieutenants voted against it. With most of his Republicans voting against the bill, he could face blowback when he asks them to re-elect him as House speaker on Thursday.
The deal shatters two decades of Republican anti-tax orthodoxy by raising rates on the wealthiest even as it makes cuts for everybody else permanent.
Lawmakers had struggled to find a way to head off across-the-board tax hikes and spending cuts worth $600 billion that began to take effect at midnight on Jan. 1, a legacy of earlier failed budget deals that is known as the fiscal cliff.
Strictly speaking, the United States went over the cliff in the first minutes of the New Year because Congress failed to act on time. But the bill passed on Tuesday will be backdated.
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