The country has been waiting to see if Congress would pass legislation toavert the impending fiscal cliff. Congress did pass a new package Tuesday eveningto extend most tax cuts as well as an extension of the current farm bill.
The Senate passed the package with an 89-8 vote, while the House was muchmore split, voting 257-167 in favor of the bill.
Sen. Mike Johanns sent a release following his support of the measure. Hesaid, "This agreement isn't my ideal option, but I firmly believe goingover the cliff isn't an option at all."
"I would have preferred stopping a tax hike for every American,significantly reducing spending and strengthening Social Security and Medicare.This package, however, is a vast improvement from the Administration's originalproposal and no one can overlook the fact it protects an estimated 99 percentof Americans from being hit with the largest tax hike in our nation'shistory."
Congressman Adrian Smith voted against the fiscal cliffagreement and said, "This debate is notover. My concerns about spending remain and I will continue to fight toreduce the deficit and pass commonsense tax reform to put our country on a moresustainable and prosperous path. We must find an alternative to arbitrarydefense cuts, but simply delaying these difficult decisions without replacingthe spending reductions is the wrong approach."
The fiscal cliff is a combination of expiring tax relief and automaticspending cuts that would have kicked in at the beginning of next year. Since thepackage was not signed by President Obama before the New Year, the deal willtake place retroactively so tax rates will continue uninterrupted for theoverwhelming majority of American taxpayers.
Below are the details of the package:
- Permanently extendscurrent tax rates for families earning less than $450,000 a year;
- Makes permanent currentcapital gains and dividends rates for families earning less than $450,000 whilechanging the rate to 20 percent for families making more than $450,000;
- Extends popular taxcredits – like the tuition and child care tax credits – for five years;
- Extends the current $5million estate tax exemption but the tax rate on estates over that limit wouldchange from 35 percent to 40 percent;
- Prevents a 27 percentreduction in Medicare payments to doctors and other health care providerstreating patients on Medicare;
- Replaces two months of theapproximately $100 billion across-the-board spending cuts known assequestration scheduled to start in January;
- Extends the current farmbill, which passed in 2008, through the end of this fiscal year;
- Permanently patches theAlternative Minimum Tax. This tax was originally designed to preventhigh-income earners from using exemptions to avoid paying income taxes but didnot automatically adjust for inflation. Without patching the AMT, this taxwould impact nearly 135,000 Nebraska households earning as little as $33,750 ayear according to the Congressional Research Office.
Without this agreement, American taxpayers would face a tax increase ofalmost $536 billion a year – the steepest single tax increase in Americanhistory. Roughly half of these tax increases would come from the expiration ofthe current income and investment income tax rates implemented during PresidentGeorge W. Bush's tenure.