LEADERS FROM BOTH the Republican and Democratic parties in the US Senate and House of Representatives came together yesterday to pass the fiscal cliff bill to avoid a significant tax hike for middle America.
With a vote of 257 to 167, the Republican-controlled House of Representatives approved the deal.
Speaking in the White House, President Barack Obama said the “overwhelming bipartisan support” for the agreement will protect 98 per cent of Americans and 97 per cent of small business owners.
“This agreement will also growth the economy and shrink our deficits in a balanced way – by investing in our middle class, and by asking the wealthy to pay a little more.”
Although he noted that millionaires and billionaires have been asked to “pay their fair share for the first time in twenty years”, he admitted that neither Democrats nor Republicans “got everything they wanted”.
However, he said the changes for the super-rich would be immediate and permanent. They include tax rate increases and reduced tax benefits.
“I will sign a law that raises taxes on the wealthiest 2 per cent of Americans while preventing a middle-class tax hike that could have sent the economy back into recession and obviously had a severe impact on families all across America,” he said.
Other measures included in the tax agreement include the permanent extension of middle-class tax cuts (for households earning up to $450k), as well as the retention of emergency unemployment insurance benefits for two million people.
The deal extends Obama’s expansions of the child tax credit, earned income tax credit, and implements the new American Opportunity Tax Credit, which helps families pay for college.
Renewable energy incentives were also extended for businesses through the end of next year.
The deal will see $620 billion extra revenue raised by restoring the top 39.6 per cent rate for high-income households and re-instating the Clinton-era levels of capital gains rates.
The agreement raises the tax rate on the wealthiest estates – worth upwards of $5 million per person – from 35 per cent to 40 per cent, in contrast to Republican proposals to continue the current estate tax levels.
Despite reaching a deal, Obama wasn’t all-positive on the developments. Describing negotiations as “a lame duck session of Congress”, he said the failure to provide a larger agreement came at a cost “as the messy nature of the process over the past several weeks has made business more uncertain and consumers less confident”.
The President also raised the issue of the debt ceiling, an issue that caused major headaches for the administration in 2011.
“While I will negotiate over many things,” said Obama, “I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed. Let me repeat: We can’t not pay bills that we’ve already incurred. If Congress refuses to give the United States government the ability to pay these bills on time, the consequences for the entire global economy would be catastrophic — far worse than the impact of a fiscal cliff.”
People will remember, back in 2011, the last time this course of action was threatened, our entire recovery was put at risk. Consumer confidence plunged. Business investment plunged. Growth dropped. We can’t go down that path again.
Last night’s vote brings an end to the 112th Congress. The 113th Congress begins on Thursday.