Senate passes tax hikes 89 to 8; fiscal cliff deal moves to House
The Senate voted 89 to 8 just after before 2 a.m. Jan. 1 to gut a unrelated House-approved tax bill and replace its language with the tax increases negotiated by that chamber’s GOP leadership and Vice-President Joseph R. Biden Jr., on the edge of the so-called “fiscal cliff.”
Working through the day and most of the night, Senate Majority Leader Harry Reid (D.-Nev.) said he had come to an agreement with the Minority Leader A. Mitchell McConnell Jr., (R-Ky.) to avert tax increases on middle-class Americans.
“I have said all along that our most important priority was to protect middle-class families and this legislation does that,” he said. “Middle-class families will wake up, today, to the assurance that their taxes won’t go up $2,200-a-year.”
Sen. Patrick Leahy (D.-Vt.), now the President pro tempore of the Senate, succeeding the late Daniel K. Inouye, was the presiding officer during the vote and after Reid spoke, he called on McConnell.
The Kentuckian began by thanking Reid for his cooperation and friendship and Biden for responding to McConnell’s request for intervention the afternoon’s talks lagged.
“I also want to thank the vice-president for recognizing the importance of preventing this tax hike on the American people, and stepping up to play a crucial role in getting us there,” he said.
“It should not have taken us this long to come to an agreement, and this shouldn’t be the model for how we do things around here,” he said.
“I know I can speak for my entire conference, when I say we don’t think taxes should be going up on anyone, but we all knew that if we did nothing they would be going up on everyone—today,” McConnell said. “We weren’t going to let that happen.”
The Senate vote came after a day of intense negotiations between Republicans and Democrats, Democrats and Republicans and Republicans.
Senators made statements on the Senate floor, one after another, and shuttled between the Senate side of the Capitol building, where the chamber’s leadership were meeting, and both their own offices and the offices of House members on the other side of the building.
Speaking in the tunnel between the Capitol and then Russell Senate Office Building after her floor remarks in that afternoon, Sen. Kay Bailey Hutchinson (R.-Texas) told Human Events Biden was critical to the negotiations.
“The basic negotiations are going on between Biden and McConnell with other leaders being kept informed—and being able to say: yes or no, to this or that,” said Hutchinson, who retires from the Senate Jan. 3.
Biden, a former senator, was a great help, she said. “This has been proven from the 2010 talks, he is used to hearing what people are saying and then trying to come up with a consensus.”
As vice-president, Biden has freedom to maneuver that the Democratic leaders in Congress do not have, she said.
The fiscal cliff was a contrived crisis crafted in the Budget Control Act passed August 2011, which triggers the automatic cuts in defense and social spending, along with the reversion of the income tax code to where it stood on President William J. Clinton’s last day in office, with the exception of the capital gains tax, which goes to 23 percent, whereas it was 20 percent Jan. 20, 1993, unless Congress found passed another bill to replace it.
The bill that passed the Senate leaves all the current tax code in place, including tax cuts from the Clinton rates passed under President George W. Bush, for individuals earning under $400,000 and households earning under $450,000.
President Barack Obama campaigned throughout 2012 for tax increases at the $250,000 threshold.
For those above those thresholds, the rates go to the 39.6 percent, the top rate on Clinton’s last day.
Because these bills are based on 10-year schedules, there are spending cuts including in the out-years, but the immediate cuts set to take effect Jan. 2, where put off for two months. That is roughly the same time both the Treasury will hit the limit on how much money it can borrow and the end of the current continuing resolution, a bill passed as a stop gap, instead of annual budget.
Reid said in his remarks before the vote the bill cuts $4 billion in fiscal year 2013 and $8 billion in FY 2014. Federal spending in FY 2012 was approximately $3.9 trillion.
The estate tax will go to 40 percent of an estate more than $5 million.
Because the Constitution requires all tax and spending bill to originate in the House of Representatives, Reid took what is called on Capitol Hill a “shell bill,” that is a House passed bill and stripped out all of its content and replaced it with the compromise language, which while technically is Senate Amendment 3348.
The bill needed to pass the Senate with at least 60 votes because Reid designated the bill as privileged, so it was not subject to amendments or filibusters.
The bill, still designated H. R. 8, will be returned to the House and the House must pass the bill exactly as it is, or there will need to be a conference between the two chambers to craft one bill, based on the two different texts that must pass each chamber before going to the president for signature.
Shortly before the Senate vote, Speaker John A. Boehner (R.-Ohio) released a statement outlining how the lower chamber will proceed as the tax increase legislation returns to the House.
“The House will honor its commitment to consider the Senate agreement if it is passed,” the speaker said, who was joined on the statement by House Majority Eric I. Cantor (R.-Va.), House Majority Whip Kevin O. McCathy (R.-Calif.) and the House’s Republican Conference Chairwoman Cathy McMorris Rodgers (R.-Wash.).
“Decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members — and the American people — have been able to review the legislation,” he said.
At or around 3 p.m., after the general framework of the time was established, Sen. Lindsey O. Graham (R.-S.C.) told a gaggle of reporters outside a door leading to the Senate floor, he would vote for the bill, but he was not happy about it.
“We have done nothing to change the debt environment,” he said.
“It will be a political victory for the president, he insisted on tax rates going up, they’re going to go up,” he said. “He dug his heels in—it goes to show you what happens when you are committed to your causes.”
The compromise does not mean the president will always win, he said.
“For him, it’s a hollow victory,” he said.
“The next round of this contest is the debt ceiling fight.”