Update: The House did not hold a vote on New Years’ Eve, but early Tuesday morning the Senate voted 89-8 to approve a deal that would raise taxes on families making over $450,000, while delaying the automatic sequestration spending cuts for two months, extending unemployment benefits for another year, and adjusting the estate tax. The Alternative Minimum Tax would also be adjusted for inflation, tax credits from the 2009 stimulus bill would be extended, and the Medicare “doc fix” would be implemented. America’s cereal bowls will snap, crackle, and pop with joy, as CNN reports the $7 milk prices that would have resulted from a failed agriculture bill will be avoided.
In an interesting little side note, Fox News reports that the deal also formally repeals the CLASS Act, a component of ObamaCare that died long ago, but was still awaiting last rites from the legislature.
Senate Minority Leader Mitch McConnell (R-KY) offered some guarded praise for the tax deal, saying “the President wanted tax increases, but thanks to this imperfect agreement, 99 percent of my constitutents won’t be hit by those hikes.”
The House leadership, including Speaker John Boehner (R-OH), Majority Leader Eric Cantor (R-VA), Majority Whip Kevin McCarthy (R-CA), and Conference Chair Cathy McMorris Rodgers (R-WA), issued a statement about the Senate agreement: “The House will honor its commitment to consider the Senate agreement if it is passed. 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.”
It remains to be seen how close this actually brings us to a final deal, but according to Fox News, Senate Minority Leader Mitch McConnell announced on the floor that he had “reached an agreement on all of the tax issues” during his negotiations with Vice President Joe Biden. This would appear to involve tax increases on couples making over $450,000 per year and individuals making over $400,000, coupled with a patch to the Alternative Minimum Tax, an estate tax of 40 percent for estates over $5 million in value, a one-year increase in unemployment benefits, an extension of tax credits from the 2009 stimulus bill, an increase in the capital gains tax rate from 15 to 20 percent, and a “doc fix” to prevent Medicare rate cuts.
A report in Politico adds that the two sides were still “haggling over how to modify the $109 billion in automatic spending cuts set to take effect in the new year.” Democrats want to neutralize the sequester with some mixture of revenue from tax increases and spending cuts, while Republicans generally insist that only offsetting spending cuts are acceptable.
McConnell nevertheless urged Congress, “Let’s pass the tax relief portion now, let’s take what’s been agreed to and get moving.” All indications suggest that the necessary votes would not be forced through in the middle of New Years’ Eve, so the country would technically slide off the “fiscal cliff” at midnight. Whatever legislation is passed in the new year would then be made retroactive.
The Huffington Post notes that the unemployment extension represents $30 billion in spending that won’t be offset anywhere else in the deal, and the “doc fix” is good for at least another $25 billion, so it doesn’t look as if the “fiscal cliff” deal is going to reduce the deficit much at all – especially if the sequestration spending cuts are averted using a chunk of the revenue from higher taxes. The only thing likely to be “reduced” much is the size of the private sector.