And so the “fiscal slope” begins.
At 10:57 pm on Jan. 1, 2013 the U.S. House of Representatives passed a fiscal cliff deal (PDF) unchanged from the senate version passed the day prior by a vote of 257 – 167.
The package puts off crippling budget cuts for another two months and extends the Bush era tax cuts for incomes less than $400,000 (filing individually) or $450,000 (filing separately). Capital gains and dividends tax rates both rose from 15% to 20%.
President Obama stated he will sign the bill before returning to his vacation home in Hawaii.
Earners making more then the above thresholds will see their marginal tax rate jump from 35% back to the Clinton era levels of 39.6%, which should generate over $600 billion in new revenue and ease the nation’s deficit problem. This amount is still far less than the $4 trillion grand bargain originally outlined in 2011, mainly because spending cuts were not included in the package.
The alternative minimum tax (AMT) was included in the package and received much needed updates: The 2012 exemption amounts were made permanent (the first time since 1983) and henceforth will be indexed for inflation.
Notable “yes” votes include House Budget Committee Chairman Paul Ryan and Speaker of the House John Boehner.
Alan Simpson and Erskine Bowles, the spearheads of the failed bi-partisan “super committee” released a statement saying that the deal is:
“truly a missed opportunity to do something big to reduce our long term fiscal problems, but it is a small step forward in our efforts to reduce the federal deficit.”
Grover Norquist, author of the famous anti-tax pledge that most Republican congress members signed tweeted:
The Bush tax cuts lapsed at midnight last night. Every R voting for Senate bill is cutting taxes and keeping his/her pledge.
The deal was a last ditch effort to save automatic spending cuts and tax hikes induced by the fiscal cliff from crippling the economy; in that regard it was a success. It comes with a silver-lining though — Congress now has two more months to resolve trillions of dollars in sequestration. Embrace yourselves for the fiscal cliff, part two.
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