While the country technically went over the fiscal cliff at midnight – any significant impact should be avoided as negotiators were able to reach a deal late Monday night that was approved early this morning by a vote of 89 to 8. Nebraska Senator Mike Johanns says the package permanently extends current tax rates for families earning less than 450-thousand dollars a year and permanently patches the alternative minimum tax. Automatic, across-the-board spending cuts that were scheduled to start this month will be postponed for two months. The estate tax – which was set to increase from 35-percent to 55-percent – will increase to a 40-percent tax rate with a five-million dollar exemption. Capital gains and dividend tax rates for those earning less than 450-thousand are permanently extended – while rates for those earning more will increase from 15-percent to 20-percent. The measure also extends the 2008 Farm Bill for the rest of the fiscal year. Since the Senate’s vote did not occur before the December 31 deadline and the House is not likely to vote on the measure before this (Tuesday) afternoon – a final deal will take place retroactively so tax rates continue uninterrupted for most American taxpayers.
Senate Minority Leader Mitch McConnell said on the Senate floor Monday that he agreed with Vice President Joe Biden that keeping taxes from rising on middle class families was the immediate priority. He urged his colleagues to pass the tax relief portion now and then continue working to find smarter ways to cut spending later. Johanns said the agreement wasn’t his ideal option – but he supported the measure because he believed going over the cliff wasn’t an option. He called the package a vast improvement from the Administration’s original proposal and said no one can overlook the fact that it protects an estimated 99-percent of Americans from being hit with the largest tax hike in the nation’s history.
Source: NAFB News Service