By ANDREW TAYLOR
Associated Press
WASHINGTON (AP) - Legislation to negate a fiscal
cliff of across-the-board tax increases and sweeping spending cuts to
the Pentagon and other government agencies is headed to the
GOP-dominated House after bipartisan, middle-of-the-night approval in
the Senate capped a New Year's Eve drama unlike any other in the annals
of Congress.
The measure cleared the Senate on an 89-8 vote
early Tuesday, hours after Vice President Joe Biden and Senate
Republican Leader Mitch McConnell of Kentucky sealed a deal.
It would prevent middle-class taxes from going up
but would raise rates on higher incomes. It would also block spending
cuts for two months, extend unemployment benefits for the long-term
jobless, prevent a 27 percent cut in fees for doctors who treat Medicare
patients and prevent a spike in milk prices.
The measure ensures that lawmakers will have to
revisit difficult budget questions in just a few weeks, as relief from
painful spending cuts expires and the government requires an increase in
its borrowing cap.
House Speaker John Boehner pointedly refrained from
endorsing the agreement, though he's promised a vote on it or a GOP
alternative right away.
The measure is the first significant bipartisan tax
increase since 1990, when former President George H.W. Bush violated
his "read my lips" promise on taxes. It would raise an additional $620
billion over the coming decade when compared with revenues after tax
cuts passed in 2001 and 2003, during the Bush administration. But
because those policies expired at midnight Monday, the measure is
officially scored as a whopping $3.9 trillion tax cut over the next
decade.
President Barack Obama praised the agreement after the Senate's vote.
"While neither Democrats nor Republicans got
everything they wanted, this agreement is the right thing to do for our
country and the House should pass it without delay," Obama said in a
statement. "This agreement will also grow 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."
The sweeping Senate vote exceeded expectations -
tea party conservatives like Pat Toomey, R-Pa., and Ron Johnson, R-Wis.,
backed the measure - and would appear to grease enactment of the
measure despite lingering questions in the House, where conservative
forces sank a recent bid by Boehner to permit tax rates on incomes
exceeding $1 million to go back to Clinton-era levels.
"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," said a statement by Boehner and other top GOP leaders.
Lawmakers hope to resolve any uncertainty over the
fiscal cliff before financial markets reopen Wednesday. It could take
lots of Democratic votes to pass the measure and overcome opposition
from tea party lawmakers.
Under the Senate deal, taxes would remain steady
for the middle class but rise at incomes over $400,000 for individuals
and $450,000 for couples - levels higher than President Barack Obama had
campaigned for in his successful drive for a second term in office.
Some liberal Democrats were disappointed that the White House did not
stick to a harder line, while other Democrats sided with Republicans to
force the White House to partially retreat on increases in taxes on
multi-million-dollar estates.
The measure also allocates $24 billion in spending
cuts and new revenues to defer, for two months, some $109 billion worth
of automatic spending cuts that were set to slap the Pentagon and
domestic programs starting this week. That would allow the White House
and lawmakers time to regroup before plunging very quickly into a new
round of budget brinkmanship, certain to revolve around Republican calls
to rein in the cost of Medicare and other government benefit programs.
Officials also decided at the last minute to use
the measure to prevent a $900 pay raise for lawmakers due to take effect
this spring.
Even by the dysfunctional standards of
government-by-gridlock, the activity at both ends of historic
Pennsylvania Avenue was remarkable as the administration and lawmakers
spent the final hours of 2012 haggling over long-festering differences.
Republicans said McConnell and Biden had struck an
agreement Sunday night but that Democrats pulled back Monday morning.
Democrats like Tom Harkin of Iowa said the agreement was too generous to
upper-bracket earners. Obama's longstanding position was to push the
top tax rate on family income exceeding $250,000 from 35 percent to 39
percent.
"No deal is better than a bad deal. And this look like a very bad deal," said Harkin.
The measure would raise the top tax rate on large
estates to 40 percent, with a $5 million exemption on estates inherited
from individuals and a $10 million exemption on family estates. At the
insistence of Republicans and some Democrats, the exemption levels would
be indexed for inflation.
Taxes on capital gains and dividends over $400,000
for individuals and $450,000 for couples would be taxed at 20 percent,
up from 15 percent.
The bill would also extend jobless benefits for the
long-term unemployed for an additional year at a cost of $30 billion,
and would spend $31 billion to prevent a 27 percent cut in Medicare
payments to doctors.
Another $64 billion would go to renew tax breaks
for businesses and for renewable energy purposes, like tax credits for
energy-efficient appliances.
Despite bitter battling over taxes in the campaign,
even die-hard conservatives endorsed the measure, arguing that the
alternative was to raise taxes on virtually every earner.
"I reluctantly supported it because it sets in
stone lower tax rates for roughly 99 percent of American taxpayers,"
said Sen. Orrin Hatch, R-Utah. "With millions of Americans watching
Washington with anger, frustration and anxiety that their taxes will
skyrocket, this is the best course of action we can take to protect as
many people as possible from massive tax hikes."
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