The country has been waiting to see if Congress would pass legislation to
avert the impending fiscal cliff. Congress did pass a new package Tuesday evening
to extend most tax cuts as well as an extension of the current farm bill.
The Senate passed the package with an 89-8 vote, while the House was much
more split, voting 257-167 in favor of the bill.
Sen. Mike Johanns sent a release following his support of the measure. He
said, "This agreement isn't my ideal option, but I firmly believe going
over the cliff isn't an option at all."
"I would have preferred stopping a tax hike for every American,
significantly reducing spending and strengthening Social Security and Medicare.
This package, however, is a vast improvement from the Administration's original
proposal and no one can overlook the fact it protects an estimated 99 percent
of Americans from being hit with the largest tax hike in our nation's
history."
Congressman Adrian Smith voted against the fiscal cliff
agreement and said, "This debate is not
over. My concerns about spending remain and I will continue to fight to
reduce the deficit and pass commonsense tax reform to put our country on a more
sustainable and prosperous path. We must find an alternative to arbitrary
defense cuts, but simply delaying these difficult decisions without replacing
the spending reductions is the wrong approach."
The fiscal cliff is a combination of expiring tax relief and automatic
spending cuts that would have kicked in at the beginning of next year. Since the
package was not signed by President Obama before the New Year, the deal will
take place retroactively so tax rates will continue uninterrupted for the
overwhelming majority of American taxpayers.
Below are the details of the package:
- Permanently extends
current tax rates for families earning less than $450,000 a year;
- Makes permanent current
capital gains and dividends rates for families earning less than $450,000 while
changing the rate to 20 percent for families making more than $450,000;
- Extends popular tax
credits – like the tuition and child care tax credits – for five years;
- Extends the current $5
million estate tax exemption but the tax rate on estates over that limit would
change from 35 percent to 40 percent;
- Prevents a 27 percent
reduction in Medicare payments to doctors and other health care providers
treating patients on Medicare;
- Replaces two months of the
approximately $100 billion across-the-board spending cuts known as
sequestration scheduled to start in January;
- Extends the current farm
bill, which passed in 2008, through the end of this fiscal year;
- Permanently patches the
Alternative Minimum Tax. This tax was originally designed to prevent
high-income earners from using exemptions to avoid paying income taxes but did
not automatically adjust for inflation. Without patching the AMT, this tax
would impact nearly 135,000 Nebraska households earning as little as $33,750 a
year according to the Congressional Research Office.
Without this agreement, American taxpayers would face a tax increase of
almost $536 billion a year – the steepest single tax increase in American
history. Roughly half of these tax increases would come from the expiration of
the current income and investment income tax rates implemented during President
George W. Bush's tenure.
