The U.S. House of Representatives passed legislation which prevents income tax increases on the bulk of Americans and also prevents large cuts in government programs.
The fiscal cliff crisis was resolved for now when the House approved legislation passed late on New Year’s Eve by the Senate. The House vote was 257 to 167, with 85 Republicans voting with 172 Democrats to allow incomes taxes to increase for the first time in 20 years. The No vote consisted of 151 Republicans and 16 Democrats.
The legislation passed the Senate at 2am on New Year’s Day by 89 votes to 8.
The legislation increases taxes on household incomes over $400,000 for individuals and $450,000 for couples. It makes permanent tax cuts for incomes below that level. The American Taxpayer Relief Act of 2012 also delays the budget sequestration by two months. The tax increases are expected to raise $600 billion over ten years, about one-fifth of the revenue that would have resulted from no action. It was widely believed that a failure to act could have led to a recession in the U.S.
Following the House vote, President Barack Obama held a media briefing just before midnight. Whilst praising the passage of the legislation, he said there was more to be done on reducing the nation’s budget deficit.
Post from Colleen Curtis on the White House blog.
What You Need to Know About the Bipartisan Tax Agreement
UPDATE: The American Taxpayer Relief Act of 2012 was also passed by a bipartisan majority in the House of Representatives on January 1, 2013.
President Obama has repeatedly called this a make-or-break moment for the middle class. That’s why we worked with Republicans and Democrats in Congress to reach an agreement that keeps income taxes low for the middle class and helps to grow the economy. And as the President promised, millionaires and billionaires will also begin doing more to help pay down the deficit through a combination of permanent tax rate increases and reduced tax benefits.
This is the first time in twenty years that a bipartisan agreement has increased tax rates on the wealthy. Additionally, this deal ensures that America will continue to invest in education, clean energy, and manufacturing to strengthen our economy and the middle class.
As President Obama noted in a statement about the deal, while neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country. And the President looks forward to working with Republicans to reduce the deficit in a balanced and bipartisan way.
The agreement passed by an overwhelming bipartisan majority in the Senate last night permanently extends the middle-class tax cuts and also extends credits for working families. It provides additional measures to protect families and promote economic growth. The lower tax rates, an expanded Child Tax Credit, and marriage penalty relief will provide certainty for 114 million households and together will prevent the typical family of four from seeing a $2,200 tax increase.
By raising income tax rates on the wealthiest and keeping taxes low for the middle class, it means we will now have the most progressive tax code in decades. The agreement also prevents two million people from losing unemployment insurance benefits in January by extending emergency UI benefits for one year.
Statement from President Barack Obama.
Statement from the President on the Senate Deal to Extend Middle Class Tax Cuts
Leaders from both parties in the Senate came together to reach an agreement that passed with overwhelming bipartisan support today that protects 98 percent of Americans and 97 percent of small business owners from a middle class tax hike. 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.
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.
What’s more, today’s agreement builds on previous efforts to reduce our deficits. Last year, I worked with Democrats and Republicans to cut spending by more than $1 trillion. Tonight’s agreement does even more by asking millionaires and billionaires to begin to pay their fair share for the first time in twenty years. As promised, that increase will be immediate, and it will be permanent.
There’s more work to do to reduce our deficits, and I’m willing to do it. But tonight’s agreement ensures that, going forward, we will continue to reduce the deficit through a combination of new spending cuts and new revenues from the wealthiest Americans. And as we address our ongoing fiscal challenges, I will continue to fight every day on behalf of the middle class and all those fighting to get into the middle class to forge an economy that grows from the middle out, not from the top down.