2013-01-01

House Approves Fiscal Deal - 257 Yes 167 No - The President will sign the bill

President Obama delivers a statement on the bipartisan agreement passed today that will protect 98 percent of Americans and 97 percent of small business owners from a tax hike.

Story by NBC News, Wall Street Journal, and I
Written by Michael O'Brien

An agreement to stave off the harshest and most immediate consequences of the "fiscal cliff" won approval in the House late Tuesday, paving the way for President Barack Obama's quick signature.

Following a day of hectic wrangling on Capitol Hill — where the prospects for passing the bipartisan, Senate legislation regarding the fiscal cliff hung in the balance for much of New Year's Day — the House voted 257 to 167 to pass the belated compromise measure over the objections of many conservative Republicans.

White House link: http://www.whitehouse.gov/blog/2013/01/01/what-you-need-know-about-bipartisan-tax-agreement

The legislation takes steps toward resolving the combination of automatic tax hikes and spending cuts that took effect at midnight on Jan. 1. It preserves tax rates as they were at the end of 2012, except for those individuals earning more than $400,000 and households earning over $450,000. It also allows taxes on capital gains and dividends to go up, and extends benefits of the unemployed. Additionally, the Senate bill delays the onset of the "sequester" — the swift, automatic spending cuts — for two months. Link to specifics: http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/31/your-fiscal-cliff-deal-cheat-sheet/  

Let's "keep it real"! Not mentioned in accompanied NBC News story are tax hikes to workers' payroll checks. The workers' share of the Social Security payroll tax was lowered by two percentage points for the past two years - 4.2% from 6.2%. The SS payroll tax returns to 6.2 percent effective immediately meaning a working person will receive 2 percent less money per check.
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Expired Payroll Tax Cut resulting in 2% more in employee social security tax withholding

As of December 31, 2012, the Payroll Tax Cut expired. 

This cut reduced payroll taxes by 2%. 

The 2012 FICA tax rate was 4.2% for employees under the Middle Class Tax Relief and Job Creation Act of 2012. 

However, bills currently being considered in Congress may change this but until Congress acts to further extend the 4.2 percent rate, the employee rate will withhold based on 6.2% with paychecks beginning in January 2013. 
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For a CALCULATION of how much "exactly" that this tax hike will cost workers on the payroll, check out this link from the Wall Street Journal: http://blogs.wsj.com/economics/2013/01/01/payroll-tax-cut-expires-how-much-more-will-you-pay/


AP photo

The House vote laid bare some of the internal ideological divisions to plague the GOP over the past two years. More Republican Congressmen (151) voted against the Senate bill than for it (85), meaning that Democrats' support was needed to advance the final deal. House Speaker John Boehner, R-Ohio, took the rare step of casting a vote, and did so in favor of the legislation. Rep. Paul Ryan, R-Wis., the former Republican vice presidential nominee, also supported the package. But Boehner's top two lieutenants, Majority Leader Eric Cantor, R-Va., and Majority Whip Kevin McCarthy, R-Calif., each opposed the deal.

While the last-minute action on Capitol Hill essentially mitigates much of the risk posed to the U.S. economic recovery by the fiscal cliff, it hardly brings resolution to the bitter and often intractable fight in Washington over taxes and spending. The first half of 2013 will feature battles in Congress over raising the debt limit, continuing basic government funding and the expiration of this two-month delay in the sequester.

The fiscal cliff itself was the product of discord in Congress resolving those very issues. And the difficulty in attaining even this less ambitious piece of legislation — versus the kind of "grand bargain" Obama had first sought in talks with Republicans — offered a cautionary tale for the 113th Congress, in which the House, Senate and White House remain controlled by the same parties as during the past two years.

And even for much of Tuesday, House approval of the fiscal legislation — which was negotiated by Senate Minority Leader Mitch McConnell, R-Ky. and Vice President Joe Biden — was far from certain. GOP leaders were forced to cajole conservatives who complained the fallback deal contained insufficient spending cuts. Only after it became clear that Republicans wouldn't have the votes to amend the Senate proposal — which the upper chamber said it wouldn't even consider — did House Speaker John Boehner, R-Ohio, bring the bill to the floor.

The squabbling was familiar to any observers of Congress during the past two years. This divide almost resulted in a government shutdown and a default on the national debt in 2011. It again threatened Tuesday to allow the painful, across-the-board tax hikes and spending cuts to play out just as the U.S. economic recovery showed signs of accelerating.

(AP photo left - Links below)

And this deal just approved by Congress in the waning hours of 2013's first day all but ensures that much of the coming year will be dominated by similar battles in Washington. Republicans are hopeful they might be able to extract more spending cuts and entitlement reforms with the government up against other deadlines, like the one needed this spring to authorize more government borrowing.

That could complicate Obama's already-ambitious second term agenda. The president said just this past Sunday on NBC's "Meet the Press" that he will seek comprehensive immigration reform legislation and new laws to address gun violence.
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posted by Kirk Tanter at 1/01/2013 11:20:00 pm

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