Congress passed legislation avoiding the immediate impacts of the so-called fiscal cliff with a short-term compromise bill that sets the stage for larger battles in the coming months.
Lawmakers will now prepare to square off within 60 days on automatic cuts to the military, non-entitlement discretionary spending, and an extension of the nation’s ability to continue borrowing.
While the tax package that Congress passed New Year’s Day will protect 99 percent of Americans from an income tax increase, most of them will still end up paying more federal payroll taxes in 2013, say critics.
The Tax Policy Center, a nonpartisan Washington research group, estimates that 77 percent of American households will face higher federal taxes in 2013 under the agreement negotiated between President Barack Obama and Senate Republicans. High-income families will feel the biggest tax increases.
Households making between $40,000 and $50,000 though will face an average tax increase of $579 in 2013, according to the Tax Policy Center’s analysis. Households making between $50,000 and $75,000 will face an average tax increase of $822.
Inbox reaction from Washington was fast and fierce with lawmakers expressing a tone of reluctance on supporting the bill, but recorded a vote in support.
U.S. Senator Kay Hagan (D-NC) said: “While I believe it is unacceptable that Washington has once again waited until the eleventh hour to find a solution, and though I would have preferred a comprehensive, balanced solution to avert the fiscal cliff and begin reducing the deficit, I voted for the plan put forth so that we can stop a tax hike on middle class families in North Carolina. The average family in our state will see their taxes increase by $2,200 without this action.
“We still have issues surrounding the fiscal cliff that we must resolve, including the defense cuts that will have an outsized impact in North Carolina and our skyrocketing federal debt,” continued Senator Kagan. “The challenges we face may be complex, but working together should not be this hard, and I will continue urging my colleagues on both sides of the aisle and both sides of the Capitol to come together to work on a commonsense solution.”
U.S. Senator Richard Burr (R-NC) said: “While the deal we voted on tonight was far from perfect and not as comprehensive as I had hoped, I supported this proposal because it protects 99% of Americans from increased taxes, it provides permanent certainty on the estate tax and Alternative Minimum Tax, it provides one year of protection for the reimbursement of doctors, it extends unemployment insurance for one year, and the net result of the deal provides over $600 billion that should be used to pay down our national debt.”
U.S. Rep. Howard Coble (R-NC 6th District) supported the bill, as well. He said making the Bush-era tax cuts permanent and protecting the $5 million exemption on the estate tax were features that convinced him to support the Senate-passed compromise.
“While far from a perfect piece of legislation, I thought it was critical to make permanent tax relief for 99 percent of Americans,” Rep. Coble stated. “This bill will guarantee that the estate tax, one of the most onerous in the tax code, will remain at the $5 million exemption level. And while the rate will rise from 35 percent to 40 percent over $5 million, it would have gone to 55 percent for all estates over $1 million if we had done nothing. We probably heard from more constituents on that one feature in this tax package than any other because it severely hits so many small businesses, farms and families. While I am in favor of permanently repealing the estate or so-caIled death tax, this compromise was the better than the alternative. I am also disappointed that spending reductions were not addressed in this legislation, but I remain committed to finding ways to reducing all levels of federal spending.”
U.S. Rep Virginia Foxx (R-NC 5th District) issued a scathing response saying the bill ignores America’s debt crisis while growing the size of government.
“Since May House Republicans have acted in good faith to generate ideas to avert the fiscal cliff,” said Foxx. “Our balanced proposals have been designed to protect American jobs and begin the hard work of overcoming America’s debt crisis. Thus, I could not in good conscience vote for a Senate “deal” that delays savings while expanding spending subsidies and ignoring the real drivers of debt.
“The process of resolving the fiscal cliff has been ugly. The Senate received H.R. 8 from the House of Representatives on August 1 of 2012. But the Senators waited until December 31 to weigh in on the legislation. The proposal they finalized in the early hours of January 1, though deeply flawed, does clear up uncertainty for families and small businesses trying to prepare for the future. I am glad for that, but feel for the many job creators who will face a higher tax burden in yet another year of tepid economic recovery.”