National debt, 10 a.m. Jan. 3
In a last minute budget deal, Congress kept most tax cuts in place but raised taxes on the wealthy to confront the soaring national debt.Conservatives are threatening to overthrow the leadership of the U.S. House of Representatives as the tax hike on the wealthy becomes law.
Federal leaders said they would wrangle over much tougher decisions to cut spending in coming weeks.
The small step to increase federal taxes was approved Tuesday by the House, 257-167, although most Tea Party conservatives and even a few Democrats voted no. Rep. Adrian Smith was among them.
Earlier, the deal passed the Senate by an overwhelming 89-8 vote.
It increases taxes on Americans who make more than $450,000 per year.
It also has $71 billion in tax breaks to select businesses, including electric scooters, NASCAR racetracks and tax free bonds for a new headquarters for Goldman-Sachs in New York City.
In the House, the biggest complaint is that the bill won’t do enough to cut spending. Some House members say they want to elect a new speaker to replace Rep. John Boehner. Rep. Eric Cantor, who led opposition, is mentioned as Boehner’s successor.
Boehner also took heavy criticism for not calling a vote on $60 billion in new spending for winter storm Sandy victims on the northeast coast.
When the time finally came to a vote on the new tax program, 85 Republicans and 172 Democrats agreed to send the bill to the president to be signed, while 151 Republicans and 16 Democrats voted no.
Congress unofficially agreed to delve into spending cuts in the next session, in a couple weeks.
Smith said there is lots of work to do.
“My concerns about spending remain and I will continue to fight to reduce the deficit and pass commonsense tax reform,” Smith said. “We must find an alternative to arbitrary defense cuts, but simply delaying these difficult decisions without replacing the spending reductions is the wrong approach.”
In the Senate, Sen. Mike Johanns voted yes and had this to say:
“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.”
If you are wondering what is in the bill, here is a summary of the deal:
• 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, something Congress typically does every year;
• 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, for a few months until 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.