January 17, 2013 News 3Senate, House pass deal to solve fiscal cliff

President Obama and Congress averted the fiscal cliff by passing a bill that raises taxes on the top tax bracket of Americans and delays sequestration.

Late on January 1, Congress signed the American Taxpayer Relief Act of 2012. The Democratic-led Senate passed the bill with a vote of 89 to 8 and the Republican controlled House of Representatives passed it with a vote of 257 to 167. President Obama signed the bill into law January 2 from Hawaii.

Under the bill, the Bush-era tax cuts are made permanent for individuals earning less than $400,000 per year and households earning less than $450,000 per year. For people who fall into these new top tax brackets, income tax rates will rise from 35 percent to 39.6 percent. This tax increase will raise about $600 billion in revenue over 10 years, according to various estimates.

In addition, the bill lets a temporary cut in the Social Security payroll tax expire. This means that most Americans will

President Barack Obama and Vice President Joe Biden speak about the fiscal cliff bill on January 1. The Senate passed the bill the morning of January 1 and the House ratified it later that night to avoid the fiscal cliff. AP Images

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see their federal taxes go up since they must once again pay 6.2 percent instead of the temporarily lowered rate of 4.2 percent on the first $113,700 of their income. The legislation caps itemized deductions for individuals making $250,000 and for married couples making $300,000. Taxes on inherited estates of over $5 million will also be raised from 35 percent to 40 percent. The “Doc Fix” will continue, which prevents cuts in Medicare reimbursements to doctors. The bill also extends unemployment insurance.

Investment taxes will increase from 15 to 20 percent for people who are in the new top tax bracket. As part of the Affordable Healthcare Act, individuals making more than $200,000 a year and couples making more than $250,000 a year will pay a new 3.8 percent tax on investment income.

Obama also signed a $633 billion defense bill for 2013 that will tighten penalties on Iran as well as strengthen security for American diplomatic missions

worldwide after the deadly attack on four Americans in Benghazi, Libya in September of 2012.

The American Taxpayer Relief Act delayed the automatic across-the-board spending cuts in both defense and domestic programs by two months. The new Congress will begin work

immediately to solve (or once again delay) the looming issues of the $16.4 trillion federal debt ceiling and the sequestration.

Carolina VonKampenCopy Editor

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