Fiscal Cliff Averted
House Republicans voted a last-minute federal budget late Tuesday night to avoid the so-called “fiscal cliff,” which analysts say would have plunged America into a second recession.
The emergency deal will protect more than 100 million families earning less than US$250,000 a year from significant income tax increases set to take effect this month — although their payroll taxes will rise with the expiration of a temporary tax cut adopted two years ago.
The measure also will keep benefits flowing to 2 million unemployed workers on the verge of losing their federal checks. And it will delay for two months automatic cuts to the Pentagon and other agencies that had been set to take effect Wednesday.
It also immediately raised the top tax rate from 35-percent to 39.6-percent on income over US$450,000 for married couples, and US$400,000 for single people.
Non-partisan think tank the Tax Policy Center claims taxes will be raised by an average of US$1,635 on 77.1-percent of Americans because of the deal, reports Bloomberg News. This is due to a 2-percent payroll tax cut, passed during the economic downturn, being allowed to expire.
The vote, which took place at 10.45pm on Tuesday night, has driven a stark divide between Republicans. Those led by House Speaker John Boehner and House Budget Committee Chairman Paul Ryan voted for the legislation so the GOP would not be blamed for recklessly playing political games that drove America into a second recession; fiscal conservatives led by Majority leader Eric Cantor and Majority Whip Kevin McCarthy voted against the deal because it not only raises taxes, it fails to cut spending.
According to the Congressional Budget Office, only US$15 billion is cut from the budget, while taxes are raised by US$620 billion – a 41:1 ratio of tax increases to spending cuts.
A minority of congressional Republicans voted in favor of the legislation – 151 to 85. A majority of Democrats, 172 in total, voted for it.