Washington — The House plans to vote late Tuesday on a deal that would avoid a sharp tax hike on most Americans.
The Senate, with the help of Connecticut’s two senators, voted before dawn Tuesday, 89-8, on a proposal that would raise about $600 billion over 10 years, far less than President Obama and congressional Democrats had wanted, by allowing taxes to rise on households earning $450,000 or more a year and through other tax increases.
While there was criticism from both parties to the agreement, Sen. Joe Lieberman embraced it. “I don’t agree no deal is better than a bad deal,” he said.
Sen. Richard Blumenthal, D-Conn., said, “I’m frustrated and unhappy that we couldn’t reach a better solution much sooner, but this deal is better than no deal at all.”
Despite the Senate’s action, the Bush-era tax cuts expired on midnight. But the House is expected to consider the fiscal cliff deal shortly. If approved, the legislation would retroactively reinstate most of the Bush-era tax cuts.
The deal would exempt from federal taxes estates worth up to $5 million for an individual and $10 million per couple, rising to $15 million after a number of years, but it would tax estates larger than that at a 40 percent rate. The rate now is 35 percent.
The proposal would also raise the capital gains tax from 15 percent to 20 percent and cap deductions for high-income taxpayers. It would end a reduction in the Social Security tax withheld from paychecks. That withholding would go from 4.2 percent to 6.2 percent, meaning that most Americans would receive smaller paychecks in 2013.
The agreement also postponed a series of automatic cuts to federal programs, half of which were to the Pentagon, that were scheduled to take place Jan. 2. The deal allows Congress two months to find targeted savings.
Blumenthal said he was glad the agreement prevented “slashing arbitrary spending cuts that would particularly damage defense spending, endangering our national security, and Connecticut’s defense industry jobs.”
Other details of the agreement include:
* A permanent fix to the formula for the Alternative Minimum Tax so middle class families would not be hit by a levy that was created to make sure the wealthy did not avoid federal taxes;
* A so-called “doc fix” that adjusts the payments doctors receive for treating Medicare patients to adjust for inflation;
* An extension of tuition tax credits and child tax credits;
* An extension of unemployment benefits to the long-term jobless who — unless Congress acts — would stop receiving checks this week.
Lieberman said the expiration of the Bush-era tax breaks would result in an average tax increase of $2,200 for 1.4 million middle class families in Connecticut. “That’s a lot of money for a family of four,” Lieberman said.
Something that might help win support in the House is that that chamber will vote after the Bush-era tax expired at midnight on Monday. Then House conservatives would be voting to lower taxes on most Americans, instead of raising them on the wealthy.