Washington — The House approved an agreement late Tuesday that avoided a “fiscal cliff” — the coupling of sharp tax increases on nearly all Americans with automatic spending cuts set to go into effect Wednesday.
All Connecticut House members voted for the deal except Rep. Rosa DeLauro, D-3rd District, who said the bill failed to raise taxes on families earning between $250,000 and $450,000 a year.
In addition, DeLauro said, “This legislation fails to address the expiring payroll tax cut, meaning that millions of middle class families will see as much as a $2,200 tax increase, beginning with less take home pay in their next paycheck. This is regrettable.”
Bush-era tax cuts that have lowered the tax rate on all Americans for years expired at midnight on New Year’s Eve. Congress’ approval of the fiscal cliff deal will retroactively reinstate most of those cuts, except for households earning $450,000 or more; these will see their tax rate rise from 35 percent to 39.6 percent.
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.
Many lawmakers voted for the compromise grudgingly.
“This is an ugly package, but it’s the right thing to do for the economy,” said Rep. Chris Murphy, D-5th District. “This is a tough vote, but we got elected to make tough votes.”
Murphy will be sworn in to the Senate Thursday, when the 113th Congress gavels in.
Rep. Joe Courtney, D-2nd District, said he was persuaded by Vice President Joe Biden to support the plan.
“He was extremely persuasive talking about this, [saying it] was as good as you could get given the time constraints,” Courtney said.
Courtney also said the vice president, who negotiated the deal with Senate GOP leaders, “did a good job” shielding Medicare and other federal programs from cuts.
The Senate approved the compromise early Tuesday on a 89-8 vote, with the support of Connecticut’s senators.
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.”
The fiscal cliff agreement now goes to President Obama for his signature.
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, those earning $400,000 or more a year.
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 would have stopped receiving checks this week.