New York Times - 43 minutes ago
WASHINGTON
— Vice President Joseph R. Biden Jr. and Senator Mitch McConnell, the
Republican leader, on Monday reached agreement on ...
Shape of Fiscal Deal Emerging, but Spending Still at Issue
By JONATHAN WEISMAN
Published: December 31, 2012 233 Comments
WASHINGTON — Vice President Joseph R. Biden Jr. and Senator Mitch
McConnell, the Republican leader, on Monday reached agreement on a
tentative deal to stave off large tax increases starting on Tuesday, but
remained stuck on whether and how to stop $110 billion in
across-the-board spending cuts in 2013, an official familiar with the
negotiations said.
Drew Angerer/Getty Images
Senator Mitch McConnell, the Republican minority leader, on Capitol Hill on Monday. More Photos »
The Fiscal Deadline in Washington
The New York Times is following the talks between President Obama and Congressional leaders on the so-called fiscal cliff.
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Senate Seeks Bipartisan Formula to Reach Tax Deal (December 30, 2012)
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Senate Leaders Set to Work on a Last-Minute Tax Agreement (December 29, 2012)
T.J. Kirkpatrick for The New York Times
“It looks awful,” Senator Richard J. Durbin of
Illinois, the second-ranking Democrat, said after tense negotiations on
Sunday. More Photos »
Stephen Crowley/The New York Times
Senator Mitch McConnell, left, the Republican leader,
with aides on Sunday. He called the vice president seeking help.
More Photos »
J. Scott Applewhite/Associated Press
Senator Harry Reid, the Democratic leader, may seek a
vote on a stopgap measure on tax cuts backed by President Obama.
More Photos »
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Under the emerging deal, income taxes would rise to 39.6 percent from 35
percent on income over $400,000 for single people and $450,000 for
couples. Above those income levels, dividends and capital gains tax
rates would also rise, to 20 percent from 15 percent.
Speaking at the Eisenhower Executive Office Building, adjacent to the
White House, President Obama took note of the progress.
“Today it appears that an agreement to prevent this New Year’s tax hike
is within sight, but it is not done,” he said. “There are still issues
left to resolve, but we are hopeful that Congress can get it done. But
it is not done.”
The official familiar with the deal stressed that taxes would rise in
some sense on the top 2 percent of earners, as Mr. Obama had wanted.
That is because the deal would reinstate provisions to tax law, ended by
the Bush tax cuts of 2001, that phase out personal exemptions and
deductions for the affluent. Those phaseouts, under the agreement, would
begin at $250,000 for single people and $300,000 for couples.
The estate tax would also rise, but considerably less than Democrats had
wanted. The value of estates over $5 million would be taxed at 40
percent, up from the current 35 percent. Democrats had wanted a 45
percent rate on inheritances larger than $3.5 million.
Under the deal, the new rates on income, investment and inheritances would be permanent.
Mr. Obama and the Democrats would be granted a five-year extension of
tax cuts they won in the 2009 stimulus law for middle-class and
working-poor taxpayers. Those include a child credit that goes out as a
check to workers who do not earn enough money to pay income taxes, an
expanded earned income credit and a refundable credit for tuition.
Democrats also secured a full year’s extension of unemployment insurance without strings attached, a $30 billion cost.
All combined, the official said, the new package would raise about $600
billion over 10 years, compared to the revenue generated if current tax
levels were simply extended. That, he said, is 85 percent of the revenue
Democrats had wanted to raise under Mr. Obama’s initial proposal, which
would have raised around $700 billion.
In addition, the deal would stave off sharp cuts for one year to health
care providers who treat Medicare patients. That cost, about $30
billion, would be paid for with cuts to other health care programs.
The official said all those provisions are sealed, but a big issue
remains open: what to do about automatic spending cuts. Democrats,
including the White House, are demanding a one-year “pause” to give
negotiators time to strike a broader deficit reduction deal. Republicans
have offered a three-month hiatus but no more.
“It would be crazy to not come together on this,” the official said.
Mr. Obama used his speech to warn Republicans that he would continue to
press for more tax increases even beyond whatever may be included in a
deal now. “If Republicans think I will finish the job of deficit
reduction through spending cuts alone,” he said, then “they’ve got
another think coming. That’s not how it’s going to work.”
Republicans responded to the president’s speech angrily, accusing him of
“moving the goal posts” just when a deal was in reach. They said that
they knew that the two sides still had to agree on how to suspend
automatic across-the-board spending cuts, but that they generally agreed
that such a suspension would be offset, at least partially, by spending
cuts elsewhere. Instead, the president said any deal to turn off the
so-called sequester had to be financed by tax increases and spending
cuts in concert.
“He can’t hold the middle class hostage when an agreement is ready
simply because he wants to get the sequester done now,” a senior
Republican leadership aide said after the speech. “That can be handled
over the next month or so.”
Democrats are more likely to protest the deal than Republicans. Liberals
are already complaining that almost all of the Bush tax cuts would be
made permanent, but that Democratic tax cuts secured in the stimulus law
get only a five-year lease on life. Richard L. Trumka, the head of the
A.F.L.-C.I.O., is demanding a separate vote to kill any cut to the
estate tax, which goes to the richest of the rich.
Senator Tom Harkin, a liberal Democrat from Iowa, earlier Monday warned
that the negotiations were producing what “looks like a very bad deal
the way this is shaping up.”
Some conservatives in the House will almost immediately criticize the
deal, saying it lacks sufficient spending cuts. House leaders were
waiting to get full details of any agreement and were particularly
interested in details on the sequester.
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