Fiscal cliff: US House of Representatives passes deal

Culled from the Citizen Newspaper of 02/01/013

The US House of Representatives has passed a Senate-backed deal to stave off a “fiscal cliff” of drastic taxation and spending measures.
The deal, passed in the House late on Tuesday by 257 votes to 167, now needs to be signed by the president.
There had been intense pressure for the vote to be passed before financial markets reopened on Wednesday.
Some House Republicans had wanted to amend the bill to add more spending cuts, but dropped this idea.
In the event, 172 Democrats and 85 Republicans voted in favour of the bill, which raises taxes for the wealthy, but delays cuts in spending for two months to allow a wider agreement.
The bill was passed in the Senate in the early hours of Tuesday by 89 votes to eight after lengthy talks between Vice-President Joe Biden and Senate Republicans.
The “fiscal cliff” measures – cutting spending and increasing taxes dramatically – came into effect at midnight on Monday when George W Bush-era tax cuts expired.
The 1 January deadline triggered tax increases of about $536bn and spending cuts of $109bn from domestic and military programmes.
Economists had warned that if the full effects of the fiscal cliff were allowed to take hold, the resulting reduction in consumer spending could have sparked a new recession.
The compromise Senate deal extends the tax cuts for Americans earning under $400,000 (£246,000) – up from the $250,000 level Democrats had originally sought.
In addition to the income tax rates and spending cuts, the package includes:

• Rises in inheritance taxes from 35% to 40% after the first $5m for an individual and $10m for a couple
• Rises in capital taxes – affecting some investment income – of up to 20%, but less than the 39.6% that would prevail without a deal
• One-year extension for unemployment benefits, affecting two million people
• Five-year extension for tax credits that help poorer and middle-class families