BY ADEYEMI OSHUNRINADE
The Nation may have averted a Fiscal Cliff catastrophe. American diary is no longer going over the cliff as earlier envisaged and among other things, the Middle Class can now breathe a sigh of relief, knowing there won’t be higher taxes as we begin the year 2013. With a show of dedication, after months of debates in which both sides have demonstrated their ideologies over the Fiscal Cliff saga, the Senate finally passed a legislation to allow taxes on the wealthy to rise.
With 89 Yeas and just 8 Nays, the Senate overwhelmingly approved a bill that will temporarily suspend the expected across the-board spending cuts, that would have taken place had a deal not been reached by the deadline. The deal was a product of serious negotiation between Vice President Joseph Biden and the Republican Senate Minority Leader, Mitch McConnell. Three Democrats voted no, they were furious that the Democrats may have conceded too much in reaching a deal. The most conservative Republicans did not back down from their fiscal ideology either. Senator Marco Rubio of Florida, Rand Paul of Kentucky, Mike Lee of Utah and Charles E. Grassley of Iowa were among Senate Republicans who voted no to the fiscal legislation.
Now that the Senate has passed the bill, it is left for the House of Representative to put it to vote for a final approval. So far the House Majority Leader John H. Boehner, and the Republican House leadership have sounded a positive note that the House would “honor its commitment to consider the Senate agreement.” However, they indicated that the “decision about whether the House will seek to accept or promptly amend the measure will not be made until House members and the American people have been able to review the legislation.”
Despite the somewhat pessimistic tone, there is high hope the House would second the Senate by passing the measure, considering what is at stake for the U.S. economy if the House fails to act positively. So what is in the Fiscal deal passed by the Senate? The agreement reached would maintain tax cuts for individuals making less than $400,000 and couples earning less than $450,000. Remember, the President had hoped to extend tax cuts to earnings below $250,000 leaving those making above that to pay more in taxes. However, the new deal is part of a concession by President Obama, to raise the income bracket, after months of negotiations with Mr. Boehner. To many who believe the nation must avoid falling over the cliff, the new agreement is better than nothing at all.
Under the new deal, tax rates would be raised from 35% the Bush era rate to 39.6% for individual incomes over $400,000 and $450,000 for couples. The agreement reached would cap itemized deductions for individuals earning $250,000 and for couples making $300,000. The GOP gained by making the President to extend the higher tax rates to income above $400,000 thereby, shrinking the number of Americans that would have been affected by a tax hike.
The President achieved his goal of protecting 98% of Americans and 97% of small business owners from a Middle Class tax increase. While both parties may not have achieved 100% of what they bargained for, the recent deal would divert the economy from a possible roll over. Inheritance estate taxes will go up to 40% from 35%. Unemployment insurance would be extended for a year to help 2 million Americans still unemployed and the alternative minimum tax would be adjusted for inflation.
Child care credits and the lower rates on tuition would be renewed. But the two percentage point cut to the payroll tax the President got in 2010 will not be renewed after lapsing at midnight December 31. So far, the spending cut which the Republican base had fought relentlessly to make part of the deal, would have to be put off for a later date. $110 billion in cuts including the so-called sequester a massive cut to military defense spending and domestic programs, have been scheduled for further negotiations in two months.
While the deal may not have been perfect, there is no doubt the President negotiated well considering the political atmosphere that led to the Senate deal. Had no deal been reached, a huge spending cut would have forced about 800,000 civilian employees of the Defense Department, to take unpaid leave. Employers would have been forced to increase tax withholding from paychecks to match the new tax rate that could have kicked in, beginning January 1st. Consumer spending would have been affected and the nation could slip into another recession due to likelihood of a higher unemployment beyond the current 7.7%.
The ball is now in the House’s court as the nation waits to see if its members would play along by approving the deal, as the Senate had done. The hope is that when the House votes on the measure, members would act by making the most important priority the protection of Middle Class families.
Dr. Adeyemi Oshunrinade [E.JD] is the author of ‘Wills Law and Contests,’ Constitutional Law-First Amendment’ and ‘SAVING LOVE’ a fiction. Follow on Twitter @san0670.