Last night, Jan. 1, 2013, at 10:45 pm, the U.S. House of Representatives approved a deal to avert the fiscal cliff, by a final vote of 257 to 167.
The House vote came less than 24 hours after the Senate had overwhelmingly approved the bill 89 to 8, with both parties’ support. The bill now goes to the POS for his signature. Instead of signing the bill, he’s already left D.C. to resume his vacation in Honolulu which was so rudely interrupted by the fiscal cliff negotiations. [snark]
The Fiscal Cliff deal:
- The top tax rate increases from 35% to 40% on annual income over $450,000 for married couples and $400,000 for single people. This is the first time in more than two decades that a broad tax increase has been approved with GOP support.
- “Temporary” Bush tax cuts for couples making less than $450,000 and individuals making less than $400,000 per year are made “permanent” (which means “until Congress changes their mind”).
- More than 100 million “middle class” families (those earning less than $250,000 a year) will be protected from significant income tax increases set to take effect this month, but their payroll taxes will rise with the expiration of a temporary tax cut adopted two years ago.
- No estate taxes on inheritance of $5 million, or $10 million for married couples.
- Federal dairy policies will be extended through September, averting a threatened doubling of milk prices.
- Extension of unemployment benefits to 2 million people for another year.
- Automatic cuts to the Pentagon and other agencies that had been set to take effect today will be delayed for two months.
- Pay raise for members of Congress, which was effectuated by Obama’s executive order, is nixed.
- Automatic spending cuts (sequestration) from last year’s debt ceiling deal are postponed until March 2013, which means — oh joy — there’ll be a Fiscal Cliff II next month!
Buried in the fine print of the 150-page deal are some New Year’s gifts to some of Washington’s favorite cronies. Under the plan, the federal government would eat nearly $100 billion in forgone tax revenue over the next two years by extending special tax credits for select businesses that had been set to expire:
- $430 million for Hollywood through “special expensing rules” to encourage TV and film production in the United States. Producers can “expense” up to $15 million of costs for their projects. All this for a film industry that enjoyed a record box office last year.
- $331 million for railroads by allowing short-line and regional operators to claim a tax credit up to 50% of the cost to maintain tracks that they own or lease.
- $222 million for Puerto Rico and the Virgin Islands through returned excise taxes collected by the federal government on rum produced in the islands and imported to the mainland.
- $70 million for NASCAR by extending a “7-year cost recovery period for certain motorsports racing track facilities.”
- $59 million for algae growers through tax credits to encourage production of “cellulosic biofuel” at up to $1.01 per gallon.
- $4 million for electric motorcycle makers by expanding an existing green-energy tax credit for buyers of plug-in vehicles to include electric motorbikes.
This is how farcical the fiscal cliff is: Members of the U.S. Senate had only 3 minutes to read the 154-page fiscal cliff bill and budget score, before they voted 89-8 to approve the bill. Senators received the bill at approximately 1:36 AM on Jan. 1, 2013 – a mere three minutes before they voted to approve it at 1:39 AM. I’ve taken longer to read the instructions for my new cell phone.
151 Republicans in the House voted “no,” which meant the GOP tally fell far short of a majority of the GOP caucus. That broke a long-standing preference by House Speaker John Boehner to advance only bills that could draw the support of a majority of his Republican members. So Boehner himself cast a rare vote: He supported the bill. So did Rep. Paul Ryan (Wis.), the GOP’s vice-presidential candidate last year.
40 House Republicans voted for the bill, including such GOP leaders on tax-and-spending policy as Sen. Patrick J. Toomey (Pa.) and Ronald H. Johnson (Wis.), a tea party star.
- Senate Republicans who voted against the bill include tea party favorites Rand Paul (Ky.) and Mike Lee (Utah), as well as Marco Rubio (Fla).
- House Republicans who voted no include Majority Leader Eric Cantor (Va.) and Majority Whip Kevin McCarthy (Calif.).
The Really Bad:
Regardless of one’s political affiliation or beliefs, from an economic and fiscal perspective, the cliff deal has accomplished nothing. Here’s why:
- The bill’s proposed spending cuts of $15 billion are less than 2% of the federal government’s deficit.
- The bill’s tax increases will raise $620 billion over the next ten years — roughly $62 billion in new tax revenue per year.
- $62 billion in new tax revenue per year is less than 6% of the $1+ trillion deficit the Obama regime has incurred every year for the past four years.
- According to the nonpartisan Congressional Budget Office, the fiscal cliff bill will cause the national debt to be $4 trillion higher by 2022 than if all of the cliff’s tax increases and spending cuts had been allowed to take effect.