Senate leaders and the White House struck a last-minute deal to avert the feared fiscal cliff Monday night, with Vice President Joe Biden headed to the Capitol Hill to pitch the plan to fellow Democrats.President Barack Obama called Democratic Senate Majority Leader Harry Reid and House of Representatives Minority Leader Nancy Pelosi, who both signed off on the deal, one source said.
The agreement, brokered by Vice President Biden and Senate Minority Leader Mitch McConnell (R-Ky.), primarily targets taxpayers who earn more than $450,000 per year, raising their rates for wages and investment profits.
The deal includes a balance of spending cuts that would put off the cuts for two months and keep the expiring Bush-era tax cuts for individuals earning less than $400,000 or couples earning less than $450,000. Taxes on inherited estates over $5 million will go up, and that exemption will be indexed for inflation.
"Now today it appears that an agreement to prevent this New Year's tax hike is within sight. But it's not done. There are still issues left to resolve, but we're hopeful that Congress can get it done. But it's not done," Obama told at a White House event.
Obama said for the last few days, leaders in both parties have been working toward an agreement that will prevent a middle-class tax hike from hitting 98 per cent of all Americans starting tomorrow. "Preventing that tax hike has been my top priority, because the last thing folks like the folks up here on this stage can afford right now is to pay an extra USD 2,000 in taxes next year. Middle-class families can't afford it.
Businesses can't afford it. Our economy can't afford it," he said.Obama said the potential agreement that's being talked about would not only make sure the taxes don't go up on middle-class families, it also would extend tax credits for families with children.
"It would extend our tuition tax credit that's helped millions of families pay for college. It would extend tax credits for clean energy companies that are creating jobs and reducing our dependence on foreign oil. It would extend unemployment insurance to 2 million Americans who are outthere still actively looking for a job," he said.
Obama said the country still has more work to do."We still have deficits that have to be dealt with. We're still going to have to think about how we put our economy on a long-term trajectory of growth, how we continue to make investments in things like education, things like infrastructure that help our economy grow," he said.
"Keep in mind that the threat of tax hikes going up is only one part of this so-called fiscal cliff that everybody is talking about. What we also have facing us, starting tomorrow,are automatic spending cuts that are scheduled to go into effect," he said.
"And keep in mind that some of these spending cuts that Congress has said will automatically go into effect have an impact on our Defense Department, but they also have an impact on things like Head Start. And so there are some programs scheduled to be cut that we're using an ax instead of a scalpel. May not always be the smartest cuts. And so that is a piece of business that still has to be taken care of," Obama said.