So it seems that late last night, or early this morning maybe, the House voted by a wide margin to approve the Senate bill which would, for now, avoid the fiscal cliff but there is more work to be done so we're told.
The bill focuses primarily on tax hikes. Or, tax cuts, depending on whether you are looking at it from the perspective of December 31 (when the Bush tax cuts were in place), or January 1 (when they were taken away at midnight).
But compared to last year, most people's taxes will go up. Income taxes will go up for people making $400,000 or above ($450,000 or above for families), and payroll taxes will go up for everybody. Bush tax cuts that apply to income below those levels will remain in place. Effectively that means for households above those thresholds, their top rate will rise to 39.6%, up from 35% in 2012.
Plus, the capital gains and dividend tax rates for these high-income households will increase to 20% from 15%. For everyone else, investment tax rates will remain at 15% or below.
The bill will permanently adjust the income exemption levels for the Alternative Minimum Tax for inflation.
Most immediately, the measure will prevent close to 30 million middle-class taxpayers from having to pay the so-called wealth tax for 2012.
The bill will also reinstate limitations on how much those making $250,000 (married couples making $300,000) may take in itemized deductions and personal exemptions, extend for two years several tax breaks for businesses (including those engaging in wind production), extend for one or two years a few "temporary" tax breaks for individuals that regularly are extended (e.g., a deduction for elementary and secondary school teachers for certain expenses), and continue a federal extension of unemployment benefits for one year.
The bill will also prevent a scheduled 27% cut in reimbursement for Medicare services for one year. The so-called "doc fix" will boost the deficit by $31 billion.
The dreaded sequester — the automatic and blunt spending cuts to defense and nondefense programs — will be replaced for two months in 2013. The two months of cuts will be replaced by $12 billion in new revenue and $12 billion in spending cuts. It's not clear what Congress will decide to do about the sequester after the two months are up. If left in place for the whole year, the sequester would have reduced spending authority in 2013 by roughly $110 billion.
But more important that what is in the deal is the fact that it was passed at all. And of course, there are "winners" and "losers". The deal got done largely through the efforts of Joe Biden, reaching across to aisle to work with Senator Mitch McConnell. Nice that the grownups could do stuff, because the Reid-Boehner negotiations didn't seem to be going well:
A Democratic source familiar with one particular exchange told CNN that Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell were sitting on a sofa in the White House.
House Speaker John Boehner breezed in and his first words to Reid were "Go f- yourself."
Boehner's comment came after Reid took to the Senate floor on Thursday and characterized the House speaker's handling of his chamber as a "dictatorship."
Reid responded to Boehner's confrontational tone by laughing, the Democratic source said.
Both men described the moment to members of their caucus.
Generally speaking though, many Democrats are unhappy about some of the provisions in the legislation (that's why it's called a "compromise") but make no mistake — breaking the back of the anti-tax right wing is an historic achievement for the Obama administration.
But don't think that the House has come around to normalcy. After everybody stopped watching, the Republicans adjourned the House without voting on a bill that would have extended aid to the victims of superstorm Sandy. The last act of this glorious night of bipartisan compromise on the part of the House majority was to flip off people who are still picking through the rubble in the middle of winter.