House Passes High Stakes Fiscal Cliff Legislation

By , FOXBusiness

The House of Representatives approved a Senate-passed bill late Tuesday night to avert some of the effects of the fiscal cliff, including painful spending cuts scheduled to begin Wednesday.

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In a vote of 257-167, the House approved the bill with bipartisan support, after an earlier procedural test vote passed with a wide margin, signaling early support for the legislation.

Click here to read the CBO score of the bill. 

The bill, which passed the Senate early Tuesday morning, staves off the effects of the fiscal cliff, including sequestration scheduled to begin Wednesday.  The bill passed with an 89-8 margin and was praised by the White House shortly after.Tax Policy The bill delays sequestration – a series of painful automatic spending cuts – for just two months. The move buys lawmakers more time, but doesn’t provide a long-term solution as was hoped for at the onset of negotiations. The deal also includes a tax increase on America’s high earners – an issue that was hotly contested in budget talks. Single filers making more than $400,000 and joint filers making more than $450,000 will see the tax rate on the top portion of their incomes increase from 39.6%. The rates will remain the same on individuals and joint filers earning incomes below those thresholds. Additionally, the bill provides a permanent fix to the alternative minimum tax. Taxes on capital gains taxes and dividends for high earners also increase from 15% to 20% (plus a 3.8% surcharge from the Affordable Care Act). In addition to increased tax rates and delayed sequestration, the Senate bill also allows the expiration of the temporary payroll tax cut, which would now require every American to pay an additional 2% in payroll taxes. Also included is an extension of current policy regarding the estate tax, but adding a $5 million exemption indexed for inflation and a 40% top rate.Spending Policy Not included in the Senate bill is an option to increase the U.S. debt limit, leaving the ceiling at $16.394 trillion. The Treasury Department is taking on “extraordinary measures” that are forecast to keep Congress from having to raise the ceiling until about February.   Under the Senate’s bill, sequestration is delayed for two months, paid for by a reduction in discretionary spending cap for 2013 and 2014. Also included is a one year extension of extended unemployment insurance benefits, and a one-year extension of the Food, Conservation and Energy Act of 2008 – also known as the farm bill. The latter will counteract antiquated legislation that economists have said could cause milk prices to surge to as much as $8 a gallon.Political Wrangling A House GOP leadership Aide told Fox News, despite a lack of adequate spending cuts to match the increases in revenue – something House GOP originally demanded at the outset of fiscal cliff negotiations-- Republican members of the House are expected to support the Senate legislation. “This is the House’s wisdom in making the best of a bad situation,” the aide said. “We had a bad hand from the start, but we’re avoiding being blamed for taking us off the cliff.” Earlier in the evening, some House GOP members demanded an amendment to the Senate bill that would add the spending cuts more conservative members were hoping for. Members quickly discovered there was not enough support among party members to amend the bill and send it back to the Senate, which has already pledged not to reopen debate on the bill if amended.

Rich Edson and Chad Pergram contributed reporting from Washington D.C.