Late Tuesday night, the House of Representatives approved a bill that would avert the US from going over the fiscal cliff, thus avoiding automatic tax hikes and spending cuts, which analysts predicted would send the U.S. back into another recession.
After the White House and Senate both approved the bill, it faced its last obstacle in the House of Representatives where it passed in a 257-167 vote. 172 Democrats favored the bill with 16 against, while 85 Republicans voted to pass the bill, with 151 voting against it.
Tax cuts will remain in place for individuals earning less than $400,000 a year and couples earning less than $450,000 a year. It does, however, raise taxes for those making more than those levels respectively. The increase will be from 35% to 39.4%. During his re-election campaign, President Obama had vowed to increase taxes on those making more than $250,000 a year, while Republicans did not want any tax increases. The $400,000 agreement seemingly reflects a compromise by the two sides, which was still heavily opposed by many Republicans, as reflected by the 151 votes casts against the deal by those Republicans in the House. Many of these Republicans cited a lack of spending cuts as a reason for voting against the deal as well.
For wealthy individuals, the deal also raises taxes on capital-gains and dividends (from 15%-20%) and estates (from 35% to 40%).
One aspect of the bill that will affect all Americans is the end to the stimulus rate of the Social Security tax. Americans of all income levels will see that tax increase to 6.2% from 4.2%.
President Obama has said he will sign the bill into law, and world markets reacted positively to the news. Wednesday morning, U.S. stocks jumped quickly after opening.
Despite the resolution, the U.S. faces another "cliff" as the $110 billion in spending cuts just averted, could once again kick in. In two months, the cuts can occur if the U.S. does not increase its borrowing limit.
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