October 24, 2014

Fiscal cliff deal reached, includes extension of current Farm Bill

Sen. Mike Johanns and Sen. Ben Nelson voted in favor of a last minute deal to avoid the so-called fiscal cliff that actually missed the last minute.

While the country celebrated a new year, the Senate in Washington approved a deal brokered by Vice President Joe Biden and Senate Republican Leader Mitch McConnell of Kentucky. The Senate approved the compromise 89-8 just before 2 o’clock this morning, about two hours passed the midnight deadline lawmakers had been rushing to meet.

“This agreement isn’t my ideal option, but I firmly believe going over the cliff isn’t an option at all,” Johanns said in a written statement released by his office. “I would have preferred stopping a tax hike for every American, significantly reducing spending and strengthening Social Security and Medicare. This package, however, is a vast improvement from the Administration’s original proposal and no one can overlook the fact it protects an estimated 99 percent of Americans from being hit with the largest tax hike in our nation’s history.”

The package now heads to the House, which has been less receptive to tax hikes. House Speaker John Boehner, a Republican from Ohio whose negotiations with President Obama earlier failed to reach a compromise, pledged to bring it to a vote in the coming days.

Johanns noted that any deal passed by Congress and signed by the president will have to implement the new tax rates retroactively since lawmakers missed the December 31st deadline.

Johanns’ office reports the deal extends the current federal income tax rates for families earning less than $450,000 a year. It makes permanent current capital gains and dividends rates for those making less than $450,000 and raises the rate to 20% for those making more. Child care and tuition tax deductions would be extended for five years. The estate tax exemption threshold would remain at $5 million, with the tax rate on estates rising from 35% to 40% above the $5 million mark.

The compromise would fix a quirk in the Alternative Minimum Tax which was originally designed to prevent wealthy Americans from avoiding income taxes through deductions. Congress failed to attach a provision to adjust the AMT for inflation and the Congressional Research Office estimated that without adjustment, the tax would affect as many as 135,000 Nebraskans, making as little as $33,750 a year.

The deep, automatic budget cuts, known as sequestration, would be delayed for two months. The deal also prevents Medicare reimbursements to doctors and hospitals from being cut.

The Farm Bill, approved in 2008, would be extended through the fiscal year, under the agreement. The Senate approved a new Farm Bill as did the House Agriculture Committee, but the bill never came before the full House for debate. Some farm state lawmakers attempted to tie the legislation to the fiscal cliff talks, but that effort failed.

Johanns’ office stated that without the agreement, American taxpayers would face a tax increase of almost $536 billion a year, the steepest single tax increase in American history. Most of the tax cuts came during the presidency of George W. Bush.