U.S. senators Lamar Alexander and Bob Corker voted in favor of a “fiscal cliff” deal early Tuesday morning that would allow tax rates to rise only for wealthy Americans while temporarily suspending sweeping federal spending cuts.
The deal was approved 89-8 in the U.S. Senate but still has to be passed by the House. Approval there is not guaranteed.
The agreement would raise tax rates for individuals who earn more than $400,000 and couples with incomes of more than $450,000. It would also extend unemployment insurance for another year and temporarily delay $110 billion in across-the-board spending cuts to military and domestic programs.
Alexander, a Tennessee Republican, released a statement after the 1:39 a.m. vote early Tuesday, New Year’s Day. The vote could help the nation avert the so-called “fiscal cliff,” a package of automatic across-the-board spending cuts and tax increases scheduled to start going into effect this month.
“This agreement rescues 99 percent of Americans from individual and estate tax increases in 2013, and then makes these lower rates permanent, providing certainty and creating jobs,” Alexander said.
However, the senator said the Medicare fiscal cliff remains.
“Sen. Corker and I have a proposal to deal with the out-of-control spending that will soon bankrupt the programs seniors rely on to pay their medical bills,” Alexander said. “If we don’t deal with this during the debt ceiling debate, we are on the road to becoming Greece.”
Under the agreement approved by the Senate early Tuesday morning, tax rates would jump from 35 percent to 39.6 percent on individual incomes over $400,000 and couples’ incomes over $450,000, the New York Times reported.
Tax deductions and credits would start phasing out on incomes as low as $250,000. Tax rates on dividends and capital gains would also rise as would the estate tax. The agreement did not renew the two-percentage point payroll tax cut.
The Times reported that Tuesday’s agreement was worked out in last-minute negotiations between Vice President Joe Biden and the Republican Senate leader, Mitch McConnell. Forty-seven Republicans, 40 Democrats, and two Independents voted for the bill. Three Democrats and five Republicans voted no.