A weary U.S. Congress went past its New Year deadline, but finally approved a compromise deal late Tuesday to avoid middle-class tax increases and spending cuts that would have sent the country over the fiscal cliff, with the measure now in the hands of President Barack Obama.
The measure also prevents House Republicans from facing blame for blocking tax cuts for most American households, though most GOP lawmakers parted ways with Speaker John Boehner and opposed it.
Passage also lays the groundwork for future battles between the two sides over federal spending and debt.
World markets breathed a huge sigh of relief Wednesday, starting 2013 with hefty gains as investors welcomed Tuesday night's vote in which the Republican-run House voted final approval for the measure by 257-167. That came after the Democratic-led Senate used a wee-hours 89-8 roll call to assent to the bill, belying the partisan brinkmanship that coloured much of the path to the final deal.
The loonie gained more than a cent on the news, trading at 101.6 cents US on Wednesday. That's the largest gain for Canada's currency in more than two months.
The bill would boost the top 35% income tax rate to 39.6% for incomes exceeding $400,000 for individuals and $450,000 U.S. for couples, while continuing decade-old income tax cuts for everyone else. In his re-election campaign last year Obama had vowed to boost rates on earnings at somewhat lower levels — $200,000 U.S. for individuals and $250,000 U.S. for families.
Scores of GOP lawmakers voted for the measure, reversing a quarter-century of solid Republican opposition to boosting any tax rates at all.
The bill would also:
Raise taxes top earners pay on dividends, capital gains and inherited estates.
Permanently stop the alternative minimum tax from raising levies on millions of middle-income families.
Extend expiring jobless benefits.
Prevent cuts in Medicare reimbursements to doctors.
Delay, for two months, billions in budget-wide cuts in defence and domestic programs slated for this year.
Both sides lamented their failure to reach a significant deficit-cutting agreement. But neither much mentioned another omission: The immediate expiration of a two-year, two-percentage-point cut in the Social Security payroll tax.
That break, which put an extra $1,000 in the wallets of typical families earning $50,000 U.S. a year, was an Obama priority two years ago as a way to boost consumer spending and spark the flagging economy, but it fell victim this time to other priorities.
House Democrats voted by an overwhelming 172-16 for the agreement, which was crafted over the weekend by Senate Minority Leader Mitch McConnell, of Kentucky, and Vice-President Joe Biden.
But Republicans tilted against it 151-85. It is rare for leaders to bring a bill to the House floor that will be opposed by most lawmakers from their own party, and the decision underscored the pressure GOP leaders felt to approve the legislation.
Boehner, the Representative from Ohio, took no public stance on the measure before the vote. But he guided the compromise to the House floor after an unsuccessful attempt by many conservatives to persuade leaders to add spending cuts to the bill.
