Fiscal cliff bill's impact on Calif. | News
By Raju Chebium
Gannett Washington Bureau
WASHINGTON - California senators supported a deal to avert the fiscal cliff, which passed the Democratic-majority Senate in the pre-dawn hours today but faces an uncertain future in the House.
Democrats Barbara Boxer and Dianne Feinstein were among the 89 senators who voted yes. Eight senators opposed the deal.
The big question is whether the agreement can pass the Republican-controlled House, which is convening today in a rare New Year's Day session.
"My major priority in resolving the fiscal cliff was ensuring that our nation's economic growth continues and is not stalled. This agreement takes important steps that are critical to keeping the economy growing in California and nationwide," Boxer said in a statement.
The deal would prevent higher tax rates for 15 million California taxpayers and keep the Alternative Minimum Tax from hitting 5 million state residents, she said.
Feinstein urged congressional Democrats and Republicans to come together as they did in approving the agreement to avert automatic tax hikes and spending cuts.
"I am hopeful this strong bipartisan vote will set a trend of more cooperation in the new year," Feinstein said in a statement. "Although this package is limited in scope, it does prevent a tax increase for 98 percent of Americans and it extends important unemployment insurance for 2 million people."
Without a deal, every California taxpayer would pay sharply higher income taxes in 2013 on top of higher Social Security payroll taxes, which will reset to the original level of 6.2 percent from the current 4.2 percent.
The agreement would restore federal unemployment benefits to 346,000 jobless Californians who were cut off at the end of last year. Thousands more whose state benefits were set to expire in the next few months would qualify for federal extensions if the agreement becomes law.
The agreement, brokered by Vice President Joe Biden and Senate Minority Leader Mitch McConnell, R-Ky., also would hold off spending cuts on everything from military bases to Head Start for two months to give Congress time to find a long-term solution to the so-called sequestration process.
In a major concession by tax-averse Republicans, virtually all GOP senators approved the package though it would permanently increase taxes for individuals earning more than $400,000 and households making over above $450,000. Their new tax rate would be 39.6 percent, up from the current 35 percent.
About 0.7 percent of California filers would pay more in income taxes, according to the Internal Revenue Service.
The lower tax rates of the George W. Bush era would remain in place permanently for those earning less than $400,000 a year, which includes almost every taxpayer in California.
The income thresholds represented a compromise for Obama, who had campaigned on raising rates on individuals earning $200,000 or more and households making at least $250,000.
The agreement would also:
- Raise the capital gains tax rate on investments from 15 percent to 20 percent for individuals making $400,000 and households making $450,000 annually
- Raise the tax on estates worth $5 million or more to 40 percent from 35 percent
- Extend unemployment insurance for 2 million people for a year
- Prevent the Alternative Minimum Tax - meant to make sure the rich pay their fair share of taxes - from hitting millions of middle-class taxpayers
- Avoid a 27 percent cut in Medicare reimbursements for doctors
- Extend the farm bill through Sept. 30, the end of the current fiscal year, which would prevent a sharp hike in milk prices set to take effect in the coming days.