On Tuesday night, the House of Representatives passed the fiscal cliff deal crafted by the Senate, known as the American Taxpayer Relief Act of 2012, by a margin of 257-167. The bill passed the Senate on Tuesday morning by a margin of 89-8. The bipartisan agreement does the following:
- Raises taxes on individuals earning more than $400,000 per year and families earning more than $450,000 per year, with their income tax rates increasing from 35% to 39.6% and their capital gains tax rates increasing from 15% to 20%.
- Limits credits and deductions for individual incomes above $250,000 per year and family incomes over $300,000 per year.
- Raises estate taxes to 40% of the value above $5,250,000, indexed for inflation, an increase from the 2012 rate of 35% of the value over $5,120,000.
- Permanently patches the alternative minimum tax to permanently index it to inflation.
- Allows Social Security payroll taxes to rise from 4.2% to 6.2%.
- Extends unemployment benefits for an additional year.
- Prevents a pay cut for Medicare providers.
- Extends tax credits for college tuition which were created by the 2009 stimulus package.
- Revokes the $900 per year salary raise recently signed into existence by President Obama for members of Congress.
- Extends a number of corporate tax breaks.
- Delays the budget sequestration process by two months.
Of North Carolina's 13 representatives, seven (Ellmers-R, Foxx-R, Jones-R, McHenry-R, McIntyre-D, Miller-D, Myrick-R) voted against the bill and six (Butterfield-D, Coble-R, Kissell-D, Price-D, Shuler-D, Watt-D) voted for it. Both of North Carolina's senators (Burr-R, Hagan-D) supported the bill.
The bill has caused much backlash from House Republicans against Speaker John Boehner (R-OH), but it was not enough to lead to him losing his position as Speaker of the House, as there was no public challenger to him.
Credit rating agencies Moody's and Standard and Poor's are threatening to downgrade the United States government's credit rating. Moody's Investors Services said in a statement that it expects lawmakers will take additional steps needed to lower the deficit in the coming months, and that if they fails to do so, the government's "AAA" credit rating could be at risk. S&P also released a statement, saying, "Washington's governance and policymaking had become less stable, less effective and less predictable. We believe that this characterization still holds."
While many Keynesian economists working for groups such as the Congressional Budget Office, the International Monetary Fund, and the Organization for Economic Cooperation and Development have claimed that the cuts and tax increases of the fiscal cliff would have caused a new recession, most libertarians agree with the Austrian School of economics, which suggests that a cliff dive, along with accompanying government credit downgrades, would have been much better than the deal that was reached.