President Obama and Senate Republicans have reached a deal to raise taxes on the wealthy and take much of the bite out of fiscal cliff. The agreement passed in the Senate early Tuesday morning by a vote of 89 to 8. It came after days of furious negations and a pact made between Vice President Biden and Senate Minority Leader Mitch McConnell.
For the first time in 20 years, income taxes will rise. Individuals making more than $400,000 and households making more than $450,000 will pay 39.6 percent in taxes, up from the Bush-era rate of 35 percent. Obama campaigned on raising taxes above $250,000 but negotiations with Republicans almost doubled that limit. (Democrats secured a $30 billion extension of unemployment benefits.) Tax breaks and credits will be phased out for those earning more than $250,000. The estate tax will rise to 40 percent. And finally, the Alternative Minimum Tax will not hit 30 million new households as the result of a proposed permanent fix.
The sequestration – an automatic $110-billion cut to defense and domestic programs – would be put off for two months.
The deal does not touch the debt ceiling.
A House vote is expected before Wednesday.
This post has been updated throughout.