The White House and the Congress have been able to narrowly avoid the infamous ‘fiscal cliff’ via a last minute deal that was agreed upon by Obama and House Republicans. The deal is a combination of spending cuts and tax increases for individuals making more than $400,000 per year and families making more than $450,000 per year, as oppose to tax hikes on income levels of $250,000 per year that Obama had initially advocated. This increase was made by the White House as a compromise for Republicans in exchange for keeping unemployment insurance for three million people, tax credits for low-income working families, and a reduction in the impact of the alternative minimum tax. The estate tax will also increase. Estates worth $5 million or more will be taxed 40 percent, up from the current 35 percent.
The bill is set to go to the Senate for a New Year’s Eve vote and is not expected to meet significant opposition there. Half of the spending cuts included in the legislation will be from the defense budget.
“It appears that an agreement to prevent this New Year’s tax hike is within sight. … But it’s not done,” Obama said just hours before the deal became public. There are still more budget negotiations in the President’s future. Republicans are planning to, early in the coming year, seek further spending cuts in exchange for raising the debt ceiling. “Now, if Republicans think that I will finish the job of deficit reduction through spending cuts alone – and you hear that sometimes coming from them … then they’ve got another think coming. … That’s not how it’s going to work at least as long as I’m president,” said Obama, “and I’m going to be president for the next four years, I think.”
