WASHINGTON – U.S. Sen. Mike Johanns (R-Neb.) tonight supported legislation negotiated by Senate Republican Leader Mitch McConnell (R-Ky.) and Vice President Joe Biden to avert the fiscal cliff and extend the current farm bill. The package passed by a vote of 89-8.
“This agreement isn’t my ideal option, but I firmly believe going over the cliff isn’t an option at all,” Johanns said. “I would have preferred stopping a tax hike for every American, significantly reducing spending and strengthening Social Security and Medicare. This package, however, is a vast improvement from the Administration’s original proposal and no one can overlook the fact it protects an estimated 99 percent of Americans from being hit with the largest tax hike in our nation’s history.”
The fiscal cliff is a combination of expiring tax relief and automatic spending cuts that would have kicked in at the beginning of next year. Since no package will be signed by President Obama before the New Year, any final deal will take place retroactively so tax rates will continue uninterrupted for the overwhelming majority of American taxpayers.
Below are the details of the package:
• Permanently extends current tax rates for families earning less than $450,000 a year;
• Makes permanent current capital gains and dividends rates for families earning less than $450,000 while changing the rate to 20 percent for families making more than $450,000;
• Extends popular tax credits – like the tuition and child care tax credits – for five years;
• Extends the current $5 million estate tax exemption but the tax rate on estates over that limit would change from 35 percent to 40 percent;
• Prevents a 27 percent reduction in Medicare payments to doctors and other health care providers treating patients on Medicare;
• Replaces two months of the approximately $100 billion across-the-board spending cuts known as sequestration scheduled to start in January;
• Extends the current farm bill, which passed in 2008, through the end of this fiscal year;
• Permanently patches the Alternative Minimum Tax. This tax was originally designed to prevent high-income earners from using exemptions to avoid paying income taxes but did not automatically adjust for inflation. Without patching the AMT, this tax would impact nearly 135,000 Nebraska households earning as little as $33,750 a year according to the Congressional Research Service.
Without this agreement, American taxpayers would face a tax increase of almost $536 billion a year – the steepest single tax increase in American history. Roughly half of these tax increases would come from the expiration of the current income and investment income tax rates implemented during President George W. Bush’s tenure.
Because entitlements and interest on our debt currently account for nearly two-thirds of our nation’s spending, Johanns believes addressing programs like Medicare and Social Security must be part of any long-term solution.