Congress Passes Agreement to Avoid Fiscal Cliff; Delays Sequester Cuts and Extends Farm Bill

Posted on: January 2nd, 2013 by NADO Admin

On January 1, Congress passed a last minute deal to avoid the fiscal cliff. The agreement, known as the American Taxpayer Relief Act (Senate amendment to H.R. 8), includes tax rate increases for families who earn more than $450,000 and individuals who make more than $400,000 a year. The middle-class Bush tax rates for families and individuals making less than $400,000 will remain unchanged. However, the payroll tax cuts were not extended and expired on January 1. Payroll tax rates will return to 6.2% from 4.2% with a cap of $2,200 regardless of income.

The Senate approved the American Taxpayer Relief Act early Monday morning by a vote of 89 to 8. The package was sent to the House of Representatives, which passed last night by a vote of 257 to 167. The bill now heads to President Obama, who is expected to sign the bill into law today.

Major Provisions:

  • Permanent extension of the 2001 and 2003 Bush tax cuts for personal income tax rates below $400,000 per year and couples with incomes below $450,000
  • Delays 8.2% sequester cuts to federal agencies for two months
  • Extends 2008 Farm Bill provisions for one year
  • Extends federal unemployment benefits

Click here to view a detailed summary of the American Taxpayer Relief Act.

What does this mean for RDOs and local governments?

With the passage of the fiscal cliff deal, federal spending on programs relevant to NADO remains the same for at least another two months. The U.S. Government is still operating under a Continuing Resolution or “CR” at FY2012 federal spending levels until March 27, 2013. In two months, the sequester cuts will take effect as scheduled unless Congress can pass an alternative debt savings measure. Congress still has to address the debt ceiling and continue work on the FY2014 federal budget. It is possible that Congress will pass another six-month CR to extend current federal spending levels for the remainder of FY2013. Click here to view NADO’s CR Federal Budget Chart.

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