In the wee hours of Jan. 1, Senate leaders reached agreement on legislation designed to avert the so-called "fiscal cliff." That agreement has also been approved by the House by a 257 to 167 vote.
According to The Washington Post the measure "would let the top tax rate rise immediately from 35 percent to 39.6 percent on income over $450,000 for married couples and $400,000 for single people."
Although the bill will protect middle income families from an increase in income taxes, the legislation passed Tuesday night will not stave off an increase in payroll taxes. A 2 percent payroll tax cut passed during the economic downturn expired Dec. 31.
According to Bloomberg the average increase would be $1,635. The increase will impact approximately 80 percent of households with incomes between $50,000 and $200,000, reported Bloomberg.
Some highlights of the so-called McConnell-Biden plan:
- The payroll tax rate, which is used to fund Social Security, will rise to 6.2 percent from 4.2 percent. For a worker making $30,000 annually, that would mean about $50 less monthly in take-home pay.
- Extends tax cuts in the 2009 stimulus act for five years, including a child tax credit, and an expanded earned income credit.
- Federal unemployment insurance would be extended for a year for 2 million people.
The entire Senate bill can be reviewed here.
The New York Times reported that the debt limit was not part of the deal. The country officially hit its debt limit Monday, and the Treasury reportedly is undertaking “extraordinary measures” to put off default.
- Patch contributor Alex Keown contributed to this story