Vice President Biden and Senate Minority Leader Mitch McConnell (R-Ky.) continued urgent talks Monday over a deal to avoid the “fiscal cliff” after Democrats offered several significant concessions on taxes, including a proposal to raise rates only on earnings over $450,000 a year.
With a New Year’s Eve deadline hours away, Democrats abandoned their earlier demand to raise tax rates on household income over $250,000 a year. President Obama had vowed repeatedly during his reelection campaign to allow tax cuts to expire for incomes over that level.
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Democrats also relented on the politically sensitive issue of the estate tax, according to a detailed account of the Democratic offer obtained by The Washington Post. They promised instead to hold a vote in the Senate that would guarantee that taxes on inherited estates remain at their current low levels, a key GOP demand.
By Monday morning, McConnell’s office reported that talks continued between the Republican leader and Biden and expressed some hope of reaching a deal.
McConnell was holding out to set the income threshold for tax increases even higher, at $550,000, according to people close to the talks in both parties. And he was protesting a Democratic proposal to raise taxes on investment profits for households with income above $250,000.
The two sides were also sharply at odds over automatic spending cuts set to decimate budgets at the Pentagon and other federal agencies next month. Democrats were seeking to delay the cuts, known as the “sequester,” until 2015, without identifying other savings to compensate. They were also pressing to extend unemployment benefits, farm subsidies and Medicare payments to doctors, again without offsetting cuts as Republicans demand.
“The Leader and the VP continued their discussion late into the evening and will continue to work toward a solution,” Don Stewart, McConnell’s spokesman, said in a statement Monday.
Rep. Chris Van Hollen (D-Md.), the top Democrat on the House Budget Committee, also expressed some optimism Monday.
“I think there is some good news,” he said on CNN. “I think now there’s a better than 50-50 chance that we will avoid the fiscal cliff by midnight tonight.” He added: “It is a very open question about whether or not something put together in the Senate would be able to get enough votes in the House. But first things first. Let’s first see if they can get an agreement in the Senate.”
Van Hollen declined to get into specifics publicly about the latest tax-rate levels, but he said, “There’s been a lot of flexibility on the Democratic side on that issue, and now we’re waiting for additional flexibility on the Republican side.” He said that lawmakers still would like to “find an alternative set of deficit reduction to replace these meat-ax, across-the-board cuts. So that remains part of the conversation.”
Unless the two sides can reach agreement, historic tax hikes are set to hit virtually every American on Jan. 1, potentially driving the nation back into recession. An impasse would also throw the coming tax filing season into chaos, as nearly 30 million unsuspecting taxpayers would be required to pay the costly alternative minimum tax for the first time.
With a New Year’s Eve deadline hours away, Democrats abandoned their earlier demand to raise tax rates on household income over $250,000 a year. President Obama had vowed repeatedly during his reelection campaign to allow tax cuts to expire for incomes over that level.
Gallery
Google, Yahoo and Bing released their list of top search terms for 2012. Here’s a recap of the year as seen through queries.
More business news
Lori Montgomery and Paul KaneDemocrats offer a key concession on increasing taxes for higher-income households.
Peter Whoriskey Rising addiction to opiates is tied to pharmaceutical companies’ effort to shape medical opinion and practice.
The Wonkblog Team Welcome to the second annual Wonky awards, where we recognize outstanding achievements and spectacular disasters in policy wonkery for 2012.
Democrats also relented on the politically sensitive issue of the estate tax, according to a detailed account of the Democratic offer obtained by The Washington Post. They promised instead to hold a vote in the Senate that would guarantee that taxes on inherited estates remain at their current low levels, a key GOP demand.
By Monday morning, McConnell’s office reported that talks continued between the Republican leader and Biden and expressed some hope of reaching a deal.
McConnell was holding out to set the income threshold for tax increases even higher, at $550,000, according to people close to the talks in both parties. And he was protesting a Democratic proposal to raise taxes on investment profits for households with income above $250,000.
The two sides were also sharply at odds over automatic spending cuts set to decimate budgets at the Pentagon and other federal agencies next month. Democrats were seeking to delay the cuts, known as the “sequester,” until 2015, without identifying other savings to compensate. They were also pressing to extend unemployment benefits, farm subsidies and Medicare payments to doctors, again without offsetting cuts as Republicans demand.
“The Leader and the VP continued their discussion late into the evening and will continue to work toward a solution,” Don Stewart, McConnell’s spokesman, said in a statement Monday.
Rep. Chris Van Hollen (D-Md.), the top Democrat on the House Budget Committee, also expressed some optimism Monday.
“I think there is some good news,” he said on CNN. “I think now there’s a better than 50-50 chance that we will avoid the fiscal cliff by midnight tonight.” He added: “It is a very open question about whether or not something put together in the Senate would be able to get enough votes in the House. But first things first. Let’s first see if they can get an agreement in the Senate.”
Van Hollen declined to get into specifics publicly about the latest tax-rate levels, but he said, “There’s been a lot of flexibility on the Democratic side on that issue, and now we’re waiting for additional flexibility on the Republican side.” He said that lawmakers still would like to “find an alternative set of deficit reduction to replace these meat-ax, across-the-board cuts. So that remains part of the conversation.”
Unless the two sides can reach agreement, historic tax hikes are set to hit virtually every American on Jan. 1, potentially driving the nation back into recession. An impasse would also throw the coming tax filing season into chaos, as nearly 30 million unsuspecting taxpayers would be required to pay the costly alternative minimum tax for the first time.