Senate Majority Leader Harry Reid said the chamber will vote tonight on an agreement between the White House and Republicans to prevent tax increases scheduled to take effect tomorrow for almost every U.S. worker.
Reid spoke after a meeting with Senate Democrats at which Vice President Joe Biden pitched the plan to party members, several of whom had earlier expressed reservations about the accord. Democrats including Senator Charles Schumer of New York said afterward they expected wide support for the plan.
“I feel very, very good,” Biden said after leaving the almost two-hour meeting. “I think we’ll get a very good vote tonight.”
After more than 17 months of bickering, Congress and President Barack Obama have yet to pass a deal to avert more than $600 billion in tax increases and federal spending cuts set to start in January and known as the fiscal cliff. Even if an agreement clears both chambers of Congress in coming days, it would be more limited than what Obama and leaders of both parties sought.
“There are many, many reasons people don’t like the proposal,” Schumer said. “But there’s very close to unanimity that it’s better than going over the cliff.”
Biden negotiated the agreement with Senate Minority Leader Mitch McConnell to increase taxes on top earners, extend expanded unemployment benefits and prevent automatic spending cuts from taking effect for two months, according to a person familiar with the talks who requested anonymity.
House Speaker John Boehner issued a statement tonight saying the House would consider the proposal if it passes the Senate. The House ended business until noon tomorrow without taking action on the budget. Republican leaders left open the option to return tonight if needed.
“Decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members -- and the American people -- have been able to review the legislation,” Boehner said in the statement.
The deal between the White House and Senate Republicans would extend income tax cuts for household income up to $450,000, said an official who spoke on condition of anonymity, with rates rising to 39.6 percent on income above that level. Expanded unemployment insurance would be continued through 2013.
The estate tax exemption would be indexed for inflation as part of the deal, up from the $5.12 million per-person level in place in 2012, said a Senate aide familiar with the talks. That issue had been one of the final sticking points, said Senator Max Baucus, a Montana Democrat who heads the Finance Committee.
Senator Sheldon Whitehouse, a Rhode Island Democrat, said entering tonight’s caucus meeting that he was reserving judgment on the deal Biden and McConnell had struck. Asked if he could support letting taxes expire on household income over $450,000 or whether Democrats should have held out for a lower threshold, Whitehouse said, “I’ll wait and see.”
Taxpayers and investors won’t see immediate effects of the changes, which would accumulate over a matter of months. By acting early in 2013, Congress could reverse the tax and spending changes known as the fiscal cliff.
The Standard & Poor’s 500 Index (SPX) rallied 1.7 percent to 1,426.19 at 4 p.m. in New York ahead of a potential agreement. The 10-year Treasury yield increased six basis points, or 0.06 percentage point, to 1.76 percent at 2 p.m. in New York, according to Bloomberg Bond Trader prices.
Representative Mike Rogers, a Michigan Republican, said “When it comes here we’ll figure out what we can pass,” referring to a possible deal. “If we don’t have real spending cuts, I don’t think it could pass the House of Representatives.”
Boehner, an Ohio Republican, has previously said he would bring any budget legislation passed by the Senate to the House floor, though members may decide to amend it.
Tax cuts first enacted during George W. Bush’s presidency are scheduled to expire tonight. Obama and other Democrats have sought to extend the reductions for married couples’ income up to $250,000 a year while letting tax rates rise for income above that amount. Republicans oppose tax rate increases for any income level.
Allowing the fiscal changes to take effect would cause a recession in the first half of 2013, according to the Congressional Budget Office.
If Congress does nothing, taxes will rise in 2013 by an average of $3,446 for U.S. households, according to the nonpartisan Tax Policy Center in Washington.
Tax filing for as many as two-thirds of U.S. taxpayers could be delayed into at least late March. Defense spending would be cut, and the economy would probably enter a recession in the first half of 2013, according to the CBO.
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