The U.S. Senate voted 89-8 at around 2 a.m. Tuesday morning to approve a package that would avert tax hikes and major spending cuts designed to go into effect officially tomorrow, January 2. However, passage in the more conservative House of Representatives is still very much uncertain at this hour.
The legislation contains a number of major provisions, but the big one is this: Taxes would not go up for any individual earning less than $400,000 and couples earning less than $450,000. That's a higher number than what President Obama campaigned on all year long - Obama wanted to have taxes go up for any individual making $200,000, or couples making $250,000. However, tax deductions and credits would start phasing out on incomes as low as $250,000.
The bill delays for two months the automatic domestic and defense spending cuts known as sequestration - a victory for Republicans, as Democrats wanted that deadline to be extended much longer. Other provisions in the Senate bill include taxes on inherited taxes going up to 40 percent from 35 percent, unemployment insurance being extended for 2 million people (at a cost of $30 billion). The alternative minimum would be permanently adjusted for inflation, and child care, tuition and research and development tax credits would be renewed.
But that wasn't good enough of a compromise for Senator Rubio, who said in a statement issued just before 10 a.m. today that though he "appreciated" the effort made by Senate Minority Leader Mitch McConnell to "make the best out of a bad situation," he could not support the plan.
Rubio was joined by fellow Tea Party favorites Mike Lee of Utah and Rand Paul of Kentucky in rejecting the bill. The two other Republicans who also voted no were Iowa's Chuck Grassley and Alabama's Richard Shelby.
Here is Rubio's full statement:
I appreciate all the hard word that went into avoiding the so-called 'fiscal cliff'. I especially commend Senator McConnell's efforts to make the best out of a bad situation. Nevertheless, I cannot support the arrangement they have arrived at. Rapid economic growth and spending reforms are the only way out of the real fiscal cliff our nation is facing. But rapid economic growth and job creation will be made more difficult under the deal reached here in Washington.
Thousands of small businesses, not just the wealthy, will now be forced to decide how they'll pay this new tax and, chances are, they'll do it by firing employees, cutting back their hours and benefits, or postponing the new hire they were looking to make. And to make matters worse, it does nothing to bring our dangerous debt under control.
Of course, many Americans will be relieved in the short term that their taxes won't go up. However in the long run, they will be hurt when employers pass on to them one of the largest tax hikes in decades. Furthermore, this deal just postpones the inevitable, the need to solve our growing debt crisis and help the 23 million Americans who can't find the work they need.
Despite the overwhelming vote in the Senate, questions loom large whether the more conservative House of Representatives will follow Rubio's lead in rejecting the package.
But the fact is that raising the threshold for higher tax rates to $400,000 should appeal to Republicans. CNN reports that while nearly 2% of filers have adjusted gross incomes over $250,000, only 0.6% have incomes above $500,000.
But there are already rumblings from conservative members of the House (which are the majority in that Republican-led body) that they will follow Rubio's lead and vote against the package, leading to taxes to rise for everybody beginning Wednesday, January 2.
Getting back to Senator Rubio - there's no question that his opposition should appeal to his most far-right wing supporters, and brandish him as a legislator who is intent on appealing to the Grover Norquist-led crowd who never want to be on record as approving a tax hike of any sort (even though Norquist said Monday he was okay with the Senate compromise). Whether it marks him as an independent sort who can rise above the din of Washington D.C. intransigence is another prospect entirely.
For the record, the three Democrats who opposed the bill were Delaware's Tom Carper, Colorado's Michael Bennett and Iowa's Tom Harkin, who said that the Democrats had given away too much by raising the rates for taxes going up to $400,000.