Published Monday, Dec. 31, 2012 | 4:54 p.m.
Updated Monday, Dec. 31, 2012 | 7:45 p.m.
Republicans, led by Sen. Minority Leader Mitch McConnell, and Democrats, led by Vice President Joe Biden, have reached a deal on the fiscal cliff.
Now all that's left to do is sell it to lawmakers, some of whom will doubtless be reluctant to support it.
The deal extends current tax rates up to the $400,000 income level for individual filers and $450,000 for couples, permanently. Under the deal, Incomes above that level will be taxed at a rate of 39.6 instead of 35 percent beginning with 2013 tax returns.
The deal also extends sales tax deductions, mortgage interest relief deductions, energy tax credits, and unemployment benefits at their current levels for another year, according to an aide for Senate Majority Leader Harry Reid.
What it does not do, however, is resolve the full force of the fiscal cliff — that combination of tax hikes and scheduled government cuts set to take effect at midnight — because it kicks the issue of those cuts down the road.
Under the deal, Democrats accepted a two-month delay of sequestration cuts, the across-the-board cuts that Reid designed to take effect on Jan. 1 back in 2011, as a fallback measure if Congress failed to come up with other budget cuts.
Under pressure from the White House and moderate Democrats, Democrats also swallowed an indexed version of the estate tax, which would allow the amount of inheritance that can be exempted from taxation to rise with inflation over time.
Senate Republican leaders signed off on the deal-in-the-making Monday evening. But Senate Democrats took hours to finally ink a deal — and with only about 90 minutes left to the fiscal cliff's midnight deadline, were still holed up in a side room discussing the details.
Many Democrats had objected during the day Monday to approving a deal that set the tax threshold as high a $450,000. And unlike in past deals, Reid — who has stayed mum about his take on the deal all day — did not seem to want to whip their votes alone.
At 9:15 p.m., less than three hours before the fiscal cliff deadline, Biden arrived at the Capitol, briefly meeting with Reid before going into a room full of Senate Democrats, already assembled off the Senate chamber. Over an hour later, almost all the Senate Democrats were still huddled in discussions.
Both aides to Reid and McConnell insisted, in that hour, that it would still be possible to hold a Senate vote in the house before the midnight deadline.
But that won't keep the country from technically going over the cliff. And whether it happens at all is up to what the Senate Democrats decide.
Senate Republicans have wanted to vote on a "fiscal cliff" deal tonight. The White House is on board. Even House Republicans say they’re ready to vote as soon as the Senate does — though they did disband Monday night with six hours to go until the fiscal cliff deadline.
It’s Senate Democrats who aren’t yet sure whether they want to see the deal that is in the works come to a vote on the floor.
Of course, even if a vote were to happen tonight, it wouldn't necessarily mean either body would pass the compromise brokered by party leaders.
On Monday, Vice President Joe Biden and Senate Minority Leader Mitch McConnell crafted most of a deal to stave off the worst effects of the tax hikes and government cuts that are scheduled to go into effect at midnight tonight.
They agreed to keep in place the Bush tax cuts — which expire at the end of 2012 — for income levels up to $400,000 for individual tax filers and $450,000 for couples. For incomes above that, tax rates would rise to 39.6 percent from 35 percent. The change would take effect on 2013 tax returns.
But that income threshold is significantly higher than the ceiling Democrats had wanted — and thought they had earned in the 2012 election.
“We’re going to lock in forever the idea that $450,000 a year is middle class in America,” Iowa Democratic Sen. Tom Harkin said Monday morning. “The direction they are heading in is absolutely the wrong direction for our country. No deal is better than a bad deal, and this looks like a very bad deal.”
Democrats had wanted to cap the extension of lower tax rates at $250,000 and thought they had a mandate from their better-than-expected wins in November to press for a deal that met that mark.
Two weeks ago, President Barack Obama introduced the $400,000 figure in a broad taxes-and-spending deal he proposed to Republicans. Republicans, then led by House Speaker John Boehner, rejected it.
But the figure resurfaced over the weekend in a proposal Republicans, now led by McConnell, proposed to Democrats.
McConnell's deal was slimmed down: Unlike Obama's initial offer, it did not include the ability to increase the country’s borrowing authority. Democrats, led by Senate Majority Leader Harry Reid, refused to make a counteroffer.
But the McConnell-Biden deal is in many other regards similar to Obama's original proposal. Both extend unemployment benefits. Both defer sequestration cuts. And both will preserve key tax deductions, such as energy tax credits, tuition tax credits and a fix to the alternative minimum tax, which limits the deductions the very wealthy are allowed to claim.
But many Democrats did not expect to have to give so much ground.
Obama, Reid and many other Democrats emerged from the November election claiming that the country had signaled to them that they agreed with plans to let tax rates on incomes over $250,000 increase.
In the past 24 hours, Obama has lauded the Biden-McConnell compromise while other Democrats such as Harkin have lambasted it.
But it is not yet clear what Reid thinks.
Since remarking on Biden and McConnell’s negotiations with a simple, “I wish them well,” on Sunday, Reid has kept an uncommonly low profile, emerging just once on Monday morning to say that significant differences remain between Republicans and Democrats on the forming deal.
According to a McConnell aide and several Republicans who emerged from a meeting of Senate GOP members Monday evening, there is no final resolution yet on how long they would defer sequestration cuts under the arrangement.
The McConnell aide also said that direct discussions between Reid and McConnell’s offices had broken down overnight and that all communication between their staffs was going through Biden as a middleman.
Biden was expected to make his way down to Capitol Hill on Monday night to sit in on the Senate Democrats’ meeting once the deal was finalized.
Reid still has not given blessing to the developing deal, or even commented on it. That means, as of yet, there is still no deal to vote on.
There is some political currency to be gained by a vote in the Senate: Because the House disbanded early, promising to return to the Capitol at noon on New Year’s Day, they have made their peace with missing the fiscal cliff deadline. The Senate, however, still has four and a half hours to hold a vote — and have the bragging rights thereafter that they met their obligations to avert a crisis.
If the Senate does vote Monday night, however, they will be doing so somewhat on faith that the measure Biden and McConnell have struck is sound. The Congressional Budget Office has not yet had time to score the measure, nor will they before midnight. As a result, lawmakers won’t really know the value of what they are voting for.