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AP Sources: ‘Fiscal Cliff’ Deal Emerging

Dec. 31, 2012 12:35pm Becket Adams

WASHINGTON (TheBlaze/AP) — The contours of a deal to avert the ‘fiscal cliff’ emerged Monday, with Democrats and Republicans agreeing to raise tax rates on family income over $450,000 a year, increase the estate tax rate and extend unemployment benefits for one year, officials familiar with the negotiations said.

But with a midnight deadline rapidly approaching, both sides were at an impasse over whether to put off automatic, across-the-board spending cuts set to take effect on Jan. 1, and if so, how to pay for that. Democrats want to put off the cuts for one year and offset the so-called sequester with unspecified revenue.

Officials emphasized that negotiations were continuing and the emerging deal was not yet final. President Barack Obama was to speak about the status of the negotiations from the White House Monday afternoon.

The proposal in the works would raise the tax rates on family income over $450,000 from 35 percent to 39.6 percent, the same level as under former President Bill Clinton. Also, estates would be taxed at 40 percent after the first $5 million for an individual and $10 million for a couple, up from 35 percent to 40 percent.

Unemployment benefits would be extended for one year. Without the extension, 2 million people would lose benefits beginning in early January.

A Republican official familiar with the plans confirmed the details described to The Associated Press.

The officials requested anonymity in order to discuss the internal negotiations.

Unless an agreement is reached and approved by Congress by the start of New Year’s Day, more than $500 billion in 2013 tax increases will begin to take effect and $109 billion will be carved from defense and domestic programs

Though the tax hikes and budget cuts would be felt gradually, economists warn that if allowed to fully take hold, their combined impact – the so-called fiscal cliff – would rekindle a recession.

Urgent talks were continuing Monday afternoon between the White House and congressional Republicans, with longtime negotiating partners Vice President Joe Biden and Senate Republican leader Mitch McConnell at the helm. Underscoring the flurry of activity, another GOP aide said the two men had conversations at 12:45 a.m. and 6:30 a.m. Monday.

An agreement on the proposed deal would also shield Medicare doctors from a 27 percent cut in fees and extend tax credits for research and development, as well as renewable energy.

The deal would also extend for five years a series of tax credits meant to lessen the financial burden on poorer and middle-class families, including one credit that helps people pay for college.

The deal would achieve about $600 billion in new revenue, the officials said.

Despite the movement, Senate Majority Leader Harry Reid warned that time was running out to finalize an agreement.

“Americans are still threatened with a tax hike in just a few hours,” said Reid, D-Nev., as the Senate began an unusual New Year’s Eve session.

Liberal Sen. Tom Harkin, D-Iowa, took to the Senate floor after Reid to warn Democratic bargainers against lowering levies on large inherited estates and raising the income threshold at which higher tax rates would kick in.

“No deal is better than a bad deal. And this look like a very bad deal the way this is shaping up,” said Harkin.

Letting tax rates rise for couples with incomes of $450,000 a year is a concessions for Obama, who campaigned for re-election on a pledge to set the levels at $200,000 for individuals and $250,000 for couples. It also marked a significant concession by Republican leaders who pledged to continue the George W. Bush-era tax cuts for all income earners. .

The hope of the White House and lawmakers was to seal an agreement, enact it and send it to Obama for his signature before taxpayers felt the impact of higher income taxes or federal agencies began issuing furloughs or taking other steps required by spending cuts.

Regardless of the fate of the negotiations, it appeared all workers would experience a cut in their take-home pay with the expiration of a two-year cut in payroll taxes.

“This whole thing is a national embarrassment,” Sen. Bob Corker, R-Tenn., said Monday on MSNBC, adding that any solution Congress would swallow at this late stage would be inconsequential. “We still haven’t moved any closer to solving our nation’s problems.”

In a move that was sure to irritate Republicans, Reid was planning – absent a deal – to force a Senate vote Monday on Obama’s campaign-season proposal to continue expiring tax cuts for all but those with income exceeding $200,000 for individuals and $250,000 for couples.

In one sign of movement on Sunday, Republicans dropped a demand to slow the growth of Social Security and other benefits by changing how those payments are increased each year to allow for inflation.

Obama had offered to include that change, despite opposition by many Democrats, as part of earlier, failed bargaining with House Speaker John Boehner, R-Ohio, over a larger deficit reduction agreement. But Democrats said they would never include the new inflation formula in the smaller deal now being sought to forestall wide-ranging tax boosts and budget cuts, and Republicans relented.

“It’s just acknowledging the reality,” Sen. Susan Collins, R-Maine, said of the GOP decision to drop the idea.

As the New Year’s Eve deadline rapidly approached, Democrats and Republicans found themselves at odds over a host of issues, including taxing large inherited estates. Republicans wanted the tax left at its current 35 percent, with the first $5.1 million excluded, while Democrats wanted the rate increased to 45 percent with a smaller exclusion.

The two sides were also apart on how to keep the alternative minimum tax from raising the tax bills of nearly 30 million middle-income families and how to extend tax breaks for research by business and other activities.

Republicans were insisting that budget cuts be found to pay for some of the spending proposals Democrats were pushing.

These included proposals to erase scheduled defense and domestic cuts exceeding $200 billion over the next two years and to extend unemployment benefits. Republicans complained that in effect, Democrats would pay for that spending with the tax boosts on the wealthy.

“We can’t use tax increases on anyone to pay for more spending,” said Sen. Kay Bailey Hutchison, R-Texas.

—–

Eds: Associated Press writers David Espo, Andrew Taylor, Alan Fram and Josh Lederman contributed to this report.

Follow Becket Adams (@BecketAdams) on Twitter

This is a breaking story. updates will be added as they become available.

Featured Image courtesy Getty Images.

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Comments (53)

ThePirateRagnar
Posted on December 31, 2012 at 2:28pm
Can anyone explain what gives them the right to take 40% of someone’s wealth when they die? So a fourth generation farm that may have a worth of $5 million can only be passed down to their son or daughter so long as they have the means to pay the government the $2,000,000 it is somehow entitled to!? And their only alternative is to sell it and then pay the $2,000,000,000 estate tax as well as an inheritance tax and every other damn tax they are required to pay as a result. And then let’s not forget that whatever they had left would be considered income and therefore they would get taxed on that!

Why don’t people care about what this government is doing to us? How do people like Encimom and SAVETHEMETEORS engage and support this crap. If they don’t want freedom, then go to China, or Cuba and live under the umbrella the commune provides! Get the hell out and allow us to be free! Buncha friggin sheep!

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- ranepowel
  Posted on December 31, 2012 at 2:45pm
  It’s not YOUR land that your farm was on. You bought or loaned it from the Government. You used their roads. Ate their food. Drank their water. Used their schools.
  
  The Government deserves to get a decent chunk of that back when you die. Let your kids fend for themselves and make their own way.
  
  Report this comment
- ThePirateRagnar
  Posted on December 31, 2012 at 6:41pm
  I sure hope that’s sarcasm.
  
  Report this comment
Astalavistababy
Posted on December 31, 2012 at 2:26pm
If you voted for Obama, your taxes should go up. After all you voted for big government and all the big programs and trillions of dollars borrowed and spent to fund it. You need to choose between low taxes or big government, but you can’t have both. I think these low info voters will choose to have low taxes and pressure Obama to make a deal with republicans to cut spending. Republicans should hold out no matter how much blame is heaped on them or how loud the dems scream. Hang tough and bring it all down if necessary to get spending and entitlements under control. It’s Obama’s presidency and his legacy. No one is going to remember who John Boehner is. They will remember Obama’s failed presidency or his successful presidency. That is up to Obama. Republicans are holding the cards to Obama’s future. Don’t fold now. Hold his presidency hostage if necessary. The next election is two years away and Obama can’t hold out that long. When the economy goes into recession he will make a deal with republicans. Republicans have a better hand than they think. The question now is, will they be smart enough and strong enough to play it and win?

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Mess23
Posted on December 31, 2012 at 2:21pm
We went off the cliff 5 years ago, we are now about to hit bottom.

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- Cavallo
  Posted on December 31, 2012 at 2:32pm
  We aint seen nut’n yet. The “cliff” is just a pot hole compared to the correction on the horizon.
  
  Report this comment
- U.S. Constitutionist
  Posted on December 31, 2012 at 2:37pm
  Cavello – Hyperinflation is next…
  
  Report this comment
Dismayed Veteran
Posted on December 31, 2012 at 2:19pm
If any of these jackasses, Democrat or Republican, worked in the private sector, they would be fired. Executives are expected to control cost, improve efficiency and improve effectiveness to achieve profit. We are $16Trillion+ in debt. We need a absolute clean sweep of everyone in Congress and the Administration. We can no longer afford incompetent employees.

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- uptickusa
  Posted on December 31, 2012 at 2:47pm
  Not only are the 537 congress members incompetent but the president gave the a raise today-what a disaster…
  
  Report this comment
- ranepowel
  Posted on December 31, 2012 at 2:47pm
  No. Term limits are called elections. If people want the same people in office they’re going to have them. Sorry you don’t like it. Move.
  
  Report this comment
Ironeagle
Posted on December 31, 2012 at 2:13pm
DOTUS (Dictator of the US) is playing Congress like a fiddle.

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thegreatcarnac
Posted on December 31, 2012 at 2:04pm
Obama wants to ‘tax the rich’ out of spite. THere is no other reason. THe message he is sending to Americans is “quit working hard to succeed…we will just take it from you”. The problem in America is idiots. Idiots who do not understand how the government works or how capitalism works are voting their idiotic mindset. Even you and I know how to kickstart this nation’s economy. Of course most of us were educated in an earlier time when “economics” and “civics” were subjects in classes. Obama is a socialist. We are not.

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- ranepowel
  Posted on December 31, 2012 at 2:48pm
  You mean like from the 20′s to the 80′s when the tax rate on the wealthiest Americans was over 90%?
  
  Oh, please, tell me more about what you failed to learn in school.
  
  Report this comment
SPOT_OF_TEA
Posted on December 31, 2012 at 1:59pm
Heres whats going on right now….there is going to be a bill passed in the Republican controlled house which will be passed by all democrats and just enough republicans to push it over the top…whats holding it up is the republicans are fighting over wich ones will have to support it because they are scared they will be voted out for supporting the bill…they dont care about the bill passing as long as they dont have t be the one held accountable and might lose their cushy job..and the farce continues in Washington where nothing you see is real……Except the Redskins…Way To Go RG3!

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- Cavallo
  Posted on December 31, 2012 at 2:33pm
  They better pick some very secure RINOs.
  
  Report this comment
dublinthewagons
Posted on December 31, 2012 at 1:54pm
Was this the movie or a cartoon? Let the linching begin.

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Gonzo
Posted on December 31, 2012 at 1:54pm
This should assure we reach at least a $22 Trillion national debt by the time Obama leaves office! Exactly what the majority of drooling idiots voted for…enjoy.

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U.S. Constitutionist
Posted on December 31, 2012 at 1:42pm
I ask, “And how much is taken for these concessions?”

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- U.S. Constitutionist
  Posted on December 31, 2012 at 2:43pm
  With this, I imply pork projects for votes…
  
  Report this comment
Ghandi was a Republican
Posted on December 31, 2012 at 1:25pm
Seriously.. Write it all up and call it the obama tax increase on everyone. If obama wants to screw the American people, let him do it up front. Obama SPENT IT ALREADY. Obama’s economic plan failed miserably and we can no longer afford his Frankenbama “experiment”

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- deskjockey
  Posted on December 31, 2012 at 1:42pm
  no, walk away… They are going to blast you anyway. Earn it. Walk away. Let’s go off the cliff. With this deal we are anyway.
  
  Report this comment
Hotconchick
Posted on December 31, 2012 at 1:15pm
I wish all these politicians would just stop and give the National Socialists what they want- all Republicans had to say is we don’t want this and vote present instead of trying to reason with an enemy whose sole purpose is to bring America down to size and fundamentally transform her to a third world cesspool.

Let’s go over and show America what they voted for. They need their money hit since they bought the BS of the election. The only hope is that most of them (obviously not the hard core commies) will see the true colors come out and then hope to change it.

If not, then we kiss what we know good bye and wished we would have stopped it.

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Ghandi was a Republican
Posted on December 31, 2012 at 1:12pm
Maybe the Republicans should rescind the Bush “Tax cuts” and then let obama increase them, making them the obama TAX INCREASES. That’s the revenue obama wants, why not put HIS name on them?

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Ghandi was a Republican
Posted on December 31, 2012 at 1:09pm
NO DEAL! NONE! Give obama exactly what he campaigned on, LESS what Republicans campaigned on. The scoreboard is 230-1 Obama is the one.
Democrats cannot show that they ran on INCREASED SPENDING. What’s an election for? You must hold to your campaign platform, otherwise t=you are a fraud and a charlatan.
Democrats must be held to account for their platform as they were represented to the voter.
STOLEN ELECTIONS based on fraud are unacceptable. Jeeez. Did that even need to be said?

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SamIamTwo
Posted on December 31, 2012 at 1:06pm
http://en.wikipedia.org/wiki/European_Fiscal_Compact

Treaty on Stability, Coordination and Governance in the Economic and Monetary Union; also referred to as TSCG or more plainly the Fiscal Stability Treaty.

Interesting, eh?

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CALLMEMSGT
Posted on December 31, 2012 at 1:06pm
So this was what the republicans got for raising the debt ceilng in 2011? Where are the spending cuts?

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- circleDwagons
  Posted on December 31, 2012 at 1:28pm
  This is what We got for voting Republican. EVIL
  
  Report this comment
- BSdetector
  Posted on December 31, 2012 at 1:28pm
  Let’s all hold our breath and maybe they’ll appear in 2050.
  
  Report this comment
- Cavallo
  Posted on December 31, 2012 at 2:35pm
  The cuts will occur when there isn’t any fake money left to spend.
  
  Report this comment
- soybomb315_II
  Posted on December 31, 2012 at 3:38pm
  “So this was what the republicans got for raising the debt ceilng in 2011? Where are the spending cuts?”
  
  This is the way it has gone, is going, and will go in the future. Mr. Boehner, tear this party down! Something better will take its place – i am sure of it
  
  Report this comment
Flakeyone
Posted on December 31, 2012 at 1:05pm
I say go over the damn cliff already. What have we got to lose? No deal is a good deal. I have had enough of the politicians in the country on both sides of the isle. It matters NOT what deal they make, we are financially doomed. Period.

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RaydocX
Posted on December 31, 2012 at 1:02pm
If there are no cuts then any money gained will be frittered away with existing, much less new spending… in fact, the damn bill itself will probably have sufficient pork to wipe out any ‘gains’

this is a travesty… any business that ran like this would have gone under years ago.

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- Wolf
  Posted on December 31, 2012 at 1:45pm
  Seriously, Ray, it is that and more. Like really: how can there be enough taxation from people earning 250K or more a year to pay for the UC for -what, 2 million?- unemployed benefits another year? It’s stealing from Hard-Worker to pay Non-worker. Period. And the plain old Worker gets the shaft as well, just not so deeply.
  
  Report this comment
pap pap
Posted on December 31, 2012 at 12:52pm
Cuts need to start now and not over a 10 yr period as you know well will never happen with the jerks in DC. Taxing estates is bad for the country. That money was already taxed. I hate Dems and Starting to hate repubs also they voted themselves a raise for what ? They weren’t able to acomplish a darned thing that was positive for this country. Almost all of them are useless and they should just GFT. (The T is for Themselves.z0

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- booger71
  Posted on December 31, 2012 at 1:54pm
  Barry right now is claiming that in 2011 he implemented 1 trillion in cuts, where are they Barry? Why are you still spending 1.5 trillion per year more than we take in. The extra money you might bleed out of those making 250K will fund the country for 8 whole days. The applaud sign is now on
  
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gyro
Posted on December 31, 2012 at 12:49pm
raise your hand sellout

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- CatB
  Posted on December 31, 2012 at 12:54pm
  We the PEOPLE are about to get scr*wed again .. btw ..I thought that the BUSH TAX CUTS were only for the rich … why are they now talking about the middle class?
  
  Report this comment
IMCHRISTIAN
Posted on December 31, 2012 at 12:45pm
Put off the cuts for one year? How stupid of an idea is that. Plenty of time has passed and they should not have spent more then they took in. We all WANT something that we can’t have unless we have the cash. I hear a plenty of ads on the radio and tv that are unnecessary and other waste shouldn’t take that long to figure out or not to pass in the first place. Children should be taught(true) economics by parents and early in school and not when ruining a country as an elected official.

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DougHuffman
Posted on December 31, 2012 at 12:44pm
Yep. ONE PARTY GOVERNMENT ruled by America’s Ruling Class against the interests of the Country Class. Angelo Codevilla’s ‘America’s Ruling Class — And the Perils of Revolution’, The American Spectator July 2010

μολων λαβέ molṑn labé ΜΟΛΩΝ ΛΑΒE “From my cold, dead hands” works for me.
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InquisitiveDebbie
Posted on December 31, 2012 at 12:43pm
I sincerely hope this is a rumor!

All lawmakers (regardless of party) SHOULD reject any new taxes and begin cutting their spending!

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- CatB
  Posted on December 31, 2012 at 1:02pm
  Amen … watch them sell out the U.S. taxpayers and THEIR CHILDREN AND CHILDREN’S CHILDREN … again.
  
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IndyGuy
Posted on December 31, 2012 at 12:40pm
Can you say…ONE PARTY GOVERNMENT???

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Thighmaster
Posted on December 31, 2012 at 12:39pm
This is the part where I show My shocked face….

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- DADDYWOREAWHITEHAT
  Posted on December 31, 2012 at 1:20pm
  Not yet. Wait for it….
  Midnite is near.
  
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