The U.S. House passed a bill undoing income tax increases for more than 99 percent of households, giving a victory to President Barack Obama even as Republicans vowed to fight him in coming weeks for spending cuts in exchange for raising the debt ceiling.
The 257-167 vote just after 11 p.m. yesterday capped a tension-filled final push as Republicans balked at a bipartisan Senate bill. House Speaker John Boehner ordered a vote even though 151 of 236 Republicans, including Majority Leader Eric Cantor, ultimately voted no. Obama said he’d sign it into law.
The largest economic impact of the budget accord will come from ending a two-percentage-point payroll tax cut, a move that will shrink paychecks for U.S. workers immediately even as most income tax cuts that expired Dec. 31 are being extended permanently.
“It’s unbelievable that what you see in there is more spending as opposed to less spending,” said Representative Rob Woodall, a Georgia Republican, about the Senate-passed bill.
Those same households would pay higher tax rates on their dividends and capital gains, including private-equity managers’ carried-interest income. The top rate will go to 23.8 percent, including taxes from the 2010 health-care law that took effect yesterday.
What’s happening instead is deficit reduction achieved in fits and starts. Democrats see a multi-stage game where they lost badly in 2011 and have now recovered their footing to insist on pairing tax increases with spending cuts.