Obama, Senate Republicans reach agreement on ‘fiscal cliff’

The Senate approved a bipartisan agreement early Tuesday morning to let income taxes rise sharply for the first time in two decades, fulfilling President Obama’s promise to raise taxes on the rich and avoiding the worst effects of the “fiscal cliff.” The agreement, brokered by Vice President Biden and Senate Minority Leader Mitch McConnell (R-Ky.), passed 89 to 8 in a highly unusual New Year’s morning vote. It now heads to the House, where leaders have not guaranteed passage but top officials believe it could win passage in the next few days.

The agreement primarily targets taxpayers who earn more than $450,000 per year, raising their rates for wages and investment profits. At the same time, the deal would protect more than 100 million households earning less than $250,000 a year from income tax increases scheduled to take effect Jan. 1.

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The fiscal cliff deal is now going to the House of Representatives, after the Senate passed it 89-8 early New Year's Day. The measure aims to avoid a series of tax hikes and spending cuts, set to kick in with the new year.

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The deal came together barely three hours before the midnight deadline, after negotiators cleared two final hurdles involving the estate tax and automatic spending cuts set to affect the Pentagon and other federal agencies this week.

Republicans gave in on the spending cuts, known as sequestration, by agreeing to a two-month delay in budget reductions that would be paid for in part with new tax revenue, a condition they had resisted. And the White House made a major concession on the estate tax, agreeing to terms that would permit estates worth as much as $15 million to escape taxation by the end of the decade, Democrats said.

As the deadline for agreement closed in on Monday, Biden rushed to the Capitol to brief Senate Democrats on the deal, as Majority Leader Harry M. Reid (D-Nev.) laid plans for a vote shortly after midnight, when taxes were set to rise for virtually every American.

“I think we’ll get a very good vote tonight,” a beaming Biden said as he emerged from the meeting with Democrats after nearly two hours. “But happy new year and I’ll see you all maybe tomorrow.”

The measure is now at the House, where Speaker John A. Boehner (R-Ohio) pledged to bring it to a vote in the coming days. “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 and other GOP leaders said in a written statement.

Senior aides predicted the measure would pass the House with bipartisan support. But Boehner’s decision to delay the vote meant the nation would tumble over the cliff at least briefly.

In addition to dealing with the fiscal crisis, the measure would extend federal farm policies through September, averting an estimated doubling of milk prices. The deal also nixed a set pay raise for members of Congress.

During a midday event at the White House, Obama praised the emerging agreement even though it would raise only about $600 billion over the next decade by White House estimates — far less than the $1.6 trillion the president had initially sought to extract from the nation’s richest households.