The House drew the nation back from the fiscal cliff tonight when it voted to approve compromise legislation that, amongst other provisions, makes the current estate tax policy permanent, with one minor change.
The final vote was 257-167. More Democrats, 172, voted for the bill, than Republicans, 85. Sixteen Democrats voted “no,” while 11 members of the House did not vote.
President Obama is expected to sign the bill shortly. He spoke to the nation shortly after the House completed the vote.
House majority leader Eric Cantor, R-Va., and other Republicans considered alternatives to supporting the plan for many hours before deciding to allow Democrats to carry the day in a rare case where the majority party did not provide the votes needed to pass legislation.
House Budget Committee Chairman Paul Ryan, R-Wis., the 2012 GOP vice presidential candidate, voted for the fiscal cliff deal, as did House Speaker John Boehner, R-Ohio. The No. 2 ranking Republican in the House, Majority Leader Eric Cantor, as well as the third-ranking Republican in the House, GOP Whip Kevin McCarthy, R-Calif., both voted against it.
While the final legislation is a big win for the life insurance industry, it is not the over-arching package that would provide the industry certainty for the tax consequences its customers would face in buying the rest of the industry’s products.
See also: The battle has just begun
Left on the table was the current debt ceiling, which must be raised by mid-March at the latest, and how to pay for cuts in entitlements and defense spending that were also kicked down the road for several months.
The interim deal to avoid a so-called “fiscal cliff” was passed by the Senate 89-8 at 2 a.m. Tuesday.
The House convened at 1 p.m. to consider the bill, but Republicans and Democrats met separately and wandered the House corridors before convening at 9:30 or so to begin debate.
The plan will raise income taxes on single earners with annual incomes above $400,000 and married couples with incomes above $450,000.
It will also block spending cuts for two months, extend unemployment benefits for the long-term jobless, prevent a 27 percent cut in fees for doctors who treat Medicare patients and prevent a spike in milk prices.
"The Association for Advanced Life Underwriting is very pleased that the agreement brings permanence and certainty to the estate tax regime--which we have been advocating for over the last decade,” said David Stertzer, AALU CEO.
Under the agreement, U.S. estate tax law will provide a $5.12 million per-person exemption. The deal raises the highest tax rate from 35 to 40 percent but continues the current policy of reunifying the estate and gift taxes. All other current policies related to the estate tax will also remain in place.
“This provides a key tool for business succession planning, and helping preserve jobs and economic investment in the process,” Sterzer said.
“This is the culmination of a great deal of work by the AALU and industry partners, our members and volunteer leaders to educate Congress on the importance of effectively resolving this issue."
Estate tax policy has been in flux since 2001, when the Bush tax cuts, known as the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) were enacted. It called for higher levels of exemptions and lower tax rates to be phased in over 10 years, with the estate tax totally eliminated in 2010.
However, it decoupled the estate and gift taxes, and made other changes in tax law that made the work of the insurance industry in helping people reduce their estate tax liability more difficult.
It also expired for the 2011 tax year, which would made estate tax policy revert to 2001 levels of a $1 million exemption and a 55 percent maximum tax rate.
This was revised on an interim basis to raise the per-person exemption to $5 million, indexed for inflation, and recouple the estate and gift tax.
The new agreement restores certainty to current policy.