WASHINGTON (CBSNewYork/AP) -- The White House has reached an agreement with Senate Republican leaders on a deal prevent the "fiscal cliff," CBS News has learned.
"I can report that we've reached an agreement on all of the tax, the tax issues," said U.S. Sen. McConnell (R-Ky.)
The deal would allow for tax hikes on wealthier Americans, while delaying spending cuts for two months.
The deal would theoretically prevent across-the-board tax increases and spending cuts to government programs from taking effect at midnight. But the House was not expected to take a vote until after the midnight deadline.
Officials said a New Year's Eve vote in the Senate to ratify the deal was possible later in the evening, barring opposition from majority Democrats.
Vice President Joseph Biden headed for the Capitol to brief the Democratic rank and file. The House must also vote on the plan, and is not planning to do so until after the "fiscal cliff" deadline at midnight.
"I hope that we will pass it by a bipartisan majority, a strong bi-partisan majority in senate and the house," said U.S. Sen. Joe Lieberman (I-Conn.)
But that may be easier said than done. Some Republicans are angry the deal does not include a package of spending cuts, and without it, the deficit might actually increase.
"Everybody knows we've done nothing, nothing by the time this agreement takes place to reduce a penny of debt in this country," said Sen. Bob Corker (R-Tenn.) "People know that, and that's a shame."
Here are some of the highlights of the tentative agreement as discussed earlier:
- Income tax rates: Extends decade-old tax cuts on incomes up to $400,000 for individuals, $450,000 for couples. Earnings above those amounts would be taxed at a rate of 39.6 percent, up from the current 35 percent. Extends Clinton-era caps on itemized deductions and the phase-out of the personal exemption for individuals making more than $250,000 and couples earning more than $300,000.
- Estate tax: Estates would be taxed at a top rate of 40 percent, with the first $5 million in value exempted for individual estates and $10 million for family estates. In 2012, such estates were subject to a top rate of 35 percent.
- Capital gains, dividends: Taxes on capital gains and dividend income exceeding $400,000 for individuals and $450,000 for families would increase from 15 percent to 20 percent.
- Alternative minimum tax: Permanently addresses the alternative minimum tax and indexes it for inflation to prevent nearly 30 million middle- and upper-middle income taxpayers from being hit with higher tax bills averaging almost $3,000. The tax was originally designed to ensure that the wealthy did not avoid owing taxes by using loopholes.
- Other tax changes: Extends for five years Obama-sought expansions of the child tax credit, earned income tax credit, and an up to $2,500 tax credit for college tuition. Also extends for one year accelerated "bonus" depreciation of business investments in new property and equipment, a tax credit for research and development costs and a tax credit for renewable energy such as wind-generated electricity.
- Unemployment benefits: Extends jobless benefits for the long-term unemployed for one year.
- Cuts in Medicare reimbursements to doctors: Blocks a 27 percent cut in Medicare payments to doctors for one year. The cut is the product of an obsolete 1997 budget formula.
- Social Security payroll tax cut: Allows a 2 percentage point cut in the payroll tax first enacted two years ago to lapse, which restores the payroll tax to 6.2 percent.
Congress could pass later legislation retroactively blocking the tax hikes and spending cuts.
OBAMA ADDRESSES THE SITUATION
Before the agreement was reached, President Barack Obama warned Republicans, specifically, about the battles still ahead. He said he would not accept any debt-reduction deals in the new year that rely on slashing spending without raising taxes, too. Cuts alone won't happen anymore "at least as long as I'm president, and I'm going to be president for the next four years."
The president said that whatever fixes are necessary, they must come from a blend of tax revenue and constrained spending, not just budget cuts.
"One thing we can count on with respect to this Congress is that if there's even one second left before you have to do what you're supposed to do, they will use that last second," he said.
Speaking shortly afterward on the Senate floor, Sen. John McCain said that "at a time of crisis, on New Year's Eve---you had the president of the United States go over and have a cheerleading, ridiculing-of-Republicans exercise."
CONSEQUENCES OF THE 'CLIFF'
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.
LOCAL REACTION TO THE FISCAL CLIFF
LISTEN: 1010 WINS' Steve Sandberg With Reaction From Union Square
Mayor Michael Bloomberg, himself a successful billionaire businessman, said he doesn't buy into the doom and gloom talk.
"I've never believed that an incremental tax rate is going to be dispositive in terms of most investments, nor do I ever think that the sequestered things are actually going to get cut. Congress has ways -- they made something, it's like a nuclear bomb, it's so strong you can't use it," Bloomberg said on Monday afternoon.
Others in New York shared the mayor's sentiments.
"That's just a lot of media hype, or the politicians, a lot of theater," a man named "Rudy" told 1010 WINS reporter Steve Sandberg.
But a man named "Alberto" said he fears real consequences if Washington doesn't reach a deal.
"Shouldn't be a game. They're playing with people's life here, people's money," he said.
For some, time has already run out, and they are convinced we will go over the cliff.
"I think over the next few months, we will see some sort of compromise, maybe not to everyone's liking, but that we will have it," said Phyliss Herman.
Mayor Bloomberg said Congress has an infamous track record of waiting until the last possible second to come to an agreement on issues that could be resolved well in advance.
"It leaves us in the same situation, the next big drop-dead date I suppose is the debt ceiling limit which has to be addressed by March. So to have January and February into March with the same chaos every day," said Bloomberg.
(TM and © Copyright 2012 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2012 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
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