Congress Reaches Fiscal Cliff Deal That Addresses Estate Tax Issues

The House drew the nation back from the fiscal cliff Tuesday night when it voted to approve compromise legislation that, amongst other provisions, makes the current estate-tax policy permanent, albeit with one minor change.

The House approved the measure by a final vote of 257-167. More Democrats, 172, voted for it, 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 Boehner. The No. 2 ranking Republican in the House, Majority Leader Eric Cantor, and third-ranking Republican in the House, GOP Whip Kevin McCarthy, R-Calif., both voted against it.

The legislation passed the Senate early Tuesday. But House Republicans worked all day to determine if they could devise a way to force the Senate to reconsider the measure so it would include more spending cuts.

The House voted to accept the Senate bill only after realizing that its hands were tied by the huge, 89-8, bipartisan support in the Senate for the package.

The fiscal cliff legislation 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 bill also contains a win for insurance agents, preserving current estate-tax law policies that provide for a $5,120,000 million per-person exemption.

Estate-tax policy has been in flux since 2001, when the Bush tax cuts were enacted. They 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, the legislation decoupled the estate and gift taxes, and created 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, during which estate-tax policy was set to revert to 2001 levels of a $1 million exemption and a 55 percent maximum tax rate.

The new agreement restores certainty to current policy, which is strongly supported by insurance agents because it allows most to pass on their business to their heirs without a high cost. Under the bill as passed, agents with businesses valued at more than $10 million will be able to easily purchase insurance that will allow their heirs to inherit the business without major cost.

The fiscal-cliff bill passed by the House also extends major portions of the current farm bill for nine months.

However, the farm provision provides no disaster assistance, something farmers had sought after suffering through the worst drought in 50 years in 2012.

That will likely put added pressure on crop insurance, a separate aid program partially subsidized by the government. More than 18,000 insurance agents sell this product.