Just when the country was peering over the edge of the so-called “fiscal cliff,” legislators in the U.S. Senate and House of Representatives reached a deal to prevent tax increases and budget cuts on Jan. 1.

Karen Bass (photo courtesy of the 33rd Congressional District)

U.S. Rep. Adam Schiff (D-Calif.) said he felt that the compromise was reasonable, though certain elements of it may give him heartburn, such as the estate tax provisions and upper income tax cut limits.

“That’s the nature of a compromise,” he said. “I’m glad we didn’t go over the cliff. That would have been a real body blow to the economy.”

Estates worth more than $5 million per person will be taxed at 40 percent, up from 35 percent, per the agreement. Schiff said the estate tax provisions are more generous than the country can afford.

The deal also restores the 39.6 percent rate for high-income households, as it was in the 1990s. According to the Congressional Budget Office (CBO), the top rate would be 39.6 percent for singles with incomes above $400,000 and married couples with incomes above $450,000.

“I wish we had arrived on a lower limit in terms of the upper income tax cuts,” Schiff said, adding that he was pleased the agreement maintained lower tax rates for middle class families.

According to the CBO, the American Taxpayer Relief Act of 2012 permanently extends middle class tax cuts and credits for working families, which will result in lower tax rates, an expanded Child Tax Credit and marriage penalty relief for 114 million households. It also included a permanent Alternative Minimum Tax fix.

The deal includes a one-year extension of emergency unemployment insurance benefits for 2 million people. It also extends — for five years — the Earned Income Tax Credit and the President’s new American Opportunity Tax Credit, which helps families pay for college.

Businesses also benefitted from the agreement, which offers tax relief to companies through the end of 2013. The Production Tax Credit, a key incentive for renewable energy, has been extended, as well as the Research & Experimentation tax credit. To support investment and growth, the deal lengthens the 50 percent bonus depreciation.

No cuts to the Affordable Care Act were included, according to the CBO. A 27 percent cut to Medicare reimbursements for doctors was avoided by fixing the sustainable growth rate formula through the end of 2013.

A decision on the sequestration process was delayed for two months. The sequester is a decade-long series of automatic cuts to defense and domestic spending to reduce expenses by $1.2 trillion. According to the CBO, the agreement saves $24 billion, half in revenue and half from spending cuts. The deal will give Congress time to work on a balanced plan to end the sequester permanently through a combination of additional revenue and spending cuts, according to the CBO.

Capital gains rates will return to 20 percent for singles above $400,000 and couples above $450,000. The deal also reinstates limits on high-income tax benefits, the “phaseout” of itemized deductions and Personal Exemption Phaseout for individuals with incomes of $250,000 or more and couples with incomes above $300,000, according to the CBO. Lastly, the deal extends the farm bill, preventing a sharp rise in milk prices at the beginning of 2013.

U.S. Rep. Karen Bass (D-Calif.) said she is worried that the deal’s cuts to Medicare could affect renal care in diabetic units, though she isn’t sure how the cuts will be administered.

“I’m glad it’s over,” she said of the negotiations. “Whenever you have a deal like this, there’s always much to hate.”

Bass said the $600 billion in revenue was desperately needed, and the extension of the unemployment insurance was “critical.” She was also pleased that the deal included keeping taxes low for the lower and middle class.

Schiff said he is concerned about the political battles that will surface during the upcoming debt discussions. He said Republicans have shown that they are willing to go to the brink of defaulting on the nation’s credit, but it would be the “height of irresponsibility” to do so in the debt ceiling negotiations.

“The debt limit ought to be off the table, as a Russian roulette type of a tactic,” Schiff said.

Bass agreed.

“I don’t think the forecast is very good considering how this played out,” she said.

U.S. Rep. Henry Waxman (D-Calif.) voted for the American Taxpayer Relief Act of 2012, but said the government must reduce the deficit further to prevent the automatic cuts that have been delayed.

“This is not the end of it,” he said. “We need to look for a balanced approach to reduce the deficit and avoid those other automatic cuts.”

House Speaker John Boehner (R-Ohio) issued a statement following passage of the Senate agreement on the fiscal cliff, saying that the federal government has a spending problem that has led to a $16 trillion national debt.

“On the day after the election, I proposed that both parties work together to avert the fiscal cliff in a manner that would ensure 2013 is the year we finally enact entitlement reform and pro-growth tax reform to begin to solve our country’s debt problem,” he said. “Now the focus turns to spending. The American people re-elected a Republican majority in the House, and we will use it in 2013 to hold the president accountable for the ‘balanced’ approach he promised, meaning significant spending cuts and reforms to the entitlement programs that are driving our country deeper and deeper into debt. Without meaningful reform of entitlements, real spending controls and a fairer, cleaner tax code, our debt will continue to grow, and our economy will continue to stumble.”