(CBS News) As revelers in Times Square and cities and towns across the country wait for the ball to drop to ring in the new year, politicians in Washington have announced that a ball is not likely to drop on the average taxpayer. Negotiators have come to an agreement on the so-called "fiscal cliff" - and with less than three hours to spare, CBS News has confirmed.
Vice President Joe Biden traveled to Capitol Hill to brief Senate Democrats on the details of the deal; both Senate Majority Leader Harry Reid, D-Nev., and House Minority Leader Nancy Pelosi, D-Calif., have signed off on the agreement, White House and congressional sources told CBS News' Chief White House Correspondent Major Garrett.
Now that lawmakers have settled on a deal, it's unclear when the Senate will vote but it's expected that if it passes, the House will vote Tuesday at the earliest.
What this means is that although the country will technically go over the "cliff" at midnight, the agreement - if passed by both houses of Congress - guarantees any detrimental impact from the "cliff" will be avoided, even if a vote happens after midnight, as language will likely be added to the final legislation that would make the changes retroactive.
Here are the known details of the deal:
Tax rates: current tax rates will be extended for all wage earners making below $400,000 and couples making below $450,000.
This was a key concession for both Republicans and Democrats. Democrats wanted the threshold for tax increases to rest at $250,000 and Republicans didn't want marginal tax rates to increase for anyone.
The automatic spending cuts under the sequester will be delayed for two months. The cost of continuing current federal spending levels will be offset by revenue increases and some spending cuts. The spending cuts will come half from defense and half non-defense accounts.
The two-month window is to allow Congress and the White House to come up with a larger deal on spending cuts, leading to another (though smaller) "fiscal cliff." Democrats see this deal as a victory because Republicans had objected to using any new tax revenue to offset the loss of sequester spending cuts, reports Garrett.
The estate tax: it was set to increase from rom 35 percent to 55 percent in 2013. Instead, the compromise sets the new rate at 40 percent with the first $5 million worth of property exempt from being taxed.
Capital gains tax: Capital gains and dividend tax rates will increase from 15 to 20 percent.
Alternative Minimum Tax: a permanent fix to the tax that would hit middle class families
"Doc Fix": doctors will be shielded from a massive reimbursement gap for treating Medicare patients.
Unemployment benefits: unemployed workers will receive their benefits which expired over the weekend.
Renewable energy tax credit: the tax credit for renewable energy companies will be extended for another year.
While the extension of unemployment benefits and the Medicare "doc fix" cost money, and revenue will be lost due to a fix in the Alternative Minimum Tax, the package will still increase the federal government's receipts. The total package will add $600 billion to federal coffers.
Emphasizing the importance of deficit reduction to his fellow Republicans, Senate Minority Leader Mitch McConnell, R-Ky., the GOP's lead negotiator, urged his colleagues not to hold up a deal because budget cuts have not been addressed. Earlier in the day he called the tax portion of the "fiscal cliff" the most important component and said, "Let's take what's been agreed to and get moving."
"Action on the sequester is something we can continue to work on," McConnell added.
The agreement, formulated mostly between McConnell and Vice President Joe Biden, was a last-ditch effort after negotiations broke down numerous times.
House Speaker John Boehner, R-Ohio, who for weeks negotiated directly with President Obama, froze himself out of the arena just before Christmas with his ill-fated attempt at a "Plan B" that landed with a thud among a few dozen of his own members. Then, after Mr. Obama flew back from his Hawaiian vacation, presumably unhappy about leaving paradise for the cold and deserted nation's capital, and summoned congressional leaders to the White House and dumped the onus of reaching a deal on the laps of Reid and McConnell.
Alas, Sunday, McConnell found himself throwing his hands up in exasperation after Reid slow-walked a promised counter-proposal and he picked up the phone to the White House to find, as he put it, "a dancing partner" in Vice President Joe Biden.
The $1.2 trillion of federal spending cuts over ten years combined with a massive tax increases for all wage earners was the result of Congress kicking the can down the road. In previous last-minute deals sealed by the two current negotiators - McConnell and Biden - Congress extended the Bush-era tax rates in 2010 for an additional two years and in 2011 agreed to the automatic, non-targeted federal spending cuts worth $1.2 trillion over ten years in exchange for an increase to the debt ceiling. Those actions combined with other extensions to tax credits, unemployment benefits and Medicare doctor payments, the "fiscal cliff" was born.
Earlier Monday, President Obama took to the stage with middle-class taxpayers urging Congress to seal the deal. Even though he was unable to reach a deal with Boehner and his vice president stepped in to finalize the last-minute negotiations, he made no qualms about digging in at Congress, raising the ire of some Republicans. Mr. Obama quipped the "one thing" he can count on with Congress is "if there is even one second left before you have to do what you're supposed to do, they will use that last second."
CBS News' Major Garrett and Nancy Cordes contributed to this report.
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