Here's The Latest On Political Posturing On The Fiscal Cliff As Compromise Continues To Be Elusive

Thursday, November 29, 2012 21:08
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Here's The Latest On Political Posturing On The Fiscal Cliff As Compromise Continues To Be Elusive

Tags: Congress | deficit | economy

The White House released on November 29 a report that strengthens its position that capping popular tax deductions will be insufficient to raise needed revenues to reduce the deficit without also raising taxes on middle-income Americans.

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Treasury Secretary Timothy Geithner introduced a proposal from President Obama that calls for raising almost $1.6 trillion over the next decade, about $1 trillion of which would be raised by letting the current tax cuts expire.
 
The rest would be raised by limiting tax deductions for those making over $250,000 per year.
But Republicans have not committed to such a high revenue number and are against making any tax hikes.
 
Both Democrats and Republicans are targeting about $4 trillion in deficit reductions over the next ten years.
 
A $25,000 cap on deductions like mortgage interest would raise between $450 billion and $800 billion and has appeal to members of both parties, including Mitt Romney.
 
The deduction cap would raise $800 billion if it applies only to those making annual salaries of greater than $250,000.
 
An additional $650 billion would be raised if the cap were phased in gradually based on income levels, which would also keep the wealthy from being suddenly hit by a large tax bill.
 
Deduction caps being discussed include mortgage interest, health insurance, charitable donations, and state and local taxes.
 
Charitable deductions are likely to escape the chopping block just as they did in the 1986 tax reform, due to the lobbying power of universities, foundations, and charities that are already moving to protect any deduction that is vital to their fund-raising efforts.
 
Compromise continues to be at a stalemate as House Republicans say Democrats are short on providing details on spending cuts.
 
The proposal Geithner introduced includes $400 billion in unspecified spending cuts and calls for a permanent increase in the budget ceiling, which would not require Congressional approval to tap.

 

Comments (2)

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bramsay
Limiting deductions for those over $250k would essentially pop up average tax rates on those between $250k and $1mil, while having very little effect on those at the very top.

Federal income taxes are already regressive as they drop for the ultra wealthy due to low cap gain and dividend taxes. I don't think the Democrats are going to go for making it even more regressive.

http://fivethirtyeight.blogs.nytimes.com/2012/11/26/congressional-proposal-could-create-bubble-in-tax-code/

If the Republicans are not just trying to maintain some negotiating room, I suspect we'll get nothing done until after taxes go back to 1990's rates on Jan 1. Then the Senate will pass a bill that lowers the rates back down for those under $250k and the House will likely concede. This scenario would also mean that there wouldn't be any violation of the Norquist pledge.
bramsay , November 30, 2012
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stvnrsmth
I agree with you. And the Senate bill might also include a set of non-entitlement discretionary and defense spending cuts -- but, less than the sequester. Together with a framework for reforming entitlements. That would put a lot of pressure on the 13-20 Republican Congressman needed to pass the bill in the House.
stvnrsmth , December 03, 2012

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