The crux of the negotiations between President Obama and House Speaker John A. Boehner is no longer about whether to raise tax rates, but about who would get hit.
At stake in the rates debate are hundreds of billions of dollars in revenue over the next decade, though the money would come from a startlingly small number of Americans — from .02 percent to 2 percent, depending on how a final deal is written.
Mr. Obama campaigned on raising taxes on individuals making $200,000 or more and families with incomes more than $250,000, and has since agreed to raise that threshold to $400,000. For his part, Mr. Boehner, who initially said he would reject all rate increases, has agreed to raise marginal rates on incomes more than $1 million, in exchange for permanently locking in the George W. Bush-era tax cuts for everyone else.
“The president has called on the House — again and again — to pass a bill to protect 98 percent of the American people from a tax hike. Well, today we’re going to do better than that. Our bill would protect 99.81 percent of the American people from an increase in taxes.” Mr. Boehner told reporters Thursday.
Mr. Boehner’s confidence proved misplaced though, as his “Plan B” bill was withdrawn Thursday evening after failure to get enough conservative support to raise taxes on anyone.
With that failure and less than two weeks to go before the Bush tax cuts expire and $110 billion in spending cuts, known as sequesters, kick in, Mr. Obama and Mr. Boehner remain deadlocked over where to go. But if they do nothing, across-the-board tax increases would touch every taxpayer, and millions of Americans would be put back onto the tax rolls.
All sides say that’s an outcome they want to avoid. But for much of the past week, they’ve been stalemated on their current offers of $400,000 from the White House and $1 million from Mr. Boehner.
Both plans result in major tax increases compared with current law, which calls for all of the tax cuts to expire Jan. 1. The difference, though, is that Mr. Boehner’s plan would cut taxes by at least $200 billion more than Mr. Obama’s $400,000 level. If Mr. Obama were to stick with his original $250,000 proposal, it would have been $500 billion less in tax cuts than the Boehner offer.
And it’s not just marginal rates. An analysis by the liberal Center on Budget and Policy Priorities that broke down the dueling proposals said that under the Boehner plan, those with incomes of more than $1 million also would see their tax rates on capital gains and dividends income rise from 15 percent to 20 percent.
Mr. Obama would also raise the dividend tax to 20 percent, and it would kick in at his lower threshold of $200,000 for individuals and $250,000 for families.
Mr. Boehner’s plan also wouldn’t renew several tax-credit enhancements — the child tax credit and earned income tax credit — that were part of Mr. Obama’s stimulus efforts in 2009 and 2010, and he’d let expanded tax credits for college tuition expire.
Democrats say the changes will result in higher taxes on millions of working-class families, even as his plan would mean an average $50,000 tax cut for millionaires.
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