Government: About that proposed tax increase....
At first blush, the Gang of Six's deficit-cutting proposal sounds a lot like President Obama's position: The former called for $1 trillion in revenue increases and $2.7 trillion in spending cuts, while the latter called for $1 trillion in revenue increases and $3 trillion in spending cuts.
But there's a big difference in Obama's trillion and the Gang's trillion -- and it's going to make the latter's plan that much tougher to sell, particularly in the House.
Robert Greenstein of the Center on Budget and Policy Priorities, a left-of-center think tank, noted Tuesday that the two proposals use different baselines, or assumptions about future tax policy. Obama compared his plan to a future in which all of the Bush-era tax cuts were renewed, permanently, in 2012. The Gang assumed that the tax cuts for the top two brackets wouldn't be renewed, costing taxpayers about $700 billion over 10 years.
In other words, as Greenstein noted on the center's blog, Obama's proposal called for $700 billion less in taxes than the Gang's proposal. House GOP negotiators rejected Obama's proposal in part because the president sought to increase tax revenues; that bodes ill for a plan that would generate even more.
On the other hand, Obama's proposal would have raised the top two individual income tax brackets to their pre-Bush levels: 39.6% (up from 35%) and 36% (up from 33%). By contrast, the Gang's plan would raise revenue by winnowing the credits, deductions and exemptions spread throughout the tax code. It also would replace the six current tax brackets with three, topping out at 29%. Such a change would be a huge win for conservatives, who argue that high marginal rates deter investment and economic growth.
-- Jon Healey
Photo: Sen. Tom Coburn (R-Okla.), a member of the Gang of Six, promoting his own, more aggressive plan to cut the deficit. Credit: Alex Wong / Getty Images