House Speaker John Boehner said he will push a budget “plan B” measure that will include tax increases on income of more than $1 million a year, while he continues to negotiate with President Barack Obama.
“It’s important that we protect as many American taxpayers as we can,” Boehner told reporters in Washington today. “Our Plan B would protect American taxpayers who make $1 million or less.”
Boehner said today that he still hopes to reach a broader budget deal with the president. The speaker said he expects the legislation to be on the House floor by the end of the week, and that it may include other measures such as the estate tax and curbing the expansion of the alternative-minimum tax.
White House spokesman Jay Carney said Boehner’s plan isn’t balanced and can’t pass the Democratic-controlled Senate. “The president is hopeful that both sides can work out remaining differences and reach a solution,” Carney said in a statement.
What Holiday? Fiscal Talks a Grinch from K Street to Wall Street
Fewer than two weeks remain to avert more than $600 billion in automatic spending cuts and tax increases, known as the fiscal cliff, set to start in January. Boehner’s decision to set up a second legislative track complicates the situation, which had been focused on the intensifying talks between the speaker and the president.
Now, there are at least three possible paths forward: a bipartisan deal between Boehner and Obama, a House tax-cut bill that leaves unresolved how to handle raising the federal debt limit, and no action — allowing the spending cuts and tax increases to start in January.
Recession in 2013
The Congressional Budget Office has said a failure to avert the changes would probably lead to a recession in the first half of 2013.
Boehner said the plan to be voted on this week won’t reverse automatic spending cuts set to take effect in January.
His spokesman, Brendan Buck, said that by rejecting Boehner’s latest plan, the White House “is threatening every American family with higher taxes.”
Boehner spoke to reporters after he and House Majority Leader Eric Cantor briefed House Republicans privately on the negotiations. Afterward, some Republicans expressed concern about backing off the party’s prior insistence on not raising tax rates for any income level.
Members ‘Struggling’
Ohio Representative Jim Jordan, chairman of a House Republican group that supports small government, said “a lot of members are struggling with” Boehner’s proposal because it would allow some tax rate increases.
“Once you cross that line and say that it’s OK for some people’s taxes to go up, I think it’s a mistake for the Republican Party,” Jordan told reporters.
Representative Paul Ryan, a Wisconsin Republican and chairman of the Budget Committee, declined to comment on Boehner’s plan, as did several other anti-tax Republicans, including Steve King of Iowa and Tim Huelskamp of Kansas.
“People are sort of all over the map,” said Representative Steve LaTourette, an Ohio Republican.
Even as the details of the proposal remain unclear, LaTourette said Republican leaders plan to begin polling rank- and-file members on the idea to determine whether Boehner has the internal backing to push it through his chamber.
Democrats rejected Boehner’s plan out of hand. “The president has been negotiating in good faith” and Boehner “seems to be walking away,” said Representative Chris Van Hollen of Maryland, ranking Democrat on the Budget Committee.
‘Non-Starter’
House Minority Leader Nancy Pelosi, a California Democrat, said, “I think Democrats would be unified in rejecting” Boehner’s plan. Sander Levin of Michigan, the top Democrat on the tax-writing Ways and Means Committee, called it an “absolute non-starter.”
Representative Jeff Flake, an Arizona Republican, said it’s a “given” that taxes are going up. The advantage of Boehner’s plan is that it would address only the tax cuts while leaving federal spending cuts in place, which would increase pressure on Democrats to offer more reductions in entitlement spending, he said.
Sixty-five percent of those polled say Obama’s Nov. 6 election victory gave him a mandate on his proposal to raise tax rates for top earners, according to a Bloomberg National Poll of 1,000 adults conducted Dec. 7-10.
Yesterday, Obama lowered his tax revenue demand by $200 billion and offered to start tax rate increases at $400,000 in income instead of $250,000.
$1.2 Trillion
Obama’s revised plan would raise $1.2 trillion in taxes in the next decade and cut $1.22 trillion in spending, said a person familiar with the talks. Obama wants a large enough debt ceiling increase for the next two years and would accept a new inflation yardstick that would reduce Social Security cost-of- living increases, said the person, who sought anonymity.
A deal about halfway between the most recent offers could include $1 trillion each in tax increases and spending cuts and allow tax rates for top earners to rise in 2013.
In exchange, Obama would accept some up-front spending cuts, and other scheduled cuts would be canceled. Congress would pursue broader changes next year against the threat of tax increases and spending cuts in 2014.
The Standard & Poor’s 500 Index climbed 0.6 percent to 1,439.31 at 11:01 a.m. in New York. The benchmark index has gained 14 percent so far this year. The Dow Jones Industrial Average advanced 58.90 points, or 0.5 percent, to 13,294.29 today. The benchmark 10-year Treasury bond yield increased two basis points, or 0.02 percentage point, to 1.79 percent at 9:06 a.m. New York time, according to Bloomberg Bond Trader prices.
Policy Changes
Obama and Boehner are talking about policy changes they would rather avoid. Boehner agreed last week to accept higher tax rates on annual household income above $1 million. Obama moved off the $250,000 threshold he has used for five years and offered to change the cost-of-living calculation for Social Security.
If Obama and Boehner reach a deal, it will take days to draft legislation, sell it to lawmakers and pass it. Reid said yesterday that senators would probably convene Dec. 26 to consider budget measures.
Boehner and Obama each have political challenges as they try to wrap up a deal.
Boehner must secure enough savings from entitlement programs to placate Republicans, who are demanding a high price for reversing their opposition to increased tax revenue.
Conversely, Obama must get enough tax concessions from Boehner to satisfy Democrats who say that the president would get the tax rate increases he wants by waiting until Jan. 1. That’s when the tax cuts expire and Obama could pressure Congress to cut rates on income of individuals below $200,000 and married couples below $250,000.
