Raising Threshold for Bush Tax Cuts from $250,000 to $1 Million Would Lose almost half the revenue

Joint Tax Committee: Raising Threshold for Bush Tax Cuts from $250,000 to $1 Million Would Lose $366 Billion — Nearly Half the Revenue http://www.cbpp.org/cms/index.cfm?fa=view&id=3785

House Minority Leader Nancy Pelosi's proposal to extend President Bush's income tax cuts for households making up to $1 million a year would lose nearly half of the revenue that President Obama's proposal to extend the tax cuts only for households making up to $250,000 would raise, according to new estimates from Congress' Joint Committee on Taxation (JCT). The higher threshold would raise 44 percent — or $366 billion — less in revenue over the coming decade than the lower threshold. Citizens for Tax Justice has released estimates showing a virtually identical percentage revenue loss.

This means that policymakers ultimately would need to find $366 billion more in deficit savings to offset the cost. That would make key programs ranging from Medicare to Medicaid and other low-income programs to education, basic research, food safety, defense, and homeland security significantly more vulnerable to deep cuts. The Obama proposal to extend income tax cuts only for those with incomes up to $250,000 would achieve $829 billion in much-needed deficit reduction over the next ten years, according to JCT (and $965 billion in total deficit reduction when debt-service savings are included).

Nor, despite common misconceptions, would the $1 million threshold end the Bush tax cuts for people making over $1 million. In fact, millionaires would benefit substantially from the Pelosi proposal; they would receive roughly half of the tax cuts from raising the threshold from $250,000 to $1 million, according to Citizens for Tax Justice, because they would continue to get the full benefit of the Bush tax cuts on all of their income between $250,000 and $1 million.[1]

After last year's Budget Control Act (BCA), which locked in more than $1 trillion in cuts to defense and nondefense spending over the next decade (relative to fiscal year 2010 levels adjusted for inflation) and produced additional savings in interest payments, policymakers will still need to find more than $3 trillion in additional ten-year budget savings to stabilize the federal debt by the latter part of the decade so that it doesn't grow faster than the economy. That goal ultimately will require wrenching policy choices. But letting the tax cuts expire on schedule for people making over $250,000 (about the top 2 percent of taxpayers) would be a sound first step, especially given the dramatic cuts in tax rates at the top in recent decades and the large increase in income inequality


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