The Center on Budget and Policy Priorities has put hard numbers to Nancy Pelosi’s shift on the Bush tax cuts. So now we know specifically that raising the dividing line on the tax cuts from $250,000 to $1 million gives back $366 billion in revenue over a ten-year time frame. This is in line with Citizens for Tax Justice’s calculations of 43% less revenue from the shift. CTJ also pointed out that half of that revenue would go to millionaires, since they would get a tax break on all of their earnings from $250,000 to $1 million. So that results in a $183 billion gift to millionaires.
This also shows what a relatively small playing field you would have left by raising the bar to that degree. Letting all the Bush tax cuts expire would increase revenue something like $3.2 trillion over ten years. If you just let them expire over $1 million in revenue, you take in $463 billion, about 14% of the total. So Pelosi would compromise 6 out of every 7 dollars of the Bush tax cuts before the negotiation even begins.
CBPP also points this out:
Extending tax cuts for high-income people also is a poor way to support the economic recovery. An economy in a recession or the early stages of recovery needs more spending, not more saving. But research shows that high-income taxpayers save, rather than spend, a greater share of any tax cut they receive than low- and moderate-income households. That’s why the Congressional Budget Office (CBO) has noted that legislation to extend most of the Bush tax cuts while letting tax cuts exclusively for high-income taxpayers expire would deliver a higher bang-for-the-buck as stimulus — that is, more stimulus per dollar of fiscal cost — than a package that also allows tax cuts for those at the top to continue.
In the longer term, if you believe there will be further deficit reduction down the line – and the vultures have been circling on this for a long time on Capitol Hill – that $366 billion forgone, half of it to sit in a millionaire’s bank account, would have to come from somewhere else. And given the predilections of the political class, you’re talking about Medicare, Medicaid, or other safety net programs. That’s basically all that’s left, as Jared Bernstein points out.
The best way to get this done is to let all the Bush tax cuts expire and then come back with a new round of tax cuts. That paradoxically may end up being the result, considering that Republicans are religiously opposed to tax hikes of any kind, and they won’t split the Bush tax cuts to accommodate that.