Nancy Pelosi’s Bush tax cut shift continues to sow confusion among the top ranks of the Democratic Party, who are struggling to find a consensus view. White House Press Secretary Jay Carney was asked about the tax cut issue yesterday:
Q: The President for a long time has advocated ending the tax breaks for those making $250,000 or more. Nancy Pelosi has come by with another suggestion, setting that number at $1 million. Her office says it’s a way to move the process along. I was wondering what the White House thinks of her proposal.
MR. CARNEY: Well, the President’s position has been clear for years. As you rightly state, we need to end the tax breaks for the wealthiest Americans and make them permanent for every family bringing in less than $250,000 a year. We know that Democratic leaders in Congress are committed to making sure that taxes do not go up on millions of families at the end of the year, as is the President. And the question now is whether Republicans will vote to raise taxes on the middle class and hold the middle class hostage on the insistence that the wealthiest Americans continue to get tax breaks that contributed mightily already to our deficits, which in this economic environment they do not need.
Carney basically ignored the distinction between the White House and Pelosi. Asked again, he said that “we’re continuing to work with leaders in Congress on how best to move forward.” He said this at least twice more. But clearly it was an uncomfortable situation, where Carney wanted to focus on Republican intransigence, not Democratic lack of consensus.
Pelosi was also asked about her new position at her weekly press conference. First she was asked if a short-term extension would be amenable if there was no resolution and she rejected it out of hand. Then a questioner brought up the damning CBPP report on what raising the dividing line to $1 million would actually mean.
Q: Madam Leader, you called for balance between more revenue and spending cuts to try to reduce the deficit, yet the Center on Budget and Policy Priorities says that your tax plan to tax people who earn a million or more in income would actually raise a little more than half of the revenue over the next 10-years than would the President’s plan of letting the Bush‑era tax cuts expire.
Leader Pelosi. I don’t agree with their calculation because I certainly – if the inference to be drawn from their calculation is therefore we have to make other cuts, I don’t agree with that. The tax rate on income is one way to approach upper‑income revenue. There are other ways as well, and our Ways and Means Committee and our Joint Tax Committee have presented us with many of those.
So this is, and I hope they have confidence in my dedication to the proper investments that we need to have a balanced approach and that means revenues, and it means cuts, which we have already by and large made. And if there are others that we can make, which do not upset our priorities, then we should go down that path. But this is what is called the lively debate, and it’s pretty exciting, and people put their views of one thing or another on the table. But the fact is that we all agree that the higher income has to pay its fair share. Everybody has to pay his or her fair share and we are not going to be able to have balance unless we have revenue and we are not going to be able to reduce the deficit unless we have revenue. And that revenue will be used to reduce the deficit.
Basically a punt. She does not address the calculations outside of saying she “didn’t agree” with them. What doesn’t she agree with? That keeping tax rates low between $250,000 and $1 million of income would necessarily reduce tax revenue? Seemingly she only disagrees that you would have to make up that revenue with spending cuts somewhere. I hope that means she’s cutting the deficit reduction target by that same amount, but I’m not hopeful. Pelosi alludes to “other ways” to capture upper-income revenue, which may be referring to the Buffett rule, but that’s not what she demanded a vote on.
The questioner restated the question, and Pelosi broke it down like this:
… part of my view is, I have been pushing for middle income tax cuts for a long time. A. B, the $250,000 never made it. Three, if we can get the million dollar and above people to pay their fair share, we get a lot of money. Eighty-percent of the benefits – excuse me, 81 percent of the benefits of the Bush [high income] tax cuts go to the people making over a million dollars a year, 81 percent of the benefits. If that’s easier for the public to understand, then we should go that route. But when we were in that debate, we can go anyplace with it – Clinton tax cuts, $250,000, whatever it is, but let’s get it started. It is a path to getting something done. It is a path to reducing the deficit while we get the wealthiest people to pay their fair share and it is a path to take us to tax simplification, tax reform. Let’s put it all on the table at that point and see what we do with the rest of it.
This is fun with statistics. Yes, 81% of the benefits of the Bush tax cuts go to people making over a million dollars a year. And they would still get a lot of those benefits under Pelosi’s plan. That’s how marginal taxes work. Millionaires would get the full benefit of the Bush tax rates staying consistent up to $1 million in revenue. This, by the way, is why they shouldn’t stay in existence.
Pelosi then shifts back to saying “we can go anyplace” once we’re in the debate. But this is the whole problem. Democrats have been talking for four years about expiring the Bush tax cuts at $250,000 of income. Once you muddle that message, once you shift, it’s actually very hard to shift back.
As I’ve been saying, the fortunate part of this is that Republicans are unlikely to allow any division on the Bush tax cuts. John Boehner made the ludicrous and debunked comment that half of all millionaires on the individual tax income rolls are actually small businesses filing as individuals. His spokesman already admitted that was untrue. Republicans want to extend all the tax rates and won’t compromise. If Pelosi’s position that a short-term extension is untenable holds, then you get a full expiration, and then you can reposition “Obama tax cuts” and force Republicans to try and object to tax cuts. That’s the program that worked on the payroll tax cuts anyway. Much of this depends on who is in Congress and who is President come January 2013, of course, and given today’s jobs report that’s up in the air.