John Boehner may not even have the votes for today’s “Plan B,” a bill that effectively raises taxes on people making over $1 million a year. He was seen gladhanding on the House floor last night, whipping votes for his side. He can only lose 24 votes to reach 217 (there are a couple vacancies right now), on the expectation that he’ll get no help at all from the other side. It’s probably a heavy lift; even with Grover Norquist’s blessing, Boehner wants his GOP colleagues to walk the plank on a tax increase bill without any hope of it becoming law, just so they can go back and pass another bill that does the same thing.
A look at the bill’s particulars, however, actually inverts expectations. Plan B actually raises taxes, if on anyone, on the poor and middle class, who lose out on 3 stimulus-era tax breaks that expire. Meanwhile, changes to tax laws that benefit the wealthy get lowered from current policy in Plan B, meaning that wealthy earners would probably see a net tax cut. The focus on tax rates has distorted this, but this is a reverse Robin Hood kind of bill that robs from the poor and gives to the rich, as is the custom in Washington.
The Tax Policy Center ran the numbers. The 3 tax credits that expire under the bill include the expansions of the Child Tax Credit and Earned Income Tax Credit, as well as the tuition tax credit. These have been included in all of the Administration offers to date. The payroll tax cut, jettisoned by both sides at this point, would also expire under this bill. So taxes would go up, if this were the only thing to pass, for everyone making up to $200,000 a year.
Plan B doesn’t have to stand in for all tax policy. But here’s what else it does. It permanently extends the current estate and gift taxes, which right now have a $5 million individual estate exemption and a 35% marginal tax rate above that. This would cost tens of billions of dollars, a gift for the wealthiest half a percent of all estates in the country. It also eliminates the phase-out of the personal exemption for high earners, and the “Pease” limit on high earners’ itemized deductions, are completely eliminated. These are actual caps and limits on deductions that were cloaked by the Bush tax cuts, putting the lie to the Republican conceit that the goal of tax reform is to limit deductions on high income earners. It also extends dividend and capital gains tax rates to 20%, at a lower level than that sought by the White House (they want dividends back up to 35%).
Despite all this, and probably because of the salience of tax rates in this debate, Boehner is having problems finding the votes, to the extent that he’s adding some spending cuts at the last minute to entice wayward conservatives. More important, he may call off the expected companion vote on what amounts to the Senate bill, an extension of tax rates on the first $250,000 of income, presumably out of fear that it might succeed. Conservatives have already voiced their displeasure out of having to vote for something that increases tax rates simply to give the Speaker perceived negotiating leverage. Luminaries like the Wall Street Journal editorial page distrust the ploy. If it actually loses today, it would be one of the biggest failures in Boehner’s short tenure. But this vote, and more broadly the failure to accept what would be an excellent deal for them, shows Boehner more desperate to keep his leadership job than anything else.
…about those spending cuts: the bill would shift the military cuts in the sequester for 2013 over to the discretionary side, cutting the same amount of money but sparing the defense industry.
Photo from Speaker Boehner under Creative Commons license.