The Million Dollar Question

Conservative Democrats in the Senate want to draw the line against tax cuts for the "wealthy" but they want to extend the definition of wealthy to be solely the 300,000 plus American households earning $1 million a year rather than the six million or so folks earning $250,000 or more a year.  Jon Cohn investigates the numbers:

OK, so what would the fiscal impact of this switch be?

When this idea first surfaced a few weeks ago, I put that question to researchers at the Center on Budget and Policy Priorities. Using very rough, preliminary numbers, they concluded that the ten-year cost of extending tax cuts for incomes below $250,000 was $3.2 trillion and that the cost of extending cuts for incomes less than $1 million was $3.6 trillion. In other words, the higher threshold would cost an additional $400 billion over ten years.

That's a lot of money, particularly at a time when, in theory, we're trying to come up with ways of improving the government's long-term finances. Then again, it's also better than extending all of the tax cuts permanently, which would cost the government roughly an additional $400 billion over the next ten years.

Keep in mind that everyone would get the tax cuts on that first $250,000 a year anyway, but the higher plan would eliminate some $400 billion in revenue over ten years.  As Ezra Klein points out, Dems would effectively be extending $3.6 trillion of the $4 trillion Bush tax cuts...90% of them.

If that's the ultimate agreement we see on the Bush tax cuts, it'll be worth taking a moment to appreciate how far Democrats have backslid on this issue since BIll Clinton. Clinton, of course, raised taxes in the face of large deficits. The Obama campaign, by contrast, swore not to raise taxes on any family making less than $250,000, and Democrats might now effectively raise that to $1,000,000. In setting up the expectation that taxes can't go up for anyone but millionaires, Democrats take most of them off the table. And given that Republicans have no interest in taxes, either, that basically removes them as a tool of fiscal policy going forward.

Which is exactly what the Republicans want to do:  California-ize the federal budget where any increase in taxes is automatically eliminated.  Republicans are quite serious about eliminating all other options but cutting government spending on non-military programs...in fact they're quite serious about eliminating all other federal government period other than military spending.

And they're doing it with the help of the Democrats.