Overview of the White House’s initial proposal to avert the fiscal cliff
The Obama administration has drawn a line in the sand over taxes, reiterating that the Bush-era tax cuts for the top 2% of Americans must expire as part of a deal to avert the fiscal cliff.
- Allow the Bush-era tax cuts to expire for the top 2% of Americans. This means that the top tax rates for individuals earning more than $250,000 a year or couples earning more than $500,000 would return to the Clinton-era rates of 39.6%. The 2001 and 2003 Bush tax cuts reduced the rate for the top income bracket down to 35%. But while the top income bracket received a 4.6% tax break, most middle-class Americans – those earning between $34,000 to $373,000 a year – received only a 3% rate reduction under the Bush tax cuts, according to the Pew Economic Policy Group. The Bush tax cuts also reduced the capital gains tax for the top income bracket from 20% to 15%, capped the tax on dividend income at 15% (from 39%), and eliminated estate taxes for inheritances under $5 million.
- Cap tax deductions for the top 2% of income earners.
- Geithner acknowledged that the White House tax proposal would raise about $1.6 trillion over 10 years.
On spending cuts:
- $600 billion in cuts to entitlement programs over 10 years, including $350 billion in Medicare savings.
- The administration also pointed out more than $1 trillion have already been cut from federal discretionary programs under the Budget Control Act of 2011, which crafted as part of the debt limit compromise.
On economic stimulus:
- About $80 billion in stimulus spending, mostly for transportation and public infrastructure projects such as fixing roads, highways, and bridges.
- Extend unemployment insurance.
- Extend the payroll tax cut
- Measures to enable Americans to refinance their mortgages and take advantage of the lower interest rates more easily.
- Geithner explained that savings from ending of wars in Afghanistan and Iraq will be used to fund the stimulus spending proposed by the White House.
On the debt limit:
- Require Congress to waive its approval to raise the debt limit. In other words, the administration can raise the debt ceiling without Congressional approval. “What every business leader says to us is that what’s so important is to make sure that you have this type of agreement and you create some of the economic — you reduce the economic uncertainty that gives them the confidence to start moving cash off the sidelines into investment and job creation,” Sperling explained to Bloomberg News. “If you had an agreement in December and those same job- creators, business leaders, think that every three to six months we’re going to go through this debacle, this ritual of people threatening the default of the United States as a way to get their way in a budget agreement, that will not achieve the type of economic certainty that I think everybody wants…Democrats and Republicans should all come together and say now that the era of threatening the default of the United States is over.:
- CNN.com: Geithner: No deal ‘without rates going up”
- Fox News Sunday: Treasury Secretary Timothy Geithner and House Speaker John Boehner talk ‘fiscal cliff’ negotiations
- Bloomberg News: Sperling Challenges Republicans to Offer Cliff Plan
- WhatTheFolly.com: Overview of the GOP’s initial proposal to avert the fiscal cliff
- WhatTheFolly.com: Warren Buffett argues for minimum tax on the “ultra rich”, debunks GOP’s myth on capital gains
- WhatTheFolly.com: How the 2001 and 2003 Bush tax cuts benefit the wealthy
- WhatTheFolly.com: Commentary: Fiscal cliff talk turns to blame game
- WhatTheFolly.com: Social Security cost-of-living increase won’t keep up with Medicare premium hike
- WhatTheFolly.com: National coalition calls on Congress to improve Social Security benefits for women
- WhatTheFolly.com: Analysis: Reforms needed to ensure sustainability of Social Security & Medicare
- WhatTheFolly.com: Older Americans hit hard by the Great Recession
- WhatTheFolly.com: U.S. debt ceiling timeline 2011
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