ANALYSIS:

Rejecting the White House’s counter-offer, Republican House Speaker John Boehner today announced his “Plan B” to extend the Bush-era tax cuts for people making up to $1 million a year. 

Read more: Overview of the White House’s counter-offer to avert the fiscal cliff

“We all know that every income tax filer in America is going to pay a higher rate come Jan. 1st unless Congress acts,” said Boehner. “Our Plan B would protect American taxpayers who make $1 million or less and have all of their current rates extended.”

Boehner’s Plan B will be called up for a vote this week. He indicated that the Republican’s bill would likely limit the reach of the Alternative Minimum Tax (AMT) and extend the estate tax (aka “death tax”) preferences.

According to the non-partisan Congressional Budget Office, indexing the AMT for inflation after 2011, which would exempt more people from paying the tax, is projected to add $994 billion (including debt service) to the deficit over 10 years.

The CBO also projected that extending the estate and gift tax will increase the deficit by $400 billion over 10 years.

Although Boehner did not explicitly say so, it’s likely that the GOP’s bill will maintain the current 15% tax rate on capital gains and dividends. This set-up has allowed wealthy people, like Mitt Romney, to pay much lower tax rates than people who work and earn wages.

‘Plan B’ won’t address sequestration

The Republicans’ Plan B, however, won’t address the other half of the fiscal cliff – sequestration or the $1 trillion across-the-board cuts to defense and non-defense discretionary spending set to take effect on Jan. 1st.

Sequestration is the other half of the fiscal cliff. According to the non-partisan Congressional Research Service,1.4 million jobs will be lost if sequestration is allowed take effect. The CBO warned that sequestration will raise the unemployment rate to 9.1% and push the country back into a recession.

White House criticizes Boehner’s ‘Plan B’

White House spokesman Jay Carney criticized Boehner’s Plan B, pointing out that it “does little to address our fiscal challenges” and “won’t protect middle-class families.” He also questioned whether Boehner’s Plan B can pass in the Senate.

“The President is willing to continue to work with Republicans to reach a bipartisan solution that averts the fiscal cliff, protects the middle class, helps the economy, and puts our nation on a fiscally sustainable path.  But he is not willing to accept a deal that doesn’t ask enough of the very wealthiest in taxes and instead shifts the burden to the middle class and seniors,” said Carney. “The President is hopeful that both sides can work out remaining differences and reach a solution so we don’t miss the opportunity in front of us today.”

Boehner rejects Obama’s counter-offer

On Monday night, President Barack Obama presented a counter-offer to Boehner, which would extend the Bush tax cuts for income up to $400,000 a year (compared to the original threshold of $250,000 a year) and impose more than $800 billion in cuts to Medicare, Social Security, and discretionary spending programs.

Boehner today dismissed Obama’s counter-offer as “not balanced.”

When asked how he would define “balanced”, Boehner responded that he’d consider $1 in spending cuts for every $1 in tax revenue raised to be balanced.

“I made it clear to the President that I would put $1 trillion of revenue on the table if he were willing to put $1 trillion of spending reductions on the table,” said Boehner. “I continue to have hope that we can reach a broader agreement with the White House that would reduce spending as well as have revenues on the table.”

Learn More:

• WhatTheFolly.com: Transcript: House Speaker John Boehner proposes Plan B to avert fiscal cliff
• WhatTheFolly.com: Overview of the White House’s counter-offer to avert the fiscal cliff
• WhiteHouse.gov: Statement by Press Secretary Jay Carney – Dec. 18, 2012
• WhatTheFolly.com: List of 174 House Republicans who voted for sequestration
• 5 key facts about sequestration
• WhatTheFolly.com: Analysis: Impact of sequestration on non-defense discretionary spending
• WhatTheFolly.com: CBO analysis shows ‘fiscal cliff’ will sharply reduce long-term deficits but lead to a recession in 2013
• WhatTheFolly.com: Sequestration will result in a ‘hollowed out’ military, armed forces chiefs warned
• WhatTheFolly.com: CBO report shows extending Bush tax cuts will raise deficit
• How the 2001 and 2003 Bush tax cuts benefit the wealthy
• WhatTheFolly.com: Warren Buffett argues for minimum tax on the “ultra rich”, debunks GOP’s myth on capital gains
• WhatTheFolly.com: Romney’s tax controversy shines spotlight on tax code that favors wealth over wages
• WhatTheFolly.com: Analysis: Romney paid 14.1% effective tax rate in 2011
• CBO.gov: An Update to the Budget and Economic Outlook: Fiscal Years 2012 to 2022