Apparently a deal on the tax side of the equation has been worked out, via the New York Times:
Under the emerging deal, income taxes would rise to 39.6 percent from 35 percent on income over $400,000 for single people and $450,000 for couples. Above those income levels, dividends and capital gains tax rates would also rise, to 20 percent from 15 percent.
The official familiar with the deal stressed that taxes would rise in some sense on the top 2 percent of earners, as Mr. Obama had wanted. That is because the deal would reinstate provisions to tax law, ended by the Bush tax cuts of 2001, that phase out personal exemptions and deductions for the affluent. Those phaseouts, under the agreement, would begin at $250,000 for single people and $300,000 for couples.
The estate tax would also rise, but considerably less than Democrats had wanted. The value of estates over $5 million would be taxed at 40 percent, up from the current 35 percent. Democrats had wanted a 45 percent rate on inheritances larger than $3.5 million.
Under the deal, the new rates on income, investment and inheritances would be permanent.
That last bit, making the rates permanent, I asume means that the Bush rates will be locked in for everyone earning under Obama’s class warfare number. Obama didn’t help things today when he went on TV and suggested he would push for more taxes later:
Mr. Obama used the occasion to warn Republicans that he would continue to press for more tax increases even beyond whatever may be included in a deal now. “If Republicans think I will finish the job of deficit reduction through spending cuts alone,” he said, then “they’ve got another thing coming. That’s not how it’s going to work.”
Republicans responded to the president’s speech angrily, accusing him of “moving the goal posts” just when a deal was in reach.
That sounds like bluster from the campaigner-in-chief designed to appease his kook base. If the rates are made permanent as part of the deal, the threat of automatic tax hikes is over. How, then, will he raise taxes again later in the debt ceiling deal? Republicans will have a much stronger hand than they do now. Does he think the Republican House will pass a tax increase? If so, he’s been nipping at the White House egg nog. The only thing left in the way of sealing the deal is the spending cuts. The Republicans appear willing to allow the spending sequestration to take place but, naturally, the Democrats want no spending cuts as part of the deal:
But a final deal is being held up by one last question: What to do about $110 billion in automatic spending cuts set to begin Jan. 2.
While Republicans want them to go into force unless they are replaced by spending cuts elsewhere, Senate Democrats want to put them on “pause” for at least a year. All sides are angry over the impasse.
Tax increases now, spending cuts later. Does that sound familiar? Unfortunately, this may be the best the GOP can do. As I argued earlier, the Republicans need to remove the possibility of being blamed for a massive middle class tax hike from the table. Once that’s done, Obama will lose a lot of negotiating leverage. Make no mistake, Obama wants to go over the fiscal cliff so that Republicans will be blamed, and is likely trying to sabotage the deal. That’s why he’s trying to move the goal posts again. My personal opinion, for what it’s worth, is that the Republicans should take the deal now and make those Bush tax rates permanent for everyone under $450,000. Then when Obama asks for additional tax hikes later, as he most certainly will, the GOP can tell him to go pound sand.