Nancy Pelosi, House minority leader and thorn in Speaker John Boehner's side, released a letter she sent to Boehner, demanding an immediate vote, since he's so concerned about taxpayer uncertainty, on extending just the middle class portion of the Bush tax cuts.
There's a problem, though, with Pelosi's formulation of middle class as those earning less than $1 million, which is at odds with what both President Obama and Senate Majority Leader Harry Reid have set as their income threshold for the middle class: $250,000 annually.
This makes a pretty big difference when it actually comes to revenue raised. Citizens for Tax Justice does the math.
■ Pelosi’s proposal would save 43 percent less revenue than Obama’s plan.Millionaires would benefit so much comparatively because the tax cut applies to the first $1 million of their incomes. That means their tax cut, even though they would still be paying on income over $1 million, would be substantially larger than it would be for someone making, say, $45,000.
CTJ’s preliminary estimates show that Obama’s proposal to extend the Bush tax cuts for the first $250,000 or $200,000 of income a taxpayer makes would save between $60 billion and $70 billion in 2013 compared to the GOP proposal to extend all the tax cuts, depending on economic conditions. Leader Pelosi’s proposal to extend the Bush tax cuts for the first $1 million of income would save 43 percent less revenue than Obama’s proposal.
■ 50 percent of the additional tax cuts proposed by Pelosi would go to millionaires.
The additional tax cut that would result from Pelosi’s plan compared to Obama’s plan (the additional tax cut resulting from extending the Bush tax provisions for taxpayers’ first $1 million of income instead of “just” their first $250,000 or $200,000 of income) would not be targeted towards the “middle class.” In fact, 50 percent of this additional tax cut would go to taxpayers with adjusted gross income (AGI) in excess of $1 million.
Politically, Pelosi was undoubtedly trying to highlight Boehner's hypocrisy. Picking the $1 million mark as her line really does highlight the fact that Republicans are protecting millionaires, and that they are doing so at the expense of the deficit. That's great for rhetoric, but as far as the public is concerned, $150,000, $250,000 or $1 million is pretty much all the same when it comes to tax fairness.
Rhetorically, $1 million is easier to use as a cutoff, but substantively, Pelosi should revise her cutoff downward.