After Republican congressmen walked out on Vice President Biden last week when he tried to discuss tax hikes, President Obama is now meeting with Congress to discuss closing loopholes that benefit owners of private jets, raising taxes on hedge fund managers who currently benefit from paying lower taxes on “carried interest”, changing how business inventory is taxed, and eliminating government subsidies for oil and gas companies. All of these changes would amount to a tax increase only for corporations and the wealthy.
The total budgetary savings from such changes would likely amount to somewhere between $100 billion and $150 billion. While that amount would hardly put a dent in the current deficit, one proposal that could really make a difference in balancing the budget is limiting tax deductions taken by the wealthiest Americans, those in households earning upwards of $500,000 a year. Those households would have their deductions capped at 10% of adjusted gross income. Estimates show that the cap would quickly increase government revenue by hundreds of billions of dollars.
If Republicans were to agree to these measures, it would violate Grover Norquist’s Americans for Tax Reform anti-tax hike pledge, which was signed by hundreds of lawmakers. However, there is a possibility that Republicans might actually be giving some consideration to the proposals. Earlier this month, a number of Senate Republicans voted to eliminate billions of dollars in subsidies for the ethanol industry. With the August 2 budget deadline approaching, Republicans have already made concessions that were previously unthinkable, like agreeing to cut defense spending. To date, Republican proposals have only suggested decreasing spending, but according to Democrats, increasing revenue is the other half of the equation necessary to any successful debt-reduction plan, and it’s looking more likely than ever that Republicans will be forced into seeing that.