President Obama and administration officials have offered two different revenue targets for the fiscal cliff debate: $1 trillion and $1.6 trillion (sometimes reported as $1.5 trillion). You might be wondering (I was) where those numbers come from.
The $1 Trillion
President Obama wants to extend the majority of the Bush-era individual income tax cuts—enacted in 2001 and 2003 and extended in 2010—except for those that affect only households with incomes more than $200,000 (single) or $250,000 (joint). In addition, he wants to return the estate tax to its 2009 structure, rather than the one that applies today. Together, those changes would increase revenue by $968 billion over the next decade, according to Treasury estimates, relative to a current policy baseline (i.e., a baseline that has income and estate taxes in their 2012 form).
That $968 billion, which rounds to $1 trillion, has the following components, all applying only to taxpayers with incomes above the president’s thresholds:
All of the provisions in this list are part of the fiscal cliff, which is why the President has emphasized them—and the trillion-dollar figure—in his comments about dealing with the cliff. The larger number—the $1.6 trillion—arises in discussions about the larger fiscal deal that might accompany the cliff negotiations.
The $1.6 Trillion
In his budget last February, President Obama proposed $1.56 trillion in tax increases. In round numbers: $1.6 trillion, sometimes misreported as $1.5 trillion.
That figure includes the $968 billion noted above plus another $593 billion in tax increases.
The largest of those, by far, is the president’s proposal to limit the value of itemized deductions and certain exclusions for upper-income taxpayers. Under that proposal, upper-income taxpayers would benefit only 28 cents on the dollar for their charitable deductions, mortgage interest, employer-provided health insurance, etc., even if they are in the 36% or 39.6% tax brackets.
That provision would raise $584 billion. The rest of his tax provisions, including both cuts and increases, then net out to just $9 billion.
As rough justice, therefore, you can think of the president’s $1.6 trillion target as being almost entirely composed of his proposed tax increases on high-income households: $968 billion + $584 billion = $1.552 trillion. That ignores dozens of his other proposals, of course, but gives a good sense of what’s in his overall revenue aspiration.
P.S. For details on any of these proposals, please see TPC’s comprehensive analysis of the president’s tax proposals.
P.P.S. The President’s budget actually proposed $1.69 trillion in revenue increases. That’s the figure reported in Treasury’s summary of the proposals (known as the Green Book) and in TPC’s analysis of the president budget. The difference between that and the budget’s $1.56 trillion figure reflects some arcane budget presentation decisions. For example, the president proposed a $61 billion fee on banks that the Treasury reports as revenue, but the budget does not include in its tax section.
P.P.P.S. 2010’s health reform included new taxes on upper incomes that go into effect on January 1. Including those taxes, the top capital gains rate under the president’s proposal would rise to 23.8% and the top dividend rate to 43.4% (not including the effects of Pease).