House Speaker John Boehner said he will push a budget “plan B” measure that would include tax increases on income of more than $1 million, while continuing to negotiate with President Barack Obama.
“It’s important that we protect as many American taxpayers as we can,” Boehner told reporters in Washington today. “Our Plan B would protect American taxpayers who make $1 million or less.”
Boehner said today that he still hopes to reach a broader budget deal with the president. The speaker said he expects the legislation to be on the House floor by the end of the week, and that it may include other measures such as the estate tax and curbing the expansion of the alternative-minimum tax.
He said the plan wouldn’t reverse automatic spending cuts set to take effect in January. “We will not deal with sequester,” the speaker said.
Boehner spoke after he and Majority Leader Eric Cantor briefed House Republicans on the negotiations during a private meeting.
Obama and Boehner are trying to reach an agreement to avoid more than $600 billion in tax increases and spending cuts scheduled to begin in January, the so-called fiscal cliff. They want to replace the immediate deficit reduction with more gradual changes. The two are far apart on where to draw the line on tax rates, whether a deal should include economic stimulus spending and how to address the debt limit.
Representative Paul Ryan, a Wisconsin Republican and chairman of the Budget Committee, declined to comment on Boehner’s plan, as did several other anti-tax Republicans, including Steve King of Iowa and Tim Huelskamp of Kansas.
“I don’t know” if Democrats would support Boehner’s plan B, Virginia Democrat Gerry Connolly said in an interview. “If that’s all we do, the markets are going to react very badly.”
Connolly has supported a higher threshold for ending the 2001 and 2003 tax cuts than the $250,000 per household originally sought by Obama.
Yesterday, Obama lowered his tax revenue demand by $200 billion and offered to start tax rate increases at $400,000 in income instead of $250,000, moving closer to a budget deal with House Speaker John Boehner.
Obama’s revised plan would raise $1.2 trillion in taxes in the next decade and cut $1.22 trillion in spending, said a person familiar with the talks. Obama wants a large enough debt ceiling increase for the next two years and would accept a new inflation yardstick that would reduce Social Security cost-of- living increases, said the person, who sought anonymity.
Representative Jeff Flake, an Arizona Republican, said, “All of us recognize the top rate is going to go up.” Asked if there was dissent during the meeting, Flake said there was a lot of discussion.
A deal about halfway between the most recent offers could include $1 trillion each in tax increases and spending cuts and allow tax rates for top earners to rise in 2013.
In exchange, Obama would accept some up-front spending cuts, and other scheduled cuts would be canceled. Congress would pursue broader changes next year against the threat of tax increases and spending cuts in 2014.
The Standard & Poor’s 500 Index added 0.2 percent to 1,432.92 at 9:44 a.m. in New York. The benchmark index has gained 14 percent so far this year. The Dow Jones Industrial Average advanced 18.43 points, or 0.1 percent, to 13,253.82 today. The benchmark 10-year Treasury bond yield was little changed at 1.78 percent at 9:06 a.m. New York time, according to Bloomberg Bond Trader prices.
Obama and Boehner are talking about policy changes they would rather avoid. Boehner agreed last week to accept higher tax rates on annual household income above $1 million. Obama moved off the $250,000 threshold he has used for five years and offered to change the cost-of-living calculation for Social Security.
If Obama and Boehner reach a deal, it will take days to draft legislation, sell it to lawmakers and pass it. Senate Majority Leader Harry Reid, a Nevada Democrat, said senators would probably convene Dec. 26 to consider budget measures.
Boehner and Obama each have political challenges as they try to wrap up a deal.
Boehner must secure enough savings from entitlement programs to placate Republicans, who are demanding a high price for reversing their opposition to increased tax revenue.
Conversely, Obama must get enough tax concessions from Boehner to satisfy Democrats who say that the president would get the tax rate increases he wants by waiting until Jan. 1. That’s when the tax cuts expire and Obama could pressure Congress to cut rates on income of individuals below $200,000 and married couples below $250,000.