Income tax rates just one piece of Obama proposal

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By Tom Curry, NBC News national affairs writer/

In the debate over how to avoid going over the “fiscal cliff” of tax increases and spending cuts, much rhetoric has focused on what President Barack Obama is proposing to do on income tax rates, but that’s just a part of the overall revenue total the president proposed raising from higher-income earners in his budget blueprint.

Obama wants the top two marginal income tax rates to be 39.6 percent and 36 percent, instead of the current 35 percent and 33 percent.

But increasing the tax rates that apply to upper-income people is only a part -- less than a third -- of his longer-term tax proposal.

In the short run, Obama is urging the House to take up a one-year tax measure which the Senate OK’d earlier in the year on July 25.

“The Senate has already passed a bill to keep income taxes from going up on middle-class families,” Obama said in his weekly radio address on Saturday. “Democrats in the House are ready to do the same thing. And if we can just get a few House Republicans on board, I’ll sign this bill as soon as Congress sends it my way.”

He said once that bill is signed, then “we’ll have more time to work out a plan to bring down our deficits in a balanced way – including by asking the wealthiest Americans to pay a little more.”

Monday's Gaggle, which includes, The Chicago Tribune's Clarence Page, The New York Times' Jeff Zeleny and Republican pollster Kristen Soltis, talk about the discussions surrounding around the fiscal cliff.

That Senate-passed bill which Obama wants the House to pass would do the following for one year, 2013:

• Extend income tax rates enacted in 2001 for individual taxpayers making less than $200,000, for heads of households making less than $225,000 and for married couples filing a joint tax return who make less than $250,000 a year.
• Raise the top income tax rates on taxpayers above those thresholds to 36 percent and 39.6 percent.
• Increase the tax rate from 15 percent to 20 percent on dividend income and capital gains income for taxpayers whose income exceeds the threshold amounts above.
• Extend for a year the American Opportunity tax credit, a temporary tax break to offset college expenses which was enacted in the 2009 stimulus law, and extend for a year several tax breaks for low-income people which were part of the 2009 stimulus.
• Extend for one year the $1,000-per-child tax credit.

Altogether, the Senate bill would reduce tax revenues by about $250 billion, compared to the amount that would be collected if the current tax law expires as scheduled at the end of the year.

But as Obama said Saturday, he wants to enact longer-term tax changes.

And his most detailed public offer on tax policy can be found in his Fiscal Year 2013 budget proposal and the July update of that proposal.

If Congress were to enact the Obama tax rate proposal, that is, reinstate the 36 percent and 39.6 percent income tax rates for single taxpayers making more than $200,000 and for married couples making more than $250,000, the president's Office of Management and Budget says it would reduce cumulative budget deficits over 10 years by nearly $430 billion.

To put that $430 billion in perspective, the deficit for fiscal year 2012 was $1.1 trillion. So the ten-year total of revenue gained from raising income tax rates on higher-income people -- $430 billion  -- wouldn't eliminate one year's deficit, much less the deficits for the next ten years. More >>