White House Slams Plan ‘B’ as a Sop to the Rich
Business + Economy

White House Slams Plan ‘B’ as a Sop to the Rich

REUTERS/Yuri Gripas

The White House on Wednesday urged House Speaker John Boehner to abandon his pursuit of Plan B legislation and immediately resume talks with President Obama on a grand Bargain of tax, spending and entitlement measures to avert the year-end fiscal cliff.

The Democratic majority Senate is determined to block the bill, and should it somehow clear that hurdle, Obama intends to veto it.

Boehner still is working his caucus to get his proposal onto the floor. The House is likely to vote as early as Thursday on the measure that would allow tax rates to rise on incomes over $1 million, a much higher threshold than the $400,000 level offered By Obama in negotiations.  Boehner said the plan was merely a fallback position in case his negotiations with the president fail to “protect as many American taxpayers as we can” from year-end tax increases when all of the Bush era tax cuts are scheduled to expire.

Many Democrats fear Plan B is a move to derail the negotiations. The White House charged today that as drafted, Plan B would continue large tax cuts for the very wealthiest individuals because of the marginal rate system. On average, millionaires would see a tax break of $50,000 on their income below the seven-figure threshold. Meanwhile, the measure would eliminate important tax incentives and breaks for businesses as well as 25 million students and their families.

“The President believes this moment presents both sides an opportunity to reach a significant, balanced deal that is good for American families, the economy and for our nation’s future,” said White House Communications Director Dan Pfeiffer. “He has put forward a proposal that meets the Speaker halfway on both taxes and spending, offering to work with Republicans to cut spending by an additional more than one trillion dollars beyond what he has already signed into law.”

The Plan B legislation was unveiled by Boehner and House Majority Leader Eric Cantor, R-Va., yesterday as part of a strategy to put pressure on Obama to make more concessions on taxes and spending cuts while also providing the GOP with political cover on taxes in the event the talks on a larger agreement fall through.

But a lengthy meeting of the House Republican Conference Tuesday night made it clear that House passage of Plan B was not a slam dunk. Many Republicans were bridling at having to vote to raise taxes without a clear commitment on reducing entitlement spending and in contravention of their no new taxes pledge when Senate Majority Leader Harry Reid, D-Nev., made it clear the legislation would never pass in the Senate.

Moreover, House Armed Services Committee Chairman Howard P. McKeon told The New York Times he was not sure he could support a bill that would allow $500 billion in military cuts over the next ten years to take effect.  He indicated that other Republicans on his committee share that concern.

 Plan B would permanently lock in tax cuts for incomes below $1 million and rein in the alternative minimum tax and maintain the tax on inherited estates worth more than $5 million at 35 percent. However, the narrow proposal doesn’t address entitlements and other major spending issues. And it doesn’t cancel across the board spending cuts in defense and domestic programs– known as sequestration – that are scheduled to total $110 Billion in 2013.

Defense hawks including McKeon and Sen. John McCain, R-Ariz., say they would likely oppose Plan B because it doesn’t address their concerns about defense sequestration and its likely adverse impact on the defense industry.

“The President urges the Republican leadership to work with us to resolve remaining differences and find a reasonable solution to this situation today instead of engaging in political exercises that increase the possibility that taxes go up on every American,” Pfeiffer said in a statement. “The American people are watching closely and deserve no less.”

According to an analysis released By the White House today, Plan B would:

  • Raise only about $300 billion from high-income households – less than one third of the amount Boehner offered in his talks with the president – and do little to reduce the deficit.

  • Provide a tax break for millionaires. The 0.3 percent of households affected would owe the IRS $50,000 less on their income below $1 million, compared to alternatives with lower thresholds.

  • Increase taxes by an average of $1,000 on 25 million working families with children and students: Plan B does not continue the American Opportunity Tax Credit and improvements to the Child Tax Credit and Earned Income Tax Credit.

  • Lose about $400 billion in high-income revenue over 10 years, relative to the Senate-passed bill, with about 70 percent of the lost revenue going to households making more than $1 million: More than 90 percent would go to households with incomes over $500,000.

  • Lose another $120 billion in revenue by providing million dollar tax cuts for the 3 in 1,000 wealthiest estates:  Plan B makes permanent the current estate tax levels, which provide an average of more than $1 million in tax relief to estates worth more than $7 million, relative to the President’s proposal.

  • Pushes 2 million Americans off their extended unemployment insurance benefits starting in January. At Christmas time, Plan B would cut off benefits for 2 million workers searching for jobs, something Congress has never done before when unemployment was still 7.7 percent.