After a brief holiday hiatus, Congress is heading back to Capitol Hill this week to try to eke out a deal to avoid higher tax rates and spending cuts that will kick in on Jan. 1.
In a recent interview on ABC’s This Week, Sen. Amy Klobuchar, D-MN, talked about the so-called fiscal cliff. She pointed out that the Senate had already passed a plan that would extend the Bush-era tax cuts for those making less than $250,000 and eliminate them for those making more than that.
The proposal would take a big chunk out of the nation’s deficit, she said.
“As you know, if we go back to the Clinton levels for people making over $250,000 we literally save $1 trillion in 10 years,” she said.
One trillion is in the ballpark.
Klobuchar is talking about a plan that would let tax cuts implemented under former President George W. Bush’s tenure to expire for higher earners. If Congress agrees to the plan, the two top tax rates of 33 and 35 percent would revert to 36 and 39.6 percent, respectively – the top rates during former President Bill Clinton’s tenure.
The idea hasn’t been popular among Republicans, who would like to see the income bar set higher, or to keep the current rates in place for everyone.
Still, the plan stands to lower the nation’s deficit, according to a recent report by the Congressional Budget Office, the non-partisan number-crunching arm of Congress.
If tax cuts are extended for everyone, it would cost about $4.5 trillion. But if they are extended for those falling in lower tax brackets, it would cost the government $3.7 trillion.
That’s an $824 billion bite out of the nation’s deficit over 10 years. The White House Office of Management and Budget has a similar estimate in its latest budget proposal.
But the potential savings doesn’t includes the roughly $127 billion the nation would save on interest on its debt, pointed out economist Chuck Marr, who works for the left-leaning Center for Budget and Policy Priorities. Factoring in interest savings brings total savings to about $950 billion, he wrote on the group’s “Off the Charts” blog.
Klobuchar could have been more precise by saying “nearly” $1 trillion, or by pointing out that her estimate includes interest savings as well.
Still, according to the Congressional Budget Office, her numbers are in the ballpark. Her claim leans toward accurate.
This Week, video, interview with Sens. Amy Klobuchar and Johnny Isakson, Dec. 23, 2012
Bloomberg News, Breaking down the cliff: The Bush tax cuts, by Evan Soltas, Nov. 28, 2012
The Congressional Budget Office, An Update to the Budget and Economic Outlook:
Fiscal Years 2012 to 2022, Aug. 2012
Office of Management and Budget, Summary Tables: Budget Fiscal Year 2013, accessed Dec. 24, 2012
Center for Budget and Policy Priorities, CBO: Ending High-Income Tax Cuts Would Save Almost $1 Trillion, by Chuck Marr, Aug. 24, 2012