Skip Navigation

Close and don't show again.

Your browser is out of date.

You may not get the full experience here on National Journal.

Please upgrade your browser to any of the following supported browsers:

Obama May Have Passed Up Nearly $250 Billion in Tax Savings Obama May Have Passed Up Nearly $250 Billion in Tax Savings

This ad will end in seconds
Close X

Want access to this content? Learn More »

Forget Your Password?

Don't have an account? Register »

Reveal Navigation



Obama May Have Passed Up Nearly $250 Billion in Tax Savings


In the fiscal-cliff deal, President Obama achieved many of his goals. But his decision to compromise on how many upper-income Americans to raise taxes on may have left billions of dollars in savings on the table.((AP Photo/Carolyn Kaster))

President Obama didn't just back away from a campaign promise when he relented to GOP demands to cut taxes for more upper-income Americans this week. He may also have passed up hundreds of billions of dollars in savings.

After years of insisting that lawmakers raise taxes on families earning more than $250,000—and months wrestling with congressional Republicans over a deal—Obama agreed to use a $450,000 cutoff instead for joint filing. In compromising, he may have given up approximately $200 billion to $250 billion in savings over the next decade, according to a rough estimate based on Joint Committee on Taxation analyses.

JCT, the nonpartisan congressional scorekeeper, hasn’t officially estimated the cost difference between raising taxes at the two income levels. But several tax experts, including former JCT Chief of Staff Edward Kleinbard, said that one can get a rough figure by comparing portions of the JCT’s analyses of the budget proposal the president released in March, which sought to raise taxes on income over $250,000, and the fiscal-cliff deal reached on New Year's Day. The estimated range is in line with the $230 billion difference between White House estimates of the revenue raised by the final deal and the amount saved using Obama’s approach.

Obama campaigned on raising taxes on family income over $250,000 during his first run for the presidency and doubled down on the pledge during his second, with the administration repeating the promise as recently as mid-December.

“The president will not sign a bill that extends those [low] tax rates for millionaires and billionaires and everyone making over $250,000. It's bad economic policy,” White House press secretary Jay Carney said on Dec. 14. But, just a few days later, Obama offered Boehner a plan in which he shifted the cutoff up to $400,000. Ultimately, the two sides settled at $450,000.

Whether the extra cost represents a big concession is up for interpretation. 


"Two hundred billion is a fair amount,” Kleinbard said. "It's four times the size of the Hurricane Sandy [relief] bill."

But the White House argues the bill raised 85 percent of what would have been generated by a Senate bill that used a similar $250,000 threshold. A couple hundred billion dollars may be just a portion of a multitrillion-dollar budget, but such changes matter because they can add up.

"When you start talking about the budget, it almost gets like buying a car," said David Kautter, the managing director of American University’s Kogod Tax Center. A feature here, a feature there, and suddenly you’re paying significantly more.


The estimate based on JCT data is far from exact, though it does represent a good approximation, Kautter and the others said. Here's how National Journal crunched the numbers:

  • The process began with the JCT cost estimates of three factors in both the Obama budget and the final-cliff deal: changes to income taxes, changes to income-tax credits, and a fix for the alternative minimum tax, a levy used to ensure that the wealthy pay their fair share but which would have ensnared a staggering number of middle-class Americans if no fix were put in place.
  • Then, line-item estimates not shared by both analyses were subtracted to minimize differences betwen the two totals. 
  • What was left were two sums that included estimates for similar AMT fixes, a virtually identical set of tax credits and tax hikes at the two income levels. The difference between the two should, according to tax experts, be a close approximation of how much lawmakers gave up in using the $450,000 income cutoff instead of the one favored by Obama.
comments powered by Disqus