Analysis: GOP movement on taxes still leaves huge budget quandary

Jenn Huls/

In a sign of movement toward resolving the fiscal cliff, House Republicans have begun to budge on their no-new-tax stance. In a development first broken by Politico, Speaker John Boehner privately signaled a willingness to raise taxes on household income above $1 million.

This is not even close to President Obama’s campaign pitch of raising taxes on wealthy families who earn more than $250,000, but it’s a start to the beginning of a serious negotiation. And, the more revenue that Boehner puts on the table, the more open to entitlement cuts the administration will be, say sources close to the White House.

The only problem with the $1 million threshold is that it doesn’t clue Americans in on some long-term budget realities. Over the next decade, the deficit will continue to climb unless the federal government gets a better handle on the amount of money it brings in, as well as the cost of its entitlement programs, including Medicare.

The federal government has promised to provide health insurance and Social Security payments for all of the baby boomers -- and that’s a fiscal problem as well as a demographic one.  Already, this is going to cause a huge spike in the cost of the entitlement programs in the coming years because a much greater share of people will sign up for the programs (at a time when healthcare costs continue to rise and when Americans pay a historically low level of federal taxes).

So, we’ve committed to spending tons of money just as we’re not bringing in enough cash to pay the bills. Moving the tax threshold to $1 million does not help that issue. Taxing household income above $1 million is estimated to bring in $463 billion over 10 years, whereas taxing rich families above the $250,000 threshold rakes in $829 billion, according to an analysis by the left-leaning Center on Budget and Policy Priorities. That’s a big difference.

But, the most significant problem with the $1 million mark is that politically it creates a false sense that we’ve solved the budget problem by raising taxes on the uber-rich. Not even close. If Americans want to keep the programs everyone seems to enjoy (and not drastically change the make-up of the federal government by cutting agencies, medical research, or education, as the Ryan budget proposes), then a greater share of people are going to have to pay more in taxes—and that inevitably will include families who earn more than $250,000 but also probably families that make over $100,000 a year. That's because the bulk of the money in the tax code comes from households making between $100,000 and $200,000.

Setting the standard of only taxing millionaires lets politicians off the hook--both Democrats and Republicans. It doesn’t give Americans the larger, genuine picture about the long-term budget quandaries. It’s just a fabulous political slogan. After all, who is going to oppose asking people with annual incomes above $1 million to pay more?

(Image via Jenn Huls/

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