In a concession to Republicans, Democrats have reportedly offered a new threshold for income tax increases: $450,000 for couples, up from the $250,000 President Obama campaigned for.
(Meaning that taxes would rise on income above $450k, instead of $250k; married couples making less than $450,000 would see their income tax rates remain the same).
The change is aimed at winning over Republicans who oppose tax hikes, including the type of moderates from the Philadelphia region, some of whom were prepared to vote last week for tax increases on income of $1 million and up.
But the change also matches the stands several local Democrats have taken in the past. In the Philadelphia area, even some of those who staunchly support Obama have called for a higher cut-off for tax increases, citing the high cost of living in the northeast.
Speaking about the increased cut off, U.S. Rep. Rob Andrews (D., N.J.) said “That would be an easy call for people from our region.”
Lawmakers from the northeast often argue that $250,000 for a couple in the northeast is not rich, considering how expensive it is to live in the Philadelphia-area or New Jersey, compared with other parts of the country.
Sen. Robert Menendez (D., N.J.), for example, has in the past preferred a $400,000 threshold for tax hikes and U.S. Rep. Allyson Schwartz (D., Pa.) has previously endorsed the idea of a $500,000 cut off, while saying she was flexible on the exact amount. U.S. Rep. Chaka Fattah (D., Pa.) said he, too, would be open to a larger amount if it created a path to an agreement; he noted that President Obama had already offered to keep taxes flat up to $400,000 of income in previous talks.
“My belief is that on whatever basis we can arrive at an agreement we should attempt to do so,” Fattah said.
Monday morning, as lawmakers and the country waited for word on a deal, Schwartz also said she was open to a higher threshold, if it could bring about a last-minute deal.
“For me I feel it’s very important for us to get agreement to avoid tax increases for middle class Americans and to do it today,” Schwartz said Monday morning.
But she said her support for any deal would depend on the entirety of the package.
Four local Republicans contacted for comment Monday morning did not immediately respond; some cited concerns that there is still no official deal, and the elements may still change before anything comes up for a vote. But some Republicans in the area have shown some willingness to raise taxes to avert the cliff. U.S. Reps. Pat Meehan and Mike Fitzpatrick, both Republicans from the Philadelphia suburbs, have said they would have supported a House bill last week to raise taxes on incomes of $1 million and up. It’s unclear if they would go as low as $450,000, but their stances indicate some flexibility on their parts. The $1 million cut-off, dubbed Plan B by House Speaker John Boehner, was scuttled by anti-tax House Republicans, so it’s not clear if enough votes can be won with tax hikes set to an even lower level.
There are also some Democrats who have already balked at moving the tax increase cut-off to $450,000. Sen. Tom Harkin, an Iowa Democrat, raised objections on the Senate floor this morning. Moving the line for tax hikes might help get Republicans on board, but it would also eat into any new revenue, meaning that long-term deficit reduction would require more tax hikes elsewhere, or deeper budget cuts.
While income tax hikes have drawn the majority of the attention, the negotiations also include emergency unemployment benefits for 2 million people who are out of work, roughly $100 billion in automatic spending cuts set to begin Tuesday, a potential increase in taxes on large inheritances, capital gains and dividends, among other provisions.
Fattah said he was working to get an extension of $2,500 tax credits for college tuition.
“I think that we’re going to resolve this,” Fattah said.
Said Schwartz, “Optimistic may be too strong, but I’m here in Washington, I’m ready to get something done.”
UPDATE: U.S. Rep. Frank Pallone (D., N.J.), one of the more liberal members of the House, said he, too, would favor an increase in the tax-hike threshold to $450,000 of income, if it led to an agreement.
"There has to be a compromise and so if the compromise is what the president is articulating now, I would support it," Pallone said shortly after Obama spoke this afternoon.