White House: Deduction cap not enough revenue

A prospective cap on itemized deductions would raise roughly $450 billion over a decade, the White House said in a Thursday blog post – well short of the amount of revenue President Obama is seeking in fiscal cliff negotiations.

The cap used in the White House example would only affect taxpayers making north of $250,000 a year, be phased in for those households and leave out the charitable deduction. 

With those exceptions, Gene Sperling and Jason Furman write, a cap would raise not even half the $1 trillion that some have claimed. The White House’s most recent offer on the cliff, presented on Thursday by Treasury Secretary Timothy Geithner, set a revenue target of $1.6 trillion for a cliff deal.

“Plausible tax expenditure limitations that protect middle-class families and incentives to give to charity would raise far less revenue from the well off than is needed for a major budget agreement,” wrote Sperling, the director of the National Economic Council, and Furman, the council’s deputy director.

“A budget framework that raises only these amounts from high-income tax deductions while committing to no rate increases on high-income Americans would inevitably force any tax reform designed to further reduce the deficit to raise taxes on middle-class families simply to preserve lower rates for the most fortunate.”

Republicans, for their part, have said they are open to including new revenues in a budget deal, but have drawn the line at tax rate increases.  

A GOP aide familiar with the latest administration offer said that it contained double the amount of revenue than a Senate Democratic bill to extend Bush-era rates only for family income up to $250,000 a year. 

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