Here’s some additional analysis of Chuck Schumer’s big speech to the National Press Club that really disrupted any effort to put together a grand bargain on tax and fiscal policy issues. Here’s the key point:
Schumer said tax reform should be rooted in three principles: First, reduce tax deductions and loopholes while protecting those most important to the middle class. Second, increase the top rate on high-income earners from 35 percent to its Clinton-era 39.6 rate. Third, narrow — though do not eliminate — the differential in the tax code’s treatment of earned and unearned income.
So Schumer, who has been at the forefront of defending the carried interest loophole, actually sacrifices it in this speech – at least some of it, in the interest of getting half a loaf over none at all.
Schumer believes this will raise $1.5 trillion. You get around $1 trillion with just the increase on the tax rates about $250,000. So the deductions/loopholes/capital gains changes would net around $500 billion over ten years.
Then there’s the troubling two-pronged approach to get Republicans on board with this:
“The lure for Republicans to come to the table around a grand bargain should be the potential for serious entitlement reform, not the promise of a lower top rate in tax reform,” Schumer said during his prepared remarks.
Those concessions would not include privatizing Medicare, Schumer insisted, but could amount to hundreds of billions of dollars in savings. “Democrats will never sign on to a shredding of the safety net because it isn’t necessary to change the fundamental way Medicare works,” he said. “But we can find ways to reduce Medicare costs by hundreds of billions of dollars.”
That’s the carrot — the stick, he said, is that if Republicans don’t negotiate a deal along