Sources familiar with the Obama-Boehner talks confirmed that Boehner proposed extending low tax rates for everyone who has earned less than $1 million, and rates would rise for wages above that. Obama wants that threshold set at $250,000.
Under current law, the 35 percent top tax rate is scheduled to expire on January 1, and would automatically go to 39.6 percent – where it was during the Clinton administration.
Boehner also has increased to $1 trillion his figure for total revenue, compared to Obama’s figure of $1.4 trillion. The balance of a 10-year deficit-reduction plan would come from spending cuts.
So we are talking $500 billion in revenue (on a static analysis basis) from tax rate hikes — good luck with that — and another $500 billion from some sort of base broadening. Not sure where capital gains and dividend taxes stand. If the increases could be kept to 20% — including the Obamacare tax — that would be a significant accomplishment for the House GOP.
Boehner has made a tremendous concession here. Will President Obama to do the same on spending, particularly entitlement reform? Now I don’t expect the president to suddenly endorse premium support Medicare reform. But some incremental reforms could be very helpful. AEI’s Jim Capretta outlines a few to encourage cost-sharing, choice, and competition:
First, in general, Medigap plans and employer-sponsored retiree coverage should not be allowed to fill in entirely Medicare’s cost-sharing. In an FFS insurance model, that’s commonsense.
Second, the [Accountable Care Organization] “shared savings” program should be explicitly expanded to foster competition among ACOs through beneficiary choice. Instead of the automatic enrollment system now in place, beneficiaries should be given the option to enroll in an ACO of their choosing. And, as an incentive to do so, they should be allowed to share in the savings from ACO cost-cutting.
Third, to provide even more incentive for enrollment in cost-effective care, the reform should allow secondary insurance to provide more favorable cost-sharing for beneficiaries who get their care from an approved integrated system (that could be an ACO model or perhaps even more aggressively managed models). This would give the beneficiaries even stronger financial incentives to forgo unmanaged FFS and would create within Medicare something like an “in-network” and “out-of-network” structure, much like what many private employers have in place today.