Obama Proposes $418 Billion in Tax Hikes

The president talked an awful lot yesterday at his press conference about ending tax breaks for corporate jets, but closing that tax break would only amount to $3 billion over 10 years. That's 0.7% of all tax increases he desires over the next 10 years as part of a deal to raise the debt limit. Or, as Charles Krauthammer put it: "If you collect the corporate jet tax every year for the next 5,000 years, you will cover one year of the debt that Obama has run up. One year."

In case you're wondering how Obama comes up with the other 99.3% of tax increases, ABC's Jake Tapper breaks down the $418 billion in proposed increases, according to Democratic sources: 

$3 billion over ten years by eliminating a tax break for corporate jet owners (which, officials noted, is not the same thing as the incentive in the stimulus bill for businesses to buy assets such as planes)*;

$20 billion from treating as regular earned income the “carried interest” hedge fund managers make;

$45 billion by eliminating oil and gas company subsidies;

$60 billion from eliminating a business tax break known as LIFO (last in/first out accounting); and

$290 billion from capping at 28% the amount Americans who earn more than $200,000 ($250,000 for a family) can make deductions for all itemized deductions, such as for charitable contributions or mortgages.

So almost three-fourths of the tax hikes Obama wants come from reducing deductions for those making more than $200,000 per year. That's what the real tax debate is about. 

Republicans do, in fact, want to reduce or eliminate deductions, but only if those reductions are paired with lowering all of the tax rates. Republicans argue that revenue-neutral tax reform would create a fairer, flatter, more competitive tax system.

President Obama simply wants to raise tax revenue by reducing deductions for those making more than $200,000 per year without lowering rates. Republicans aren't biting, as ABC's Tapper reports. But Democratic officials tell him there's a "basic framework" for cutting spending by $1.4 trillion: 

The Democratic officials underlined that nothing had been agreed to, but outlined parts of a basic framework for spending cuts: over the next ten years the agreement would shed roughly $200 billion from Medicare and Medicaid, roughly $200 billion from other mandatory federal spending such as farm subsidies and federal pensions, and roughly $1 trillion in discretionary spending including from the Pentagon budget.