WASHINGTON -- The preliminary fiscal cliff deal being negotiated by Senate Minority Leader Mitch McConnell (R-Ky.) and Vice President Joe Biden would achieve up to $790 billion in revenue over the next decade. Some of that money would be offset by extensions of tax credits and other stimulative policy, leaving roughly $715 billion in debt reduction over that same time period. Because the revenue is counted over a decade, much depends on a variety of inexact assumptions, which is why the White House calculation of the total revenue raised by the deal is only $600 billion.
The details for the deal, which are still being tinkered with, were passed along to The Huffington Post by a source with direct knowledge of the talks. While progressive lawmakers and pundits have bemoaned some of the provisions, some top Hill aides seemed increasingly bullish on the prospect of closing a deal before the day was through.
Under the framework, the Bush-era tax cuts would be extended permanently for individuals at $400,000 and joint filers at $450,000. A second Senate Democratic source familiar with the state of play confirmed those details. The top rate on ordinary income would go back to 39.6 percent and raise an estimated $370 billion in revenue over 10 years.
The same thresholds would be applied for capital gains and dividends, with the top rates in that case going up to 20 percent -- a concession to Republicans (the rate on dividends was set to return to 39.6 percent) but not far from the president's position during the campaign.
Left unaddressed, at the moment, are the $1.2 trillion in sequestration-related cuts that will be triggered on Jan. 1. The parties are arguing over how long to stave off the cuts, and whether and how to offset them.
House Republicans will make no decision on next steps until the Senate finally acts, at which point the leadership will convene the entire conference and make a party-wide decision, said a person familiar with the planning. The aim is to avoid a repeat of the Harry Reid-dubbed "mother of all debacles" that was Plan B, which was concocted by the Republican leadership and delivered to the conference, which publicly rejected it.
The estate tax, which had been a sticking point, will be raised slightly. Currently, it stands at 35 percent on a $5 million threshold. That would be raised to 40 percent, again on a $5 million threshold, which would raise an estimated $25 billion in revenue over 10 years.
Tax benefits would also decrease for high-income earners, with respect to their personal exemptions and itemized deductions. Under the deal being negotiated, the personal exemption phase-out would be capped at $375,000 for individual filers and $425,000 for joint filers. The limitation on itemized deductions would be set at $250,000 and $300,000 respectively. What this means, in basic terms, is that above those income levels, the value of exemptions and deductions goes down and the tax bill paid by those taking the exemptions and deductions goes up. These provisions would raise an estimated $185 billion over 10 years.
The deal being negotiated would, in addition, include a permanent patch to the alternative minimum tax, which was designed to ensure that the wealthy paid a share of taxes, but could engulf millions of middle-class earners if left untouched.
The deal would include a five-year extension of stimulative tax policies, such as the Earned Income Tax Credit, the Child Tax Credit and the college credit expansions. Democrats are counting $135 billion in savings here because they are not extending these policies over a ten year window (the savings come from letting the policies lapse in years five through 10). It's an accounting gimmick that the White House hasn't made itself, in part out of a belief that the provisions will likely be extended beyond 2017.
The deal would also include a one-year extension of the 50 percent bonus depreciation provision introduced in the American Recovery Act, which enables small businesses to deduct up to $250,000 of the cost of machinery and other equipment.
There are still major areas of disagreement to be negotiated. For example, the deal calls for a one-year resolution to the so-called doc-fix, which adjusts the amount of money doctors receive for taking Medicare patients. But as of Monday morning, there was no agreement on how to pay for it.
Both sides had also agreed that unemployment insurance should be extended for one year, affecting an estimated 2 million recipients. But again, there was a dispute over how to cover the $30 billion cost.
While those issues remain unresolved, questions also loomed over whether there was enough support among lawmakers to see the deal through.
A top Democratic Senate aide, wondering why Democrats are panicked at the prospect of a deal that keeps Bush-era tax rates for income higher than $250,000 when the House couldn't even pass one that keeps them for $1 million in income, noted that whatever happens in the Senate still needs to be dealt with by House Speaker John Boehner (R-Ohio). "What I want to know is: if Boehner couldn't get $1 million through the House and now McConnell is caving at $450,000, then how does Boehner deal with this?"