Early this afternoon Senate Democrats revealed their plan to replace the $85 billion cut to federal spending known as the sequester with a $110 billion package that raises $54 billion in new revenue and cuts about $55 billion in federal spending. Republican House Speaker John Boehner had said this morning that he would wait for the Senate to pass a budget bill before bringing a bill up in the House.
That’s not to say that the Democratic bill is going to make it out of the Senate. Republicans in both houses of Congress are opposed to an tax increase to replace spending cuts.
The $54 billion tax increase proposed by the Democrats would come from an implementation of the so-called Buffett Rule, which would set a minimum tax rate for wealthy taxpayers, a change in the tax treatment of oil recovered from oil sands deposits, and an end to tax breaks that encourage companies to move jobs overseas.
Details are scarce, but according to thehill.com, implementing a Buffett Rule would mean phasing in a 30% effective tax rate for incomes between $1 and $2 million. A good example of how this might work is provided Tony Nitti over at Forbes.com.
Last year the Joint Committee on Taxation estimated that a 30% tax rate would generate about $5 billion a year, a nice chunk, but still less than 10% of the $54 billion in tax increases required under the Democrats’ proposal. The other loopholes would not make up the difference, so there are definitely boxes still to be filled in.
While there are still some questions about how it all might work and how much money it might raise, it’s pretty certain that none of that matters. The Republicans are a virtual lock to kill the bill, perhaps even in the Senate.