Pelosi defends $1M tax-cut threshold proposal from liberal critics

House Minority Leader Nancy Pelosi (D-Calif.) is pushing back against liberal critics of her proposal to extend the Bush-era tax rates only for those earning less than $1 million per year.

President Obama has supported a tax-cut extension only on family incomes up to $250,000. The Center on Budget and Policy Priorities (CBPP) — a left-leaning group often cited by Democrats — reported Wednesday that hiking the threshold to $1 million would sacrifice hundreds of billions of dollars in federal revenues, perhaps leading to steeper cuts in federal programs to fill the void.

{mosads}But Pelosi on Thursday rejected the CBPP’s analysis, arguing that the lower revenues from the $1 million cutoff won’t automatically translate into larger spending cuts.

“If the inference to be drawn from the calculation is that, therefore, we have to make other cuts, I don’t agree with that,” Pelosi said during her weekly press briefing in the Capitol. “I don’t know where they got their information. I highly regard them, but I have a different view of how this goes.”

Members on the Ways and Means and Joint Economic committees have floated “an array” of proposals gleaning additional revenues from high-income earners that could offset the lost revenues under her $1 million plan, Pelosi said. She did not offer specifics. 

“I hope they [the CBPP] have confidence in my dedication to the proper investments,” she said. “We need to have a balanced approach, and that means revenues and it means cuts.”

Pelosi also rejected the notion that Obama and congressional Democrats are at odds over what defines the middle class, suggesting she’d still be pushing the $250,000 threshold if she thought there was a chance it could pass through Congress.

“They’re where they have to be and we’re where we have to be, and that’s not about defining who is a middle income person, it’s about getting something done,” she said. “This has played into the hands of the wealthiest people in our country because we’ve gotten nothing done.”

Pelosi has been advocating the $1 million cutoff for months in casual remarks. But her push became official last week when she sent a letter to House Speaker John Boehner (R-Ohio) urging an immediate vote on a benefit extension only for those earning less than that figure.

The $1 million cutoff aligns Pelosi with Democratic leaders in the Senate, but marks a break from Obama, who seems to be holding firm to the $250,000 figure.

Pelosi’s letter sparked an outcry from some liberal groups, which expressed concerns that the moving goalposts would be a windfall for the wealthy at the expense of lower-income Americans who rely on federal programs. 

Citizens for Tax Justice, for instance, estimated the $1 million threshold would raise 43 percent less for the government than the lower threshold over the next decade. The CBPP bolstered that argument this week, putting the figure at 44 percent. 

“That would make key programs ranging from Medicare to Medicaid and other low-income programs to education, basic research, food safety, defense and homeland security significantly more vulnerable to deep cuts,” the CBPP wrote.

Pelosi disagrees. Pressed on whether the lost revenue would put more pressure on Congress to make steeper cuts to federal programs, Pelosi was terse.

“No, it would not,” she said.

Pelosi also clarified that her $1 million proposal is no indication that she’s abandoning the House Democrats’ earlier push for a $250,000 threshold, as proposed in the 2013 budget drafted by Rep. Chris Van Hollen (Md.), the senior Democrat on the House Budget Committee. She suggested the $1 million figure is simply the easier figure around which to craft a political message. 

“The 250 [cutoff] never made it … If we can get the $1 million people, and above, to pay their fair share, we get a lot of money,” she said. “If that’s easier for the public to understand, then we should go that route. But when we’re in that debate, we can go anyplace with it … 250 or whatever it is. But let’s get it started. It’s a path to getting something done.”

Pelosi also repeated her request to GOP leaders that the House separate the tax-cut extensions by income and stage an immediate vote on the benefit for the lower-income earners.

“Put it on the table … let’s have that debate. Let the American people see what the decisions are and what the difference is,” Pelosi said. “What they will see is the Republicans going to any length to protect the wealthiest people in America at the expense of the middle class.”

An hour earlier at his own news conference, Boehner had rejected that strategy. He argued a tax increase for the wealthy would cripple small businesses amid an ongoing jobs crisis.

“Even under Ms. Pelosi’s argument, half of those who would get this higher tax are small business people that are sub-Chapter S or other types of pass-through entities,” Boehner told reporters in the Capitol. “At a time when we are trying to help small businesses create jobs, this proposal would kill jobs.”

The Joint Committee on Taxation (JCT) has estimated the number of high-income earners — those earning more than $250,000 — who file as a small business to be roughly 3 percent. 

Pelosi accused GOP leaders of wanting to shower tax cuts on the wealthy in hopes the money will eventually reach everyone else. She characterized their plan as “deja vu all over again.” 

“Trickle down and it will create jobs — and if it doesn’t, so be it,” she said. “That’s exactly … what we had under George W. Bush.”