The new revenue would be split between outright tax increases and other forms of government income, including higher fees for an array of federal services, asset sales and higher Medicare premiums for well-off seniors — provisions that are more typically counted not as revenue but as income that helps to reduce spending.
The proposal included about $300 billion in actual tax increases, marking the first time Republicans offered to acquiesce to that key Democratic demand. The offer envisions a tax code rewrite that would lower rates for everyone while raising overall tax collections by $250 billion, mainly by limiting the value of itemized deductions such as write-offs for home mortgage interest.
In addition, the Republicans would raise about $40 billion by applying the new inflation index to the tax code, a move that would push people more rapidly into higher tax brackets.
Senior Republican aides described the proposal as a “significant concession” on taxes. But the tax increases would be offset by permanently extending the George W. Bush-era tax cuts past their 2012 expiration date, a move that would increase deficits by about $4 trillion over the next decade. In the past, Democrats have demanded at least $1 trillion in fresh revenue in exchange for extending the Bush tax cuts.
Kerry said the offer represents “a change” in position for Republicans, though he said, “I would not characterize it as a substantial change yet.”
Other Democrats challenged the notion that Republicans had made any major concessions. Lowering the top rate from 35 percent to 28 percent would eat up most of the extra revenue generated by limiting itemized deductions, they said, leaving very little savings to reduce future borrowing.
“They would plow all of the money back into lowering the rates,” said a Democrat with knowledge of the offer who spoke on the condition of anonymity to discuss the closed-door negotiations. “It’s impossible to net out $250 billion, unless they’re willing to raise rates on capital gains and dividends, and I don’t think that’s what they’re talking about. They either think we’re morons or desperate.”
Democrats also scoffed at the “other revenue” provisions, noting that Republicans at one point suggested raising as much as $5 billion over the next decade by permitting oil drilling in Alaska’s Arctic National Wildlife Refuge — a move that is extremely controversial and opposed by many Democrats.
GOP aides played down the ANWR idea, saying it is no longer part of the discussions.