The Washington Post first reported that Senate Minority Leader Mitch McConnell (R-KY) is shopping around a plan that would increase income tax rates for onlythe highest earners, who would see their top marginal rate return to 39.6 percent, where it was under President Bill Clinton.
That's exactly what Obama's asking for, right?
It's actually only part of it. The Senate-passed bill to extend Bush tax cuts for income under $250,000 ($200,000 for a single filer) applies to both the 2001 and 2003 Bush tax cuts, and thus also allows tax rates on capital gains and dividends over $250,000 to return to 20 percent. It would also reinstate separate tax provisions cutting the amount by which high earners can benefit from the personal exemption and itemized deductions.
These items are commonly described as the Bush tax cuts for the wealthy, or top earners, or the rich. But lawmakers and Obama typically focus on the marginal income tax rate -- the most contentious piece of the debate -- and the Republican plan would essentially exploit the ambiguity.
A top Senate Republican aide says leadership is tossing around a number of ideas to avoid completely caving to Obama. This one would about halve the Senate bill's revenue haul, and constitute only a quarter of the total revenue Obama is currently seeking for a grand deficit-reduction bargain.
House Speaker John Boehner (R-OH) is reportedly cool to the idea. But if another week passes without a deal, and he can't bring himself to allow a vote on the Senate's plan, a fallback along these lines would allow Republicans to pass legislation allowing income tax rates on top earners only to go up -- and then go home claiming Obama can't take yes for an answer, as the economy rolls off the fiscal cliff.