Drawing the tax line at $1 million

DRAWING THE TAX LINE AT $1 MILLION…. The first Democratic compromise plan on Bush-era tax rates was straightforward: a permanent lower rate for those making under $250,000; Clinton-era top rates for those making more. The second compromise floated by Dems was even more conservative: a permanent lower rate for those making under $250,000 and a temporary extension of existing rates for the wealthy. Congressional Republicans balked at both.

Now there’s a third Democratic compromise plan.

Over the past few days, a growing number of lawmakers have publicly embraced the idea of extending expiring tax cuts for families making as much as $1 million a year. They include newly elected Sen. Joe Manchin (D-W.Va.), Sen. Robert Menendez (D-N.J.) and Sen. Claire McCaskill (D-Mo.), who argued on “Fox News Sunday” that “we should draw the line in the sand for millionaires.”

The idea’s chief proponent, Sen. Charles E. Schumer (D-N.Y.), said that raising the income threshold from $250,000, as Obama has proposed, has the potential to unite fractious Democrats behind a single strategy on the tax cuts, which are set to expire Dec. 31 unless Congress acts.

Schumer also said the higher threshold would make it far more difficult for Republicans to say no.

Almost immediately thereafter, Senate Minority Leader Mitch McConnell (R-Ky.) said no.

Still, Schumer’s pitch isn’t ridiculous. “There’s a strong view in the caucus that if we make the dividing line $1 million, it becomes a very simple argument: We are for giving the middle class a tax break; they’re for tax cuts for millionaires,” the New York senator said yesterday. At $250,000, the message is “too muddled,” he said. “It’s much clearer at $1 million. It unites our base and the independent voters we lost in this election.”

The next question, of course, is how much this would cost, and Jonathan Cohn connected with the Center on Budget and Policy Priorities to get an answer.

The original Democratic policy (extending tax breaks to those below $250,000) would cost about $3.2 trillion over the next decade, whereas the Republican alternative (permanent Bush-era rates for everyone) would cost about $4 trillion. The Schumer-backed compromise, meanwhile, would come in with a price tag in between: $3.6 trillion.

For all the talk about deficit commissions, spending cuts, and austerity, no one in the political establishment seems to think it’s odd that policymakers are having this discussion — and that those who claim to be most concerned about the debt are the ones pushing the most expensive package.

That said, if Republicans continue to believe even a penny of tax increases applied to one person is a bridge too far, and they’re prepared to kill middle-class cuts unless they get everything they want, all of this is probably moot. Dems think the GOP would feel embarrassed about fighting tooth and nail to protect millionaires and billionaires at the expense of everyone else? That assumes Republicans are capable of shame.