Boehner, Obama close to a "fiscal cliff" deal?

President Obama & John Boehner Fiscal Cliff
CBS

Though many differences remain, President Obama and House Speaker John Boehner have never been closer to a deal, numerous congressional and White House sources confirm to CBS News.

Sources familiar with the Friday call from Boehner to Mr. Obama, placed after the president's emotional statement on the Connecticut elementary school massacre, was the most productive of the fiscal cliff process.

In that call, Boehner offered to raise marginal income tax rates on households earning more than $1 million in adjusted gross income. The tax rate Boehner offered was 39.6 percent, the top rate under the Clinton-era tax code Mr. Obama favors.

This was the first time Boehner put higher income tax rates on the table and numerous sources said that broke the logjam in the talks. In theory, a deal could be struck by midweek.

Neither side is predicting this outcome, merely acknowledging, in ways they never would have before, that it is theoretically possible to pull everything together that fast. But significant obstacles remain.

Here are the broad outlines of Boehner's proposal:

  • Higher income tax rates on households earning $1 million and above.
  • $1 trillion in revenue over 10 years with $440 billion coming from higher tax rates, $500 billion from tax reform in 2013 and $60 billion from changes in benefit and tax treatment tied to the Consumer Price Index.
  • Dollar-for-dollar cuts in entitlement programs tied directly to the tax revenue number. One is contingent upon the other.
  • An unspecified increase in the Medicare eligibility age.
  • A one-year lifting of the debt ceiling.
  • Waiving most of the scheduled budget cuts under sequestration and replacing them with the entitlement cuts.

Since the revenue component is the most important, here is a summary of the Boehner offer, as confirmed by numerous sources familiar with the talks.

  • A marginal income tax rate of 39.6 percent on household incomes of $1 million and above.
  • The rate would apply for 10 years and raise an estimated $440 billion.
  • Tax reform in 2013 would have a legislatively enforceable goal of raising $500 billion in additional revenue through the elimination of deductions and tax loopholes.
  • Boehner also asked for a reduction in the Consumer Price Index (CPI) adjustment in government benefits and in the indexing of tax brackets. By Boehner's numbers, this would generate $60 billion in revenue over 10 years.
  • The sum total of revenue under Boehner's plan was $1 trillion over 10 years.

Within the this tax revenue proposal, there are some snags. The White House doesn't want to credit the $60 billion in CPI changes as revenue increases, thus argues Boehner's under the $1 trillion revenue threshold Obama considers crucial to a deal. More broadly, the White House has not agreed to any CPI adjustment.