Middle-class tax cuts may be on the line in Washington's debt ceiling battle.
While Republicans want to match increases in the debt ceiling with spending cuts, President Barack Obama and Congressional Democrats want more revenue and have pointed to deductions and corporate subsidies, according to CNNMoney.
The problem is that extra revenue is not enough. For significant income they'll have to turn to politically sensitive areas — like middle-class taxes.
Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video
"They'll have to go down to where the real money is, which is the middle class," Brian Gardner, an analyst with investment bank Keefe, Bruyette & Woods, told CNNMoney.
"Politically, that would be very tough."
Less than 10 percent of the $1.1 trillion in tax exclusions and deductions a year benefit corporations, according to Tax Policy Center data cited by CNNMoney, meaning that any cut would mostly impact individuals.
Limiting deductions for the wealthy would increase revenue by several hundred billion dollars over the next 10 years, but that's still falls short of enough revenue.
For instance, the employer health insurance exclusion protects workers with employer-sponsored health insurance from paying taxes on the amount of their premiums their company pays for. Ending the exclusion would add $164 billion in revenue in fiscal year 2014, but companies might then offer less-generous plans, according to CNNMoney.
Ending the mortgage-interest deduction would add another $100 billion a year in revenue, and ending the tax break for employer-provided pensions, which allows companies to offer tax-deferred pensions and 401(k) plans, would add another $163 billion.
The fiscal cliff deal fell short of Obama's revenue goal. He had called for higher tax rates for individuals with incomes of $250,000 or higher and couples with incomes of $300,000 or higher, but the legislation only increased rates for individuals earning over $400,000 and couples with over $450,000.
“He’s always said it would require more than that, and that there would be this effort to curtail loopholes and deductions,” said Robert Bixby of the Concord Coalition, a budget watchdog group, according to McClatchy Newspapers.
“I don’t think we are through with the tax piece, although Republicans think we are. The next couple of months are going to be just horrendously acrimonious.”
Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video
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