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Behind the Scenes of the Deficit Negotiations

Jupiterimages/Thinkstock(WASHINGTON) -- President Obama has proposed possible tax increases that altogether total more than $400 billion over the next decade, Democratic officials with knowledge of the deficit negotiations said Thursday, with a goal of roughly $2 trillion in total reductions, most of which would be obtained by spending cuts.

But last week, Republicans participating in the talks -- Rep. Eric Cantor, R-Va., and Sen. Jon Kyl, R-Ariz. -- indicated that “we are now getting down to the crunch time” and “this would have to be kicked upstairs to the leaders” of their respective caucuses, House Speaker John Boehner, R-Ohio, and Senate Minority Leader Mitch McConnell, R-Ky.

“There had been real progress” before that, the officials said, arguing that a framework would need to be agreed upon by mid-July in order to have the bill passed and the debt ceiling raised by Aug. 2. The officials expressed chagrin that Congress is planning on leaving on July 3 or 4 for a three-week recess.

They nonetheless said they were “very confident a deal will get done,” as one said. The U.S. government “will not default,” he said, insisting that CNBC would not be airing live a congressional vote at the last minute on the deficit package, as happened with the Greek Parliament Wednesday. The talks have been difficult, with negotiators continuously doing “vote balancing,” trying to get to 218 votes in the House and 60 votes in the Senate.

“Both caucuses have trouble with -- if it’s the right deal -- getting 100 percent of their caucuses,” one of the Democratic officials said. These talks have been different from dealing with the House Republicans over the continuing resolution to fund the government, they said. The goal for Republicans then “was to pass it with as few Democratic votes as possible…and for our side to be as unhappy as possible.” For this vote, “they know they can’t pass it without our help.”

The officials said the American people see a president willing to put everything on the table and Republicans saying “my way or the highway,” which will hurt Congress.

Increasing general tax rates was never on the table, the Democratic officials said.

Some of the proposed tax increases included:

-- $3 billion over 10 years by eliminating a tax break for corporate jet owners (which, officials noted, is not the same thing as the incentive in the stimulus bill for businesses to buy assets such as planes);
-- $20 billion from treating as regular earned income the “carried interest” hedge fund managers make;
-- $45 billion by eliminating oil and gas company subsidies;
-- $60 billion from eliminating a business tax break known as LIFO (last in/first out accounting); and
-- $290 billion from capping at 28% the amount Americans who earn more than $200,000 ($250,000 for a family) can make deductions for all itemized deductions, such as for charitable contributions or mortgages.

Have Republican negotiators ever agreed to any of these tax hikes?

No, Democrats said, though “there have been on different occasions a receptivity to a discussion -- but not a decision.”

Copyright 2011 ABC News Radio

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