Since the Supreme Court’s Citizens United decision, certain independent advocacy groups have played an increasingly large role in political campaigns, spending an estimated $250 million during the 2012 presidential race. Now, news that some Internal Revenue Service employees targeted Tea Party and other conservative groups that engaged in political advocacy has reignited the debate over whether some of these organizations are abusing their tax-exempt status.

And some observers are concerned that the furor over the IRS singling out those groups could result in less legitimate scrutiny if the agency backs away from the political hot potato.

President Barack Obama on Monday called the targeting of conservative groups “outrageous,” and politicians from both sides of the aisle demanded accountability from the agency.

At issue is a type of nonprofit group called a 501(c)(4). The tax code allows people to form such a group under the rubric of a “social welfare organization” for the purpose of informing the public on issues like vanishing rain forests or gun control.

While contributions to a 501(c)(4) aren’t tax deductible, they do offer one big advantage to donors: The money given does not need to be publicly disclosed. 

What 501(c)(4) groups can do is advocate -- through advertising and by other means -- for or against a particular view: that Americans need to take action to conserve energy, for example.

What they can’t do, according to IRS regulations, is spend most of their funds on outright campaigning for a candidate. Campaign election activity cannot be their primary activity.

It’s up to the IRS to determine whether a 501(c)(4) group has crossed the line and has become primarily a campaign group.

The $250 million estimate from the Center for Responsive Politics makes 501(c)(4) groups important, but not dominant players on the political stage. Groups called super PACs, which are required to disclose their donors, spent more than twice as much as the 501(c)(4)s, according to the same estimate.

Lawrence Noble, a campaign finance lawyer who was general counsel for the Federal Election Commission and now heads a group called Americans for Campaign Reform that calls for taxpayer funding of elections, said that the IRS scrutiny of certain conservative groups -- and the resulting furor -- “is not totally surprising since Congress and the IRS have failed to clearly spell out what activity is permissible for a 501(c)(4). Instead, the IRS relies on vague ‘factors’ that come down to a ‘we know it when we see it’ standard. Congress must set clearer rules for what is permissible for these organizations to do.”

The 2010 Citizens United Supreme Court decision changed the playing field for 501(c)(4)s by allowing them to spend money in elections for federal office.

The decision led to “a dramatic increase in the number of C4’s getting involved in politics generally,” said Paul Ryan, senior counsel at the Campaign Legal Center, a nonpartisan group that has called for greater scrutiny of such groups. They “serve as a pretty convenient tool for legally laundering money from other entities -- business corporations, for example -- that might not want their names being disclosed publicly to their customers or to their shareholders.”

But the Citizens United decision did not repeal the IRS regulations stating that campaigning in elections cannot be a 501(c)(4)’s primary activity.

Ryan said his group has long criticized the IRS “for its slow or complete lack of enforcement of the restrictions on 501(c)(4) groups getting involved in candidate elections. Notwithstanding our criticism, we find it wholly inappropriate that the agency used partisan screening criteria in order to decide which groups to take a closer look at.”

The Campaign Legal Center’s position is that the IRS should be scrutinizing all 501(c)(4) groups “regardless of their political ideologies,” Ryan said. “It would truly be an unfortunate development if these recent revelations of IRS missteps led to even less enforcement generally across the board of C4 groups that may in fact be violating or abusing our tax laws.”

Noble sounded a similar note: “My concern is that the wrong lesson will be learned from this incident and it will be used to deter any attempts to make sure that the political activity of C4 organizations stays within the bounds of the law.”

Professor Donald Tobin at the Ohio State University Moritz College of Law, an expert on how tax laws apply to political activity, explained that “the IRS is always in a very precarious position” in trying to enforce rules on 501(c)(4) organizations since “whenever a group is being investigated, it may complain that it is being done for political reasons.”

Tobin said one consequence of the recent IRS revelations is that “it may make IRS even more skittish in its regulating in this area.” He added, “The IRS is not particularly interested in regulating in this area; it does not produce a lot of revenue and it’s outside the agency’s core function of trying to obtain revenue.”

The agency, Tobin said, has a difficult task in searching for abuse of 501(c)(4) status: “The IRS needs some way of culling through the mass of information that they get” in order to figure out which groups need further scrutiny. “The IRS does need some sorting device.”

But, he said, “I wish the IRS had looked for a neutral term like ‘party’ rather than ‘Tea Party.’”

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• Obama: IRS targeting of conservative groups 'outrageous'
• The White House's terrible, horrible Friday spills over
• IRS apologizes for targeting conservative groups

This story was originally published on Tue May 14, 2013 3:43 AM EDT

Ken Cuccinelli, Republicans’ candidate for governor in Virginia, unveiled a major new tax plan on Tuesday, and it very much resembles proposals by GOP presidential candidate Mitt Romney and congressional Republicans from over the past year.

Cuccinelli debuted a new plan that would cut about $1.4 billion in taxes, namely by making major reductions to the state’s personal income and corporate tax rates. The Virginia attorney general’s plan would cut the personal income tax rate to 5 percent (down from 5.75 percent) and reduce the corporate tax rate to 4 percent (from 6 percent).

Cuccinelli sold his “Economic Growth and Virginia Jobs Plan” as a way to not only cap government spending in Virginia, but to also ease the burden on Virginia taxpayers and encourage new business investment.

Of course, it’s hardly unusual to hear a high-profile Republican candidate for office call for a regimen of tax cuts during the height of campaigns. But Cuccinelli’s similarities to many contemporary Republicans extends to the way in which he would finance the cost of the tax cuts, as well.

Per the website for Cuccinelli’s plan, the attorney general would help offset the $1.4 billion price tag for his tax cuts by indentifying and eliminating “outdated exemptions and loopholes that promote crony capitalism.”

Steve Helber / Steve Helber / AP file photo

Virginia Attorney General Ken Cuccinelli gestures as he talks about the Supreme Court decision on the Health Care law during a press conference Thursday, June 28, 2012 in Richmond, Va.

That’s an approach remarkably similar to the kind preferred by Romney during his presidential campaign last year, and subsequently by congressional Republicans during their negotiations with President Barack Obama over the automatic tax hikes that almost took effect this year as part of the “fiscal cliff.”

Romney and the GOP lawmakers each largely declined to specify the exact loopholes and deductions they would target as part of their reforms. Because of the few details about the specifics of their plans, it made it difficult for analysts to account for the exact price tag of their tax proposals. Moreover, in the case of Romney, he was left vulnerable to charges that his plan would actually result in higher taxes for many middle class Americans, since if some of the costliest tax deductions – for instance, the home mortgage interest deduction – were eliminated, it would disproportionately affect middle class households.

A spokeswoman for Cuccinelli said that a task force called for by the plan would be put in charge of adding greater detail about which exemptions the gubernatorial candidate would eliminate to meet his target.

But in a campaign against Democrat Terry McAuliffe that has already become a murky battle of volleying characterizations about the other candidate and his proposals, it’s not hard to imagine the Cuccinelli plan becoming a ripe target for McAuliffe, unless more meat is added to the plan’s bones.

This story was originally published on Tue May 7, 2013 3:27 PM EDT

White House photo

President Barack Obama's tax return.

It’s getting close to Tax Day for all Americans – and that includes the inhabitants of the White House.

Last year, President Barack Obama and First Lady Michelle Obama paid an effective tax rate of 18.4 percent, the White House reported Friday, with an adjusted gross income of  $608,611 and a total of $112,214 in taxes.

The family gave almost a quarter of its income to charity, including a $103,871 donation to the Fischer House Foundation.

According to their website, the foundation “donates ‘comfort homes’ built on the grounds of major military and VA medical centers.” The homes allow family members of those who are hospitalized to stay closed to loved ones for free. The president donates the proceeds of the children’s book he released in 2010, “Of Thee I Sing” to the foundation.

Among the other entities that received charitable donations from the Obamas were the American Red Cross, the Boys and Girls Club and Sidwell Friends school, where their daughters are enrolled.

The Obamas also gave $5000 to the Palm Beach County Law Enforcement Fund. In September of 2012, a Palm Beach County motorcycle police officer was struck and killed as he was helping set up a rolling roadblock for the president’s motorcade.  

Check out the full tax return here (.pdf)

The Obama’s income has dropped over his presidency, as royalties from his books have tapered off. In 2009, the couple reported a gross income of about $5.5 million. By last year, the Obamas reported an income of $789,674 on which they paid $162,074 in taxes and gave $172,130 to charity. Their effective federal tax rate that year was 20.5 percent.

The president has campaigned on the idea that higher-income Americans – including himself - should pay “their fair share,” while those with incomes under $250,000 should not be subject to tax increases.

Vice President Joe Biden and his wife Jill reported a gross income of $385,072 and paid $87,851 in federal taxes in 2012. They gave just $7,190 to charity – including donations valued at $2000 in furniture, household goods and exercise equipment. That totals about 2 percent of their 2012 income.

And if you ever wondered who exactly pays the salaries of two of the most important people in the world, here's your answer: The president is paid by an agency of the Department of Defense (the Defense Finance and Accounting Service), while the vice president is paid by the U.S. Senate.

This story was originally published on Fri Apr 12, 2013 3:07 PM EDT

The proposed Fiscal Year 2014 budget which President Barack Obama unveiled Wednesday would raise taxes for some Americans, not all of them upper-income earners, while awarding tax breaks to particular groups and interests such as college students, people who don’t save for retirement, and investors in low-income neighborhoods.

What’s most notable in the Obama plan is that despite much talk from the Simpson-Bowles commission and from other reformers of simplifying the tax code, Obama would, if Congress passed his plan, still be very much in the business of using the tax code to try to fine-tune the economy and engineer certain policy outcomes.

This targeted tax break approach seems exactly opposed to the tax reform effort that the chairmen of the House and Senate tax-writing committees are planning later this year.

Under his plan – which covers the next 10 years – tax revenues would be nearly $1 trillion higher than the baseline current-law forecast by the Congressional Budget Office. Much of that additional revenue would come from tax increases he is proposing.

The president seeks to increase taxes by far more than the $600 billion tax increase in the American Taxpayer Relief Act (ATRA) of 2012 which he signed into law on Jan 2.

He would get the $580 billion by reducing certain tax preferences for upper-income earners. He would limit the value of itemized deductions to 28 percent for families in the highest tax brackets – an idea he offered in his very first budget proposal back in 2009.

Among the other tax increases Obama proposes:

• A new “Financial Crisis Responsibility Fee” imposed on large banks and financial institutions, a kind of retroactive charge five years after the 2008 bailout of the financial sector. The fee is intended “to fully compensate taxpayers for the support they provided to the financial sector during the 2008–2009 economic crisis and to discourage excessive risk-taking” in the future, the president’s budget document says. If enacted, this targeted financial sector tax would raise nearly $60 billion, budget officials say.
• An increase in the estate and gift tax of nearly $72 billion. This was an issue Congress thought it had settled when it passed ATRA at the end of 2012.
• $78 billion in increased taxes on cigarettes and tobacco products.
• $44 billion in tax increases on oil, natural gas and coal producers by eliminating certain tax breaks for those industries.
• $10.7 billion from indexing all tax penalties to the inflation rate.
• $9.3 billion from limiting the amount of money that higher-income people could put in tax-sheltered retirement accounts.

Yuri Gripas / Reuters

A staff member prepares the release and distribution of President Barack Obama's Fiscal Year 2014 Budget at the Government Printing Office in Washington April 10, 2013.

Many of these tax increases can be seen as part of an ongoing project by the president to shift more of the burden of paying for government and especially entitlement programs to upper-income Americans, both retirees and the currently employed.

In the same vein, the president again offered certain Medicare ideas he'd included in his budget plan last year: $68 billion in higher premiums, co-payments and surcharges for mostly higher-income Medicare recipients.

He’d get another $120 billion or so in revenue by tweaking the inflation indexing formula used to set the levels for the tax brackets, the standard deduction, and other provisions in tax law.

But on the other hand Obama also proposes an array of new tax breaks.

For example, he seeks:

• A 10 percent tax credit for small businesses that hire new employees or increase wages. This would cost $25.7 billion in lost revenue.
• Creation of tax-preferred "Promise Zones” in high-poverty communities which would provide tax breaks for hiring workers and investing within the zones, an idea somewhat reminiscent of former Housing Secretary Jack Kemp's Urban Enterprise Zones. This would cost $5.3 billion in lost revenue.
• A new tax-preferred bond program called America Fast Forward Bonds, at a cost of $10 billion, for public school construction.
• A new tax credit to encourage employers to offer retirement savings plans and to automatically enroll workers in them. Cost: $17.6 billion.

Obama’s proposal also makes some assumptions about future spending that might not turn out to be realistic: for example, it forecasts nearly $1.8 trillion in savings from overseas military operations that it assumes will not take place during the next 10 years.

The Obama blueprint isn’t likely to be adopted, but some of its specific proposals might be, if the president can use his persuasive power to bring Republican members of Congress to accept at least some of his new tax increases.

The initial response from GOP leaders was at best tepid.

“The document headed our way does not appear designed to bridge the differences between the House- and Senate-passed budgets. That’s the role Americans would expect the president to play at this stage,” said Senate Republican Leader Mitch McConnell.

In the battles over the budget, there are really just two issues: How much revenue the government takes in and how much it spends. 

President Barack Obama signed a big tax increase into law on Jan. 2, and since then Republicans have tried to keep the fight squarely focused on the spending-side of the ledger. But that hasn't stopped Democrats and others from seeking different, and at times innovative, ideas for bringing in more cash to federal coffers.

Some of them are new, such as limiting the amount of money that could be shielded from taxes in retirement accounts. But not all of the proposals are targeted at higher earners.

Although it may be months before a tax reform effort promised by the chairmen of the House and Senate tax-writing committees moves into higher gear, an increasing number of items are now on the tax menu.

Some of these proposals could be ingredients in a compromise deal on taxes and entitlements between Obama and GOP congressional leaders.

In Obama’s budget proposal for Fiscal Year 2014, which will be formally released Wednesday, administration officials say the president will offer a few new contributions to the revenue debate:

• A change in the inflation indexing formula used to set the levels for the tax brackets, the standard deduction and other provisions in tax law. Obama will propose using a less generous indexing measure called “chained CPI.” According to an analysis by the Congressional Budget Office, using chained CPI for the tax code would raise nearly $124 billion in new revenue over 10 years.
• An increase in taxes on cigarettes and other tobacco products in order to help pay for an initiative to provide preschool education to four-year-old children.
• A limit on the amount of money that could be shielded from taxation in retirement accounts. The Obama proposal would prohibit individuals from accumulating more than $3 million in IRAs and other tax-sheltered retirement accounts. This proposal would raise $9 billion over 10 years, according to administration officials.

Obama will likely reiterate his support for an idea he has proposed since 2009 and which Senate Democrats endorsed in their budget resolution: limiting deductions and other tax preferences for upper-income people.

Meanwhile, there’s some bipartisan support for a tax or fee on carbon dioxide emissions. Former Secretary of State George Shultz --who served under President Ronald Reagan -- and conservative University of Chicago Nobel laureate economist Gary Becker co-authored an op-ed in Monday’s Wall Street Journal endorsing the idea of a revenue-neutral tax on carbon.

This would encourage producers and consumers to shift away from more carbon-intensive energy sources such as coal and toward less carbon-intensive sources. They’d also eliminate tax breaks for various energy sources, such as biodiesel. The revenue from the carbon tax could be refunded to taxpayers, perhaps in the form of a “carbon dividend,” Shultz and Becker argue.

Although their version is revenue-neutral, the carbon tax idea could end up being part of a larger package of revenue raisers.

Susan Walsh / Susan Walsh / AP

President Barack Obama gestures as he speaks during an Easter Prayer Breakfast in the East Room of the White House in Washington, Friday, April 5, 2013.

The carbon tax concept won the support of 41 senators, all of them Democrats, during a vote three weeks ago, when it was proposed by Sen. Sheldon Whitehouse, D-R.I., as an amendment to the Fiscal Year 2012 budget resolution.

Whitehouse said Tuesday that the lesson of that vote was “we’ve got a more solid base of support than I thought and obviously we need lots of room to grow in order to move it along.”

Whitehouse said a carbon tax could be part of the tax reform effort that Senate Finance Committee chairman Sen. Max Baucus, D-Mont., and House Ways & Means Committee chairman Rep. Dave Camp, R-Mich., will lead this year.

The Rhode Island Democrat argued that a carbon tax could be made appealing to Republicans since the revenue that would be generated could be used to pay for tax cuts: “They’d probably want to do things like get rid of the estate tax, lower the corporate tax rate – I’m not sure we’d be thrilled with all of those – but it’s a discussion worth having,” he said.

Senate Finance Committee ranking Republican Orrin Hatch of Utah said he had noticed Shultz’s support for a carbon tax, adding, “I’ve basically been against a carbon tax, but I’ll look at it and see.”

Another Senate Finance Committee member, Ben Cardin, D-Md. said Tuesday the carbon tax is an idea “absolutely we need to take a look at ... we need to look at different revenues to take care of our energy and transportation needs.”

As for using chained CPI to index parts of the tax code, Cardin said he was “very much aware” of the increased revenue that would result from that change. “More revenue is a good idea, but chained CPI also affects the beneficiaries not only of Social Security but other programs. My preference is to do entitlement reform without affecting middle-income and lower-income beneficiaries.”

Related:

Budget, immigration, gun control: Congress returns to debate cornerstones of Obama agenda

First Thoughts: Obama to offer compromise budget to Republicans

With budgets on the table, Washington divide remains as wide as ever

The standoff between President Barack Obama and congressional Republicans over taxes and spending isn’t entirely unprecedented, but the underlying dynamics shaping federal spending, particularly entitlement programs for the aging Baby Boom generation, could make it harder for Washington’s leaders to resolve.

They and their predecessors have been in something like this predicament before: unable to agree on a mix of spending reductions or changes in entitlement programs, and carrying the disagreement to the point of a government shutdown. It happened in 1995 when House Speaker Newt Gingrich took on President Bill Clinton.

Then, as now, one of the underlying causes of the dispute was the attempt by Republicans to bring market principles to the Medicare program.

Jewel Samad / AFP - Getty Images

Speaker of the House John Boehner, R-Ohio, speaks to reporters following a meeting with President Barack Obama on March 1, 2013 in Washington, DC.

The 1995 standoff ended with a Clinton victory, but once he’d won re-election in 1996 and was still faced with a Republican-controlled House, Clinton came to terms with Republicans on a deal to try to control Medicare’s spending growth.

That 1997 accord came at a time when the economy was robust — with the unemployment rate dipping under 5 percent by the summer of 1997 — and federal revenues were growing faster the economy itself.

By 2000, the $236 billion federal budget surplus — yes, surplus — was creating political pressure to cut income taxes – prominent Democrats such as Sens. Max Baucus of Montana and Dianne Feinstein of California supported the idea and voted for it in 2001.

“I strongly believe that when the government is in position to be able to return money to the American taxpayers, we should,” Feinstein said then.

That 2001 tax cut — accelerated in 2003 due to the post-Sept. 11 economic downturn — became an entrenched part of the government’s finances. Many Democrats complained about it, especially after the costs of the Afghanistan and Iraq wars mounted, but they couldn’t undo it.

And the tax law that Obama signed on Jan. 2 preserves much of that 2001-03 income tax structure. Middle-income earners go largely unscathed.

The tax accord Obama signed into law will produce revenues smaller than he and congressional Democrats had hoped for. That’s one reason Obama is again urging Republicans to agree to another round of tax increases.

Much has changed since 2001 and 2003 — and fiscally it has changed for the worse. The federal government’s debt burden today and over the next 10 years “is very high by historical standards” and greater than at any time since just after World War II, the Congressional Budget Office said in its annual budget outlook in January.

Even though that debt burden is high, the interest rate at which the government is borrowing money is extraordinarily low, due to Federal Reserve policy. Hanging over the budget standoff is the risk that interest rates will at some point in the next few years revert to their 30-year norm and drive up the government’s borrowing costs.

Clinton himself warned last year, “If interest rates were the same today as they were when I was president, the payment on the debt, that is, what the taxpayers have to pay every year, the financial debt (payments) would go from $250 billion to $650 billion a year.”

Unlike in 1997 when Clinton and Gingrich reached their deal, the demographic cost crunch produced by the Baby Boom is no longer in the distant future. It’s happening now.

The peak of the Baby Boom came in 1947 (the year Hillary Clinton was born and the year after her husband was born): 26.6 births per 1,000 people.

Compare that to 14.6 births per 1,000 people in 1975 and you see why, in fiscal terms, there are too few workers and too many beneficiaries.

Many of the cuddly newborns of 1947 are now wrinkled retirees collecting the Social Security and Medicare benefits that were promised to them.

The budget standoff is partly the result of those Baby Boom and Baby Bust demographics and of Democrats’ belief in expansive government – best symbolized by President Lyndon Johnson’s creation of Medicare in 1965.

The Affordable Care Act is Obama’s signature domestic accomplishment, just as Medicare was Johnson’s. “Obamacare” – which includes efforts to curb the growth of Medicare outlays – is still in its earliest stages, a massive and unproven experiment in trying to control costs of the already insured while simultaneously expanding benefits to the uninsured.

The backlash against “Obamacare” led to the Republican takeover of the House in 2010. That tenacious Republican House majority is what stymies Obama today.

Politically, the best-case scenario for Democrats is that Obama leads them to victory in the 2014 midterm elections and turns the clock back to 2009, when Democrats enjoyed a majority in the House and a supermajority in the Senate – which allowed them to enact the Affordable Care Act.  If that happened, there’d be no need for Obama to haggle with GOP congressional leaders.

But White House spokesman Jay Carney denied Monday that Obama was primarily focused on 2014 and on using Republican blocking of his agenda as a theme for the midterms.

“It goes without saying that a president wants those in his party to do well, but it is not a focus of his, particularly at this point,” Carney said.

Even with Obama campaigning for them in 2014, it will hard for Democrats to recover some of the districts they lost in 2010 — resilient incumbents such as Rep. Ike Skelton in Missouri and Rep. Rick Boucher in Virginia were swept out by the 2010 wave and their old districts seem unlikely to revert to Democratic control.

Redistricting plays a role, too, in Obama’s predicament.

Republicans were better prepared than Democrats for the 2010 state legislature races that determined which party controlled the drawing of new lines for House districts in most states.

“Republicans enjoy a 33-seat margin in the U.S. House having endured Democratic successes atop the ticket and over one million more votes cast for Democratic House candidates than (for) Republicans,” noted a memo in January from the Republican State Leadership Committee, which organized the $30 million Redistricting Majority Project in 2010.

Obama may have exaggerated when he complained in January that “the House Republican majority is made up mostly of members who are in sharply gerrymandered districts,” but he can’t get a do-over for what happened in 2010. And it is 2010’s outcome that is driving 2013’s bargaining.

This story was originally published on Tue Mar 5, 2013 11:22 AM EST

The battle over the Budget Control Act -- and the cuts contained in it known as the sequester -- is as much about tax increases as it is about spending.

That fact might have gotten lost in recent days amid press conferences and photo ops from President Barack Obama, his Cabinet officers, and Democratic members of Congress warning of meat inspectors being furloughed, trucks being slowed by long delays in Customs inspections at U.S. ports of entry, and the canceled deployment of an aircraft carrier to the Persian Gulf.

Related: Sequester fight takes a toll on all

Obama and his allies argue that to help avert the $44 billion in cuts to federal outlays required by the Budget Control Act in this fiscal year, another round of tax increases is required.

Democrats later this week will bring to the Senate floor a bill to replace the spending cuts with $55 billion in tax increases on people with incomes greater than $1 million, higher taxes on the oil industry, and changes in rules on U.S. corporations with foreign operations. The Democrats’ bill would also trim subsidies to farmers and make smaller cuts to defense spending than the reductions in the Budget Control Act.

One way to look at the tax side of the battle is that Obama has an unfinished project which he detailed in his first budget blueprint in 2009, with an array of tax increase proposals. In his first term, he succeeded in shifting more of the tax burden to higher-income Americans and to U.S. coporations, first with the $400 billion in tax increases over ten years in the 2010 Affordable Care Act and then with the income tax increase he signed into law on Jan. 2, which the Congressional Budget Office estimates will raise between $600 billion and $700 billion over ten years.

But there are more tax increases that Obama asked for that he has not achieved yet. The current showdown with congressional Republicans is another occasion to get them.

Obama spokesman Jay Carney has said that Republicans would allow federal employees and contractors to be put out of work “in order to protect these special tax breaks for corporate jet owners and oil and gas companies.”

Obama has proposed a ten-year $580 billion package of tax increases, such as $2 billion in revenue from changing the tax depreciation schedule for general aviation aircraft, including corporate-owned or leased jets.

That idea raises the hackles of Sen. Pat Roberts, R- Kansas. Beechcraft Corp. and other jet manufacturers are based in Wichita, Kansas; Roberts said 40,000 jobs in his state are at stake.

“Not only do they propose that (tax increase), but the language in which they describe it, it’s always ‘fat cat corporate jets,’” complained Roberts.

He added, “The general aviation industry is always on the cusp (of financial viability) and it has become a favorite target” for Democrats’ tax increase proposals. “I’m damned tired of it.”

Roberts said, “I just don’t think it adds up – unless you want your general aviation industry to come from Brazil.”

Jewel Samad / AFP - Getty Images

President Barack Obama walks in the rain to the Oval Office on Feb. 26, 2013 upon returning to the White House in Washington.

On principle, Republicans object to Obama seeking to raise taxes again on some immediately after getting his tax increase at end of 2012. 

And there’s another reason Republicans oppose any just-get-us-past-this-crisis tax hike: every change in tax law they might agree to now chips away at what some GOP leaders hope to do as part of comprehensive tax reform later this year.

Rep. Dave Camp, R- Mich., the chairman of the tax-writing House Ways and Means Committee told reporters Tuesday, “I’m not interested in a one-off (tax reform or tax increase). … What I’m interested in is a comprehensive effort” to redesign the entire tax code, both the corporate tax and the individual income tax.

He added, “I’m not interested in more revenue at this point. The comprehensive reform I’m looking at is revenue neutral. As some people say, 'We gave at the office at the end of the year’” – meaning the tax increase Obama signed into law on Jan. 2 is all he is going to get.

On the spending side of the battle, some Republicans seem to acknowledge that Obama’s campaign to portray the $44 billion in spending cuts as disruptive and potentially disastrous is having some effect.

“All the hot buttons have been pushed,” Roberts said Tuesday. “We have the Secretary of Agriculture saying, ‘we’re going to call off all the meat inspectors, shut down the packing plants.’ Every cowboy in Kansas has been in touch with me saying, ‘what in the hell am I going to do with my cow herd?’”

But some Republicans argue that it might useful to see how Americans do with $44 billion less in spending  -- out of more than $3.5 trillion in total federal outlays this year.

“I think it would be a wonderful test of whether or not we have the ability to actually reduce spending in Washington D.C.,” said Rep. Mick Mulvaney, R- S.C.

Even though he voted against the Budget Control Act, Mulvaney is willing to see it begin to bite. “I agree with many of the concerns regarding the disproportionate share the Defense Department bears here,” he said. “But that aside, the real question is; can we really cut spending? And not just cut the growth in future spending, which is typically what a ‘cut’ is in this town. Can we actually spend less money in any agency this year than we did last year?”

The South Carolina Republican said Obama and his subordinates have the discretion and flexibility they need to manage the spending reductions. “It looks as though it would be up to the administration whether to furlough air traffic controllers -- or janitors at FAA facilities. It’ll be an interesting test of the president’s management abilities.”

Another fiscal conservative, Sen. Pat Toomey, R –Pa., said Tuesday, “The magnitude of the spending cuts -- it’s very important that they be preserved and not be delayed. The willingness to go ahead with them will send a constructive message to our citizens, to the markets.”

He added, “I think they’re badly designed; I think too much of them lands on our defense budget and the nature of the across-the-board cuts precludes a more thoughtful way of prioritizing. But given the disastrous fiscal situation we’re in, we’ve got to make these cuts.”  

Spending must be reined in, he argued, and the cuts are “crude way to do it, but at least it’s moving in that direction.”

He said he supports a Senate Republican effort to give Obama and his aides some flexibility in how they administer the cuts “so they can make the least disruptive cuts possible.” But in Obama’s test of wills with congressional Republicans, that kind of flexibility might not be in Obama’s tactical interest. 

House Majority Leader Eric Cantor sought to lead Republicans past their dollars-and-cents fights of the last two years, arguing Tuesday for a more expansive agenda that resonates with a broader scope of Americans.

As the GOP works to redefine itself in the wake of an electoral drubbing last fall, Cantor outlined a series of policies he said Republicans would pursue over the next two years. The agenda includes staples of Republican politics — tax and entitlement reforms, for instance — but also education, immigration and research and development, particularly in the sciences.

Recommended: Obama calls for at least short-term fix with cuts, revenue to avoid sequester

"In Washington, over the past few weeks and months, our attention has been on cliffs, debt ceilings and budgets, on deadlines and negotiations," Cantor said at a speech at the American Enterprise Institute, a conservative think-tank in Washington. "But today, I'd like to focus our attention on what lies beyond these fiscal debates. Over the next two years, the House majority will pursue an agenda based on a shared vision of creating the conditions for health, happiness and prosperity for more Americans and their families."

Mandel Ngan / AFP - Getty Images

House Majority Leader Eric Cantor, R-Va., speaks to the media following a Republican Conference meeting on Feb. 5, 2013 at the U.S. Capitol in Washington, D.C.

The speech fits squarely within the rubric of reinvention sought by the GOP at the advent of President Barack Obama's second term. The Virginia congressman offered generally familiar proposals, couched in the rhetoric of middle class advancement. This "softer" approach to policy-making squares with an emerging Republican consensus that the party does not necessarily need to change its policies so much as frame them in a way that is more relevant to middle class, minority, and women voters.

To that extent, Cantor was flanked at moments during his speech by students from schools in inner-city Washington, a master's student from China looking to stay in America, a nurse from Baltimore looking for a more flexible work schedule, and a former intern of Cantor's who benefited from improved medical technology.

Cantor sought with his speech to put a newer, more accessible face on the Republican Party; whether he'll succeed is a question that might not be answered for two or four more years.

First Read: Cantor's shift on immigration

One policy shift Cantor did announce was in regard to immigration. The No. 2 House Republican embraced the thrust of the so-called DREAM Act, a piece of immigration legislation looking to undocumented immigrants who were brought to the U.S. as children a pathway to citizenship.

"It is time to provide an opportunity for legal residence and citizenship for those who were brought to this country as children and who know no other home," he said.

Other points of emphasis were familiar to any observers of the contemporary GOP.

On education, Cantor called for increased access to vouchers, more efficient spending per student, cost transparency in college tuition and fuller disclosure to students about the career prospects associated with different degrees.

On immigration, Cantor endorsed easier access to green cards to immigrants with high-level degrees, a reformed guest worker program and stronger employee verification tools.

And in an appeal to middle class workers, Cantor endorsed giving all employees greater flex-time at work and simpler simpler ways to file taxes.

On top of this, Cantor appealed to Republican staples: comprehensive tax reform and reforms to Medicare (including streamlined provider networks, and increased leeway for states to administer their own programs).

The recurring theme, though, for Cantor involved an appeal directed intently toward middle class voters.

"Government policy should aim to strike a balance between what is needed to advance the next generation, what we can afford, what is a federal responsibility and what is necessary to ensure our children are safe, healthy and able to reach their dreams," Cantor said.

Is the nation better off than it was four years ago?

The answer largely depends on the statistics you pick.

With President Barack Obama beginning his second term, there are plenty of numbers suggesting that the country is on more solid footing than it was when he first took office on Jan. 20, 2009.

The Dow Jones Industrial average is up 5,550 points since then. The economy is growing (instead of contracting). Consumer confidence has nearly doubled (though it remains below where it was before the Great Recession). And a larger percentage of Americans believe the country is headed in the right direction (but a majority still think it’s on the wrong track).

On the other hand, there’s data indicating that the nation isn’t better off than it was four years ago – and that the Great Recession continues to take a toll on families. Median household income (adjusted for inflation) is lower than it was in 2009. And more Americans live below the poverty level than they did four years ago.

And some numbers are exactly the same. The current unemployment rate is at 7.8%, which is where it was in Jan. 2009 (though it’s down from a high of 10% in Oct. 2009). And right now, there are roughly 49 million Americans without health insurance, which is identical to where it was in 2009. (The health-insurance mandate under the health-care law doesn’t kick in until 2014.)

Here are other figures over the last four years:

-- The number of U.S. troops in Iraq has dwindled from nearly 140,000 to just 200, while the presence in Afghanistan has increased from 34,000 to 66,000.

-- The federal public debt has increased from $10.6 trillion in Jan. 2009 to $16.4 trillion now.

-- The number of Democrats serving in the U.S. House, U.S. Senate, and in governorships across the country has declined.

Below is a look at Obama’s presidency – so far – by the numbers. The “then” figure is the best-available figure for when Obama was taking office in 2009. And the “now” is the most recent figure. First Read, in 2009, ran a statistical then-vs.-now comparison of George W. Bush’s presidency.

Unemployment rate

Then: 7.8% (Jan. 2009)

Now: 7.8%  (Dec. 2012)

Dow Jones Industrial Average

Then: 7,949.09 (close as of Jan. 20, 2009)

Now: 13,534.89 (close as of Jan. 15, 2013)

Gross Domestic Product

Then: -5.3% (1^st quarter of 2009)

Now: +3.1% (3^rd quarter of 2012)

Consumer Confidence (1985=100)

Then: 37.4 (Jan. 2009)

Now: 65.1 (Dec. 2012)

Americans who believe the country is headed in the right direction

Then: 26% of adults (Jan. 2009 NBC/WSJ poll)

Now: 41% of adults (Dec. 2012 NBC/WSJ poll)

Median household income (adjusted for inflation)

Then: $52,195 (Census data for 2009)

Now: $50,054 (Census data for 2011)

Americans living below the poverty level

Then: 43.6 million (Census data for 2009)

Now: 46.2 million (Census data for 2011)

Americans without health insurance

Then: 49.0 million (Census data for 2009)

Now: 48.6 million (Census data for 2011)

Americans receiving food stamps

Then: 33.5 million (average for 2009)

Now: 46.6 million (average for 2012)

Federal budget deficit

Then: -1.4 trillion (FY 2009)

Now: -$1.1 trillion (FY 2012 projected)

Federal public debt

Then: $10.6 trillion (Jan. 20, 2009)

Now: $16.4 trillion (Jan. 14, 2013)

Federal spending as a percentage of GDP

Then: 25.2% (FY 2009)

Now: 24.3% (FY 2012 projected)

Median sales price of new homes

Then: $208,600 (Jan. 2009)

Now: $246,200 (Nov. 2012)

Number of Democrats in U.S. House of Representatives

Then: 257 (2009)

Now: 201 (2013)

Number of Democrats (plus independents caucusing with Dems) in U.S. Senate

Then: 58 (Jan. 2009)

Now: 55 (Jan. 2013)

Number of Democratic governors

Then: 28 (2009)

Now: 19 (2013)

Number of U.S. troops in Iraq

Then: 139,500 (Jan. 2009)

Now: 200 (Jan. 2013)

Number of U.S. troops in Afghanistan

Then: 34,400 (Jan. 2009)

Now: 66,000 (Jan. 2013)

NBC’s Courtney Kube contributed to this article.

Veteran budget experts said Tuesday that it may require a U.S. sovereign debt crisis to finally force President Barack Obama -- or some future president -- and Congress to agree on truly fundamental changes in fiscal policy.

Last week’s overwhelming bipartisan agreement between Obama and Congress enacted modest income tax increases for most workers (an average tax hike of about $364 in 2013, according to the Tax Policy Center), a return to the full 6.2 percent Social Security payroll tax, and a two-month postponement of the “sequester,” the mandatory spending cuts required by the Budget Control Act. The deal made no changes in long-term spending or in the design of the entitlement programs such as Medicare.

Back in 2011, Obama signed the BCA into law in return for Congress agreeing to a higher federal borrowing limit. The law’s automatic spending cuts were designed to be the ultimate “action-forcing event” that would nudge Obama and Congress into clinching a historic bargain: entitlement reform and spending curbs combined with tax increases.

But three former Congressional Budget Office directors who assembled at a panel discussion Tuesday at the Urban Institute agreed that Congress’s attempt to design an action-forcing mechanism had failed. “I’m really at a loss for what kind of thing might cause the Congress to act in a sensible way,” said former CBO director Rudolph Penner. “We’ve reduced the credibility of something like a sequester. It’s just hard to come up with artificial crises of that sort.”

The BCA itself was supposed to be the action-forcing device – and it resulted only in postponing significant deficit reduction, not forcing it. According to the Congressional Budget Office, the deal Obama signed last week will increase spending and reduce tax revenues by nearly $4 trillion between now and 2022, compared to what would have happened if he and Congress had done nothing.

Another deadline – or another occasion for postponing action -- comes when the Treasury hits the government’s borrowing limit in late February or early March. Then at the end of March, an interim spending resolution expires. If Congress takes no action before that happens, parts of the government may shut down and federal employees could be furloughed for one day a month.

Penner said Tuesday that “those old warriors” – Vice President Joe Biden and Senate Republican Leader Sen. Mitch McConnell – might once again devise a stopgap, perhaps again postponing spending cuts and raising the borrowing limit.

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Penner said he saw no reason to change the forecast he has been making for a long time: “It’s going to take a sovereign debt crisis to get our leaders to act responsibly. If that does happen, I think groups like the AARP -- who have adamantly opposed even the tiniest of reforms of entitlement spending – will see that they have been very short-sighted. Their constituents will be hurt mightily” in a U.S. sovereign debt crisis by seeing their retirement savings evaporate amid a market crash.

A sovereign debt crisis would arrive if bond market investors concluded that the ratio of federal debt to U.S. national income was so high that it created doubts about full and timely repayment of money lent to the Treasury. Investors would force interest rates sharply higher to compensate for the perceived increase in risk.

Sovereign debt crises, or near-approaches to them, in Greece and other countries have resulted in dramatic cuts in government benefits without much advance warning, Penner said.  

He said he was puzzled that financial markets didn’t show a bigger reaction to the fiscal uncertainty in the run-up to last week’s accord, but he cautioned “markets tend to remain very, very calm as the budget situation deteriorates – until one day they don’t (remain calm). It’s not a gradual process…. These things are essentially impossible to predict, they can be set off by a bit of bad budget news on an otherwise slow news day.”

But former CBO acting director Donald Marron said his view was that “the hypothetical fiscal crisis for the United States is still many years in the future.”

Former CBO director Robert Reischauer warned that the Federal Reserve’s policy of keeping short term rates ultra-low “has eliminated one of the signals that the public and markets and (political) leaders look to in forcing action” on budgets. With such low interest rates, the federal government’s borrowing costs are not painful.

Related: Despite fiscal cliff setback, GOP remains dogged in resistance to Obama

The CBO reported Tuesday that there were signs of modest improvement in the budget picture in the short term: total tax receipts increased by 11 percent in the first quarter of fiscal year 2013 – and that came even before the tax increase that Obama signed into law last week. The 2013 fiscal year began on Oct. 1, 2012.

Spending was about the same in the first quarter of 2013 as it was during that period in 2012, when adjusted for shifts in the timing of certain payments due to weekends and holidays. Defense outlays were $9 billion (or 5 percent) less than in the same period last year.

But the bad news was that interest payments are already edging up, even without a sovereign debt crisis or a spike in interest rates.  The CBO said outlays for interest on the public debt were 7 percent greater than in the same period a year earlier, reflecting in part the growing debt held by the public.

For some Democrats, a lingering regret from last week’s deal is that Obama did not extract higher tax revenues; they worry that having agreed to income tax increases that largely fall on the top one percent of earners, the president won’t be able to persuade Congress to enact more tax increases this year or in 2014.

Larry Downing / Reuters

The Capitol Dome is seen on Capitol Hill, Nov. 9, 2012. To the left is the House of Representatives.

“The amount of revenue that was generated by the deal was far lower than the president and the Democrats had hoped for, and even lower than the amount the Republicans seemed willing at various times to put on the table,” noted Reischauer.

He added that last week’s deal will create the impression that higher income tax rates “are off the table in the future” – which he said was “very damaging” since higher federal revenues will be needed over the next few decades. He added that in order to provide the services and benefits Americans expect and to keep deficits and debt at sustainable levels, “we’re going to have to increase taxes on not (only) the (top) 1 percent, not the 2 percent, probably not the 20 percent, but the 30 or 40 percent of Americans. The sooner we face up to that, the sooner we can get on to other important issues that the government should be addressing.”

Noting that Obama had campaigned on sparing the middle class from having to pay any tax increases, Penner noted that that left the very high earners as the only source of more revenue. But, he said, “The arithmetic clearly shows that you can’t solve this long-run budget problem without the middle class making a contribution. The problem with rich people is that there just aren’t enough of them.”

Senate Minority Leader Mitch McConnell said Sunday that Republicans will not support more revenue-raising measures in future fights over the nation's deficit, saying that President Barack Obama should lead on addressing spending cuts alone.

"That's over," McConnell said on NBC's Meet the Press when asked about possible new streams of revenue through taxes or tax code reforms.

"We've resolved this issue," McConnell said. "We don't have this problem because we tax too little, we have it because we spend way, way too much. So we've settled the tax issue and now we have to address the single biggest threat to America's future, and that's our excessive spending."

McConnell helped broker an eleventh-hour deal to avert the fiscal cliff last week, a bill that included the expiration of Bush-era tax rates for some of the wealthiest Americans. On Sunday, McConnell defended that deal, opposed by many House Republicans despite an overwhelming bipartisan deal in the Senate.

"Look, this was not a tax increase," he said of the fiscal cliff agreement. "It was not the kind of complete deal we'd like because we want to cut spending but we did stabilize taxes. The tax issue's behind us." 

McConnell did not answer repeated questions about whether or not he would use the threat of a government shutdown to force Democrats' hand on spending cuts.

"I know what your question is," he told host David Gregory. "What I'm telling you is I have not given up on the president stepping up to the plate and tackling the biggest issue confronting the country.

Congress has avoided going over the so-called fiscal cliff for now -- but the solution comes at a cost of nearly $4 trillion in foregone revenue over the next 10 years.

In Tuesday’s climactic late-night vote, the overwhelming House majority made some clear policy choices: against income tax increases for most people, against fundamental changes in the major drivers of federal spending (entitlement programs), and against cuts – at least immediate cuts – in non-entitlement spending.

So what policies and interests were the winners and losers? Here’s an assessment:

Loser: The power of “leverage.” Since they took over the House in the 2010 election, Republicans haven’t figured out a way to use their political clout to persuade or nudge Obama into what they say they most want: changes in entitlement programs and therefore a slower increase in spending. Confrontation tactics and threats to not raise the federal borrowing limit led to the Budget Control Act of 2011, but then some Republicans, joined by almost all Democrats, voted Tuesday to not allow that law to start biting.

Conversely, even with his re-election on a platform of raising taxes on single earners over $200,000 and married couples with incomes over $250,000, Obama was unable to use his leverage to get what he really wanted and ended up settling for a partial victory.

Tuesday’s final vote that had just 85 Republicans in support, including House Speaker John Boehner but not some of his top lieutenants, also unveiled something of a split within the party that could hamper GOP success in negotiations in the next few months on the debt ceiling.

Loser: Deficit reduction. If deficit reduction is what voters want, the bill passed by the House and Senate will disappoint them.

It will cause a loss of nearly $4 trillion in tax revenues over 10 years – compared to the projected revenues if Congress had simply done nothing and allowed the law on the books in 2012 to expire.

That $4 trillion will need to be found somewhere if Congress wants to reduce budget deficits in future years and hold down the debt-to-national income ratio.

Erskine Bowles and Alan Simpson, the heads of President Barack Obama’s commission on fiscal policy and now the heads of the Campaign to Fix the Debt, said after the House vote that “Washington missed this magic moment to do something big to reduce the deficit, reform our tax code, and fix our entitlement programs…. Yet even after taking the country to the brink of economic disaster, Washington still could not forge a common-sense bipartisan consensus on a plan that stabilizes the debt.”

Winner: The Washington, D.C. culture of tax breaks for special interests.

Despite much rhetoric from Obama, Boehner, Bowles and Simpson, and others about abolishing tax preferences and simplifying the tax code, the bill passed by the House and Senate preserves and extends 60 specific credits, preferences and other benefits for targeted groups and industries.

In one sense, this is a tribute to the interests and lobbyists who have worked diligently to advocate for these provisions; in another sense it reflects the desire of members of Congress to use their power to shape the tax code for the benefit of favored groups.

Some of the tax breaks are minuscule in budget terms: a one-year extension of an economic development tax credit for American Samoa will cost only $62 million in lost revenue, according to the official scorekeepers for tax legislation, the staff of the Joint Committee on Taxation.

But some of the provisions are especially significant for particular industries: a two-year extension of tax credits for blenders of biodiesel and renewable diesel is worth $2 billion.

Anne Steckel, vice president of federal affairs at the National Biodiesel Board, said, “Because of this decision, we'll begin to see real economic impacts with companies expanding production and hiring new employees."

A study conducted for the National Biodiesel Board by economics consulting firm Cardno ENTRIX found that the biodiesel industry would support more than 112,000 jobs with the tax credit in place compared to 82,000 without it.

Due to another provision of the bill, taxpayers in states with sales taxes get a one-year extension of their ability to deduct their state tax payments on their federal tax return. That’s worth more than $5 billion to them – and a loss of the same amount to the Treasury. This is especially valuable to people in states with no state income tax, such as Nevada and Florida, where much of the state revenue comes from relatively high state sales taxes.

As bargaining between Obama and GOP congressional leaders plodded on into December, it seemed that there was never any real likelihood that the year-ending legislation was the moment for fundamental tax reform. That fundamental reform is supposed to come later this year, according to the chairmen of the House and Senate tax-writing committees. But the ability of special tax preferences to survive year after year indicates that old tax-favoritism habits will die hard, even if Congress embarks on tax reform.

Loser: “Certainty.” A favorite theme of members of Congress on both sides of the aisle was the need to end the uncertainty over fiscal policy so that business owners and investors could make decisions about hiring and deploying their capital.

Both Obama and House Ways and Means Committee Chairman Dave Camp, R-Mich. used the word “permanent” to describe the income tax provisions in the bill.

Obama said on New Year’s Eve that Republicans vowed they “would never agree to raise tax rates on the wealthiest Americans.” But he said the bill “would raise those rates and raise them permanently.”

And Camp said after Tuesday’s vote that “We have acted to make those (2001 and 2003) tax cuts permanent – protecting middle-class Americans from the higher tax rates that were in place when President Bill Clinton occupied the White House.”

Former Rep. Jim McCrery, a tax lobbyist with Capitol Counsel in Washington and former Republican member of the House Ways and Means Committee, said “’permanent’ simply means that there’s no sunset provision… It does not mean by any stretch of the imagination that those provisions will be in the tax code forever. In fact, most people anticipate a very aggressive effort to reform the tax code in an overarching way” in the new Congress that convenes Thursday.

History argues against anything being permanent in the tax code. The top personal income tax rate has changed seven times in the past 30 years and other tax provisions have changed even more frequently.

Winners: Taxpayers earning less than $250,000, and joint filers earning less than $300,000.

Most workers won’t be paying higher income taxes. For workers in the $50,000 to $75,000 range, the bill represents roughly a $1,500 income tax cut – compared to what their tax liability would have been if Congress had allowed Clinton-era tax policies to return as they were scheduled to do on Jan. 1.

While tax rates will not go up for most, people making more than $250,000 will face a reduction in the amount they can deduct and in the value of their personal exemption. And those above $400,000 income face higher income tax rates, with the top marginal rate increasing from 35 percent to 39.6 percent.

And upper-income investors are already facing an increase in the tax on capital gains enacted in the Affordable Care Act. The top capital gains tax rate will go from 15 percent to 23.8 percent.

But overall, 92 percent of the tax increase will fall on tax filers with incomes over $1 million, according to the nonpartisan Tax Policy Center. Contrary to rhetoric from some members of Congress, it’s not only the middle class who are being shielded from paying more for their government – it’s upper-income people as well. (Median annual U.S. household income is about $51,000.)

Winner: Traditional Social Security funding. There was bipartisan agreement to restore the 6.2 percent payroll tax which – in a bid to stimulate the economy – had been cut to 4.2 percent in 2011.

Going back to a 6.2 percent rate reverts to longstanding policy of having a dedicated source of tax funding for Social Security. For a worker making $60,000 a year, this decision will mean $23 a week or $1,200 a year in higher taxes. But it also means Social Security will not be borrowing general tax revenues to make up its shortfall as it had been doing in 2011 and 2012.

The original version of this story incorrectly said the extension of the biodiesel tax credit is for one year. It is extended for two years.