This is a rush transcript from "Your World With Neil Cavuto," February 26, 2009. This copy may not be in its final form and may be updated.
NEIL CAVUTO, HOST: So did the president just change his definition of who is rich? It used to be that anyone earning over $250,000 a year fit that category.
But, in his first budget, the president says for his promised health care expansion by cutting deductions for those paying taxes at both the 33 percent and the 35 percent rates. Now, this year, the 33 percent rate starts with couples with taxable income of $208,850.
White House Budget Director Peter Orszag with me right now.
So, Director, maybe you can put this issue to bed. What is it going to be? Where do you start limiting deductions?
PETER ORSZAG, DIRECTOR OF OFFICE OF MANAGEMENT AND BUDGET: I think it is pretty clear that proposal would kick in, in 2011.
In 2011, that threshold should apply at about $250,000. It is perfectly consistent with what the president campaigned on.
CAVUTO: All right. So, the 33 percent rate right now, if it moves to 36 percent — but 33 percent right now is around $208,000, $209,000. What is it going to be at 36 percent in 2011?
ORSZAG: The threshold should be at around $250,000 in income. So, again, this is perfectly consistent with what the president campaigned on.
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ORSZAG: I think there has been confusion about when this proposal would kick in. And it's very clear it would not kick in until 2011.
CAVUTO: Then, Director, I am confused, then, because, right now, 33 percent, to start, is at $208,000, $209,000. You're saying, when it's up to...
ORSZAG: That goes up — that goes...
CAVUTO: Go ahead.
ORSZAG: That goes up over time. Under the existing tax code..
CAVUTO: OK. So, understood, so that, in 2011, it will be around $250,000?
ORSZAG: Something like that, approximately in that range, yes.
So, can you tell me now that there will not be a deduction cut for anyone making less than $250,000?
ORSZAG: That is correct. That is the way that this proposal is structured, again, kicking in, in 2011 and thereafter.
CAVUTO: OK, so nothing kicks in, in 2010?
ORSZAG: That is correct.
CAVUTO: OK. So, I'm going to be...
ORSZAG: I think folks need to actually look at the budget document, where this is clearly laid out, but I'm happy to explain it, also.
CAVUTO: Actually, I did look at the budget document, and it is not clearly laid out.
But let me ask you this. Since you're the brain here, you are now swearing to me on a stack of White House bibles that no one is going to see their taxes increased if they make under $250,000, right?
ORSZAG: Again, let me just be clear. This proposal only affects the top 5 percent of taxpayers. It kicks in after 2011. And it is targeted at — or it applies to those earning $250,000, a quarter-million dollars, a year, or more.
So, when the president was in the beginning talking about "I'm going to only hit the top 2 percent," it just might be just numerical semantics here, Director, but it is the top 5 percent, right?
ORSZAG: It is likely to be less than that.
But, again, let's focus on the big picture here. For 95 percent of working families, there's going to be a net tax reduction. That seems to be lost in much of this discussion.
CAVUTO: All right. But it's fair to say that the population on which you are going to be raising taxes account for the majority of the taxes that you raise, right?
ORSZAG: That is — that is right. The revenue changes are focused on those making more than a quarter-million dollars a year.
All right, now, let me ask you about this, because, besides taking the 33 percent rate to 36, and the 35 percent rate eventually to 39.6, you're also, for that upper-income group — and I guess solely that group — raising capital gains on dividends as well for top earners from 15 percent to 20 percent.