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Higher revenues without higher tax rates?

By msnbc.com's Tom Curry:  In a tweet Monday morning, freshman Republican Sen. Ron Johnson of Wisconsin asked, “If the President was serious about reforming tax code, why would he want a trillion dollars in new taxes?”

The answer from Obama at his press conference: he wants more revenue so he can both avoid having to make cuts in programs that would hurt lower- and middle-income people -- and so he can simultaneously reduce deficits and government borrowing.

But Obama stressed a crucial point Monday: more revenue doesn’t necessarily mean higher income tax rates. More revenue can come from tax reform.

Obama had been proposing higher tax rates on upper-income people since he campaigned for president in 2008. And he succeeded in last year’s health care reform bill in raising Medicare taxes on people with income in excess of $200,000, a tax increase which will raise $87 billion over the next ten years.

But taking his cue from last December’s report from the Bowles-Simpson commission which he appointed, Obama reiterated Monday that he’s willing to give up his demand for higher income tax rates on top earners -- in return for scrapping or curtailing deductions and credits.

Bowles and Simpson say such an approach would raise more revenue than the current tax code, partly by getting rid of some of the inefficiency and cost of compliance in the current code.

The increased revenue could also come partly from a less complex tax system leading to faster economic growth. But with lower tax rates and fewer deductions, the net result would be some taxpayers paying more in taxes than they do right now.

The caveat, as Obama signaled in his press conference: any redesigned tax code would need to be “sufficiently progressive.” Mutual agreement on the definition of that term would likely be the toughest nut for Republicans and the president to crack.

A pertinent fact has gone mostly unnoticed in this tax debate – and it’s cause for a little optimism.

The Congressional Budget Office reported last week that tax revenues for the first three quarters of this fiscal year were 8.5 percent higher than in the same period last year and individual income taxes, which is what the government most relies on, showed a gain of 24 percent.

These higher revenues are being generated not by higher tax rates but by an increase in incomes and from more people working: according to the Bureau of Labor Statistics, 242,000 more people were working last month than in June of 2010. (Yes, that’s even though 14 million people looking for jobs and are unable to find them.)

Tax revenues are recovering – even if they’re still not at the level they were in 2007. At this point in fiscal year 2007, the government had collected $885 billion in individual income tax revenue; that compares to about $814 billion so far this fiscal year.