Federal Budget & Tax

Federal Budget & Tax: News Blog Background

Friday, April 29, 2005

Bush Talks to the Public About Social Security

In President Bush's news conference last night on energy and Social Security reform, he stated, "I know some Americans have reservations about investing in the stock market, so I propose that one investment option consist entirely of treasury bonds, which are backed by the full faith and credit of the United States government." (the entire transcript can be read here.

This statement is interesting given the fact that on his "60 day, 60 city tour" Bush spent much of his time discussing how the treasury bonds in the trust fund are little more than IOUs which the American people expect will be paid back by the government someday.

He has been discrediting the trust fund as nothing more than IOUs, just last week he said, "You see, a lot of people in America think there's a trust, in this sense -- that we take your money through payroll taxes and then we hold it for you, and then when you retire, we give it back to you. But that's not the way it works. There is no "trust fund," just IOUs that I saw firsthand, that future generations will pay -- will pay for either in higher taxes, or reduced benefits, or cuts to other critical government programs." He has been criss-crossing the country saying this, yet last night said the trust fund has the full faith and credit of the United States Government.

Bush spent much of his press conference discussing the need for responsible reforms to Social Security; reforms that he says won't cut benefits for people and that will keep retirees receiving benefits out of poverty. Yet in the same breath he says he believes the best way to do this is to have workers divert a percentage of their payroll taxes into a personal account. Hundreds of economists, policy analysts, and Social Security experts have come out over the last few months and said that personal accounts will add a level of risk to the benefits being paid to recipients. Bush is still trying to market a bad plan to the American people, yet disguising it as one that is both necessary and progressive. Private accounts are neither necessary nor progressive, and luckily, polls have shown that more and more Americans are believing this to be true.

Posted by Becky Lewis, 03:09:29 PM

Thursday, April 28, 2005

House and Senate Reach Budget Agreement

Today House and Senate budget negotiators came to an agreement on a $35 billion, five-year package of cuts in spending, after agreeing to trim the plan by about $6 billion. This agreement was made in large part because of objections voiced by Senator Gordon Smith (R-OR) concerning the size of Medicaid cuts, as well as the fact that those cuts would most likely grow in years to come. Smith sponsored an amendment in the Senate which stripped many of the entitlement cuts from the Senate's budget resolution. His amendment was passed by a margin of 52 - 48.

The budget plan agreed to in conference assumes $843 billion of discretionary spending in FY 2006. It reduces the amount of money that the House Ways and Means Committee will have to cut in reconciliation from $6 billion to $1 billion. The budget plan also assumes $106 billion worth of tax cuts over the next five years, $70 billion of which are protected under reconciliation.

This budget plan increases the already record-high deficit, and at the same time calls for more tax cuts for the wealthy. It cuts almost all funding for domestic programs by 1 percent, yet protects $70 billion worth of tax cuts in under reconciliation. Congress is effectively taking money from social programs that help the average American, and giving it out in the form of tax breaks to the wealthy.

For more information on the budget agreement, click here and here. To read Center on Budget and Policy Priorities Director Bob Greenstein's comments, click here. For a CBPP analysis, click here.

Posted by Becky Lewis, 03:54:35 PM

Bush News Conference On Energy and Social Security

Tonight at 8:30 PM (EST) the President will hold his first publicly broadcasted evening news conference since the start of his second term. At the news conference he will discuss plans for overhauling Social Security, and he will also discuss the high gas prices which have been plaguing the nation in recent months.

Press Secretary Scott McLellan has noted that Bush will speak more specifically about his plans for Social Security reform than he has been. The President has been criticized by many for not speaking specifically enough regarding his exact plans for reform. During the conference Bush is also expected to urge Congress to pass his energy reform plan. High oil and gas prices are beginning to take a toll on the the level of national economic growth, as well as on Bush's approval ratings. Click here to read Sierra Club comments on his energy plan.

Posted by Becky Lewis, 02:43:38 PM

Sen. Smith Walks Away From Budget Deal

Senator Gordon Smith (R-OR) walked away from negotiations on the congressional budget resolution last night moments before a final deal was struck. Smith, a key senator in the negotiations because of his successful amendment protecting Medicaid funding during the Senate debate, has said he will not vote for the final budget. This development will likely delay floor consideration of the budget this week and could doom the legislation altogether.

Senate Majority Leader Bill Frist (R-TN) and Budget Committee Chairman Judd Gregg (R-NH) will have a very difficult time passing the budget without Smith's support. Smith's amendment to protect funding for the low-income health care program on the Senate floor passed with the support of five other Republicans. Because the Senate passed the budget resolution by only two votes, those Republican Senators become the key to passing the final resolution. The position of some of those Senators on final passage is still unclear.

As the Washington Post editorializes this morning, this may be the best thing for the country in the end.

Posted by Adam Hughes, 10:44:32 AM

Wednesday, April 27, 2005

Rolling Stone Article on Sunset Commission

An article on the OMB's "Sunset Commission" appeared in the last issue of Rolling Stone magazine. Gary Bass and Bob Shull are quoted in the article discussing the Program Assessment Rating Tool and Bush's Sunset Commission. Check out the article: Bush's Most Radical Plan Yet

The article has also been widely discussed on the blog "Daily Kos." To read the discussion on the article, click here.

Posted by Becky Lewis, 07:37:39 PM

WA Passes New Stand-Alone State Estate Tax

As support for the estate tax continues to flounder somewhat at the national level, the state of Washington recently demonstrated their support of the estate tax by approving on April 24 a new stand-alone estate tax that is expected to generate nearly $140 million of state revenue over the next two years.

This move is especially significant because in February, the Washington State Supreme Court "threw out" the state's existing estate tax for various technical reasons, costing the state roughly $430 million in state revenues. However, in resistance to this, Governor Christine Gregoire (D-WA) included the estate tax in her budget proposal. State legislators rallied around her decision and passed the bill, which is now headed to the Governor for her signature.

The Washington estate tax will apply to estates worth more than $1.5 million. In 2006, that level will rise to $2 million. An estimated 250 Washington estates will be subject to tax each year.

Posted by Becky Lewis, 07:16:43 PM

House Votes Overwhelmingly To Support Medicaid

Last night, the House of Representatives overwhelmingly approved a motion to instruct conferees to the budget resolution conference committee to protect Medicaid funding. By a vote of 348 - 72, the House approved Rep. Stephanie Herseth's (D-SD) motion to the budget resolution conferees that Medicaid funding should not be cut through the reconciliation process.

This vote puts a majority of both the House and Senate on record as opposing such cuts. Despite this, GOP leadership negotiators seem ready to sign-off on a deal on the budget resolution that would cut Medicaid funding by $10 billion over the next five years among other reductions to mandatory spending programs.

Senate Budget Committee Chair Judd Gregg (R-NH) is pushing Congress to pass a budget resolution before the upcoming congressional recess at the end of this week. Gregg has said if an agreement is not reached this week, it becomes very difficult for Congress to pass a resolution. It is possible floor votes on the budget resolution could begin as early as tomorrow, but it is not assured it will pass in either the House or the Senate.

Posted by Adam Hughes, 05:17:57 PM

Finance Committee Hearing on SS Solvency

The Senate Finance Committe held a hearing yesterday on the issue of Social Security solvency and private accounts. Witnesses testifying before the committee included Peter Orszag from the Brookings Institution, Robert Pozen, whose Social Security plan has been praised by Bush, Joan Entmacher of the National Women's Law Center, Michael Tanner of Cato, and Peter Ferrara of the Free Enterprise Fund. Click here for witness testimonies.

Committee Chairman Charles Grassley told reporters after the hearing that he wants to move forward with Social Security legislation. Republicans on the committee are planning to meet in two weeks to start coming with legislation that Grassley hopes will appeal to the Democrats on the committee, which include Senators Max Baucus (D-MT), Kent Conrad (D-ND), Jeff Bingaman (D-NM), John Kerry (D-MA), Blanche Lincoln (D-AR), and Ron Wyden (D-OR).

While the Democratic senators seem to be united in their opposition to private accounts, Republicans are more splintered on the issue. During yesterday's hearing Craig Thomas (R-WY) questioned a move that would add trillions of dollars to our debt, and Olympia Snowe (R-ME) seemed opposed to personal investment accounts. She said, "Social Security became the bedrock of support for seniors in my state precisely because it's defined and guaranteed. What cost and what risk is it worth to erode the guaranteed benefit?"

Click here and here for newspaper articles on the hearing as well as the Social Security rally that took place yesterday afternoon on Capitol Hill.

Posted by Becky Lewis, 04:31:08 PM

Greenspan Comments on Tax Increases and the Deficit

Last week Alan Greenspan testified before the Senate Budget Committee. He said that tax increases, as well as spending decreases, must be part of any responsible deficit reduction plan. In his testimony he also stated, "The federal budget deficit is on an unsustainable path, in which large deficits result in rising interest rates and ever-growing interest payments that augment deficits in future years." For more information, click here.

Posted by Becky Lewis, 12:46:56 PM

Thursday, April 21, 2005

Another Strike Against Private Accounts

On tuesday, Finance Committee member Orrin Hatch (R-UT) said that both he and Sen. Charles Grassley (R-IA) had "pretty much told the president he's not going to get carve-outs" in regards to Social Security reform. Senate GOP leaders seem to be coming around to the fact that Bush's Social Security plan is not politically popular enough for them to seriously pursue.

Hatch, in fact, is promoting a plan that would let people contribute up to $5,000 per year into a personal account, with the government providing scaled matching contributions for those who make less than $80,000 annually. Hatch's proposal also provides financial incentives that would be added to the accounts of those who opt to defer their receipt of Social Security retirement benefits. And the debate for reform continues.

Of note: On April 26th, at 10 AM, the Senate Finance Committee will hold a hearing on sustainable solvency, during which they will look at proposals for reform both with and without private accounts. Robert Pozen, a former member of Bush's 2001 Social Security commission, will testify. His plan for reform has garnered a lot of attention over the past few months.

Posted by Becky Lewis, 03:53:38 PM

Wednesday, April 20, 2005

Watcher: April 20th, 2005
Federal Budget

Posted by Becky Lewis, 04:19:46 PM

Allard Looks Into GPRA for Legislative Branch

Senator Wayne Allard (R-CO), the Chairman of the Appropriations Subcommittee on the Legislative Branch, is interested in looking to apply the Government Performance Results Act (GPRA) to the legislative branch of the government. Currently, GPRA is a program that requires federal agencies to set goals and measure results through annual performance report. For more information on GPRA click here.

Allard wants to see legislative agencies follow the GPRA, noting during a hearing yesterday, "I want to look into whether we apply all of the formulating in the GPRA or just a part of [it]." His interest in seeing GPRA applied to legislative agencies was fueled by a funding request for FY 2006 from the Library of Congress which is significantly higher (7 percent) than the funding request was for FY 2005. The GPRA ideally would be used to evaluate programs and the resources necessary to run them effectively.

Allard indicated that he will need to spend time discussing this idea with other members of the Committee before it goes anywhere. To read an article in The Hill on this issue, click here.

Posted by Becky Lewis, 11:34:38 AM

Tuesday, April 19, 2005

House to Debate on Tax Breaks in Energy Bill

Tomorrow the House will debate an energy bill, H.R. 1541, which includes provisions on tax breaks targeted for the energy industry. Last week the Ways and Means Committee approved $8 billion in tax breaks for the energy industry -- a number which is actually at odds with the Bush administration.

The administration proposed $6.7 billion worth of tax breaks, with 72 percent of that amount going towards renewable sources of energy and energy efficiency. The House version passed by the Committee increases the tax cut by $1.3 billion and only allocates 6 percent of the money to go towards renewable and efficient sources of energy. Not only is this measure environmentally irresponsible, but it is also fiscally irresponsible. As Erich Pica of Friends of the Earth stated in this Washington Post article, "The energy bill is just another example of the House Republican leadership overreaching for corporate interests."

Posted by Becky Lewis, 11:41:10 AM

Monday, April 18, 2005

State Budgets Plagued By Education and Health Costs

The National Conference of State Legislatures released a report last thursday highlighting the fiscal health of states and the budget pressures that exist for states regarding some key programs. The report noted that in FY 2003, 31 states faced budget gaps after the fiscal year began, however this year only 3 states found themselves in that situation.

Despite this fact, Medicaid and other health costs continue to cause increasing financial pressure for states, and while state tax revenues have been able to cover most costs this year it may not work out as nicely in the years to come -- as the report says 26 states are facing shortfalls as they put together their FY 2006 budgets. More on the report can be read here.

Posted by Becky Lewis, 11:41:10 AM

Friday, April 15, 2005

Tax Panel Meeting in DC 4/18

The President's Advisory Panel on Tax Reform will hold their next meeting on Monday, April 18th at the University of Maryland's School of Public Policy. The meeting will focus on state tax systems, how they interact with the federal system, and also how the tax system affects business investment in technology. These meetings are open to the public. A list of witnesses as well as more information can be found here.

Posted by Becky Lewis, 04:44:08 PM

Finance Committee Hearing on Tax Gap

On April 14th, the day before tax day, the Senate Finance Committee held a hearing on the tax gap where they discussed compliance issues, tax code complexity, and the amount of revenue that is lost each year due to people and corporations who don't pay 100 percent of their taxes.

Witnesses included GAO Comptroller David Walker, IRS Commissioner Mark Everson, Cheif of Staff of the Joint Committee on Taxation George Yin, and National Taxpayer Advocate Nina Olson. All Committee member and witness statements can be read here.

Read this Washington Post article for more info on the tax gap and compliance issues, and look for an article in next week's edition of the Watcher for more detailed coverage.

Posted by Becky Lewis, 11:24:24 AM

Thursday, April 14, 2005

4 in 10 SS Recipents Affected By Taxation of Benefits

According to a new report by the Congressional Research Service, almost 4 in 10 Americans are affected by taxation of Social Security benefits.

There are three tiers of income taxes on Social Security benefits. For married couples, with a total income of $32,000 or less, there is no tax on their benefits. For couples with income between $32,000 and $44,000, half of their benefits are subject to tax. For couples with income exceeding $44,000, 85 percent of their benefits are subject to income tax.

For individuals, these levels are set at $25,000, $34,000, and greater than $34,000.

The Senate-approved budget resolution includes language that would roll back a tax increase on Social Security benefits that was enacted in 1993, but the provision is not expected to survive a House-Senate conference.

Posted by Adam Hughes, 11:23:55 AM

44 House Republicans Supporting Medicaid Funding

While the House has yet to name conferees to the conference committee for the budget resolution - a sign that final compromises have not yet been reached - 44 House Republicans have sent a letter to House Budget Chairman Jim Nussle (IA) urging the reinstatement of $20 billion to the Medicaid program in the budget resolution.

The position of those House Republicans may make it even more difficult for any cuts in spending to the Medicaid program this year through reconciliation instructions. The Senate stripped instructions for $20 billion in savings from the program before passing their budget resolution.

However, if the House GOP leadership is willing to relent on Medicaid funding, it may increase the changes of a compromise on a final budget resolution. Congress has failed to pass a budget resolution in two out of the last three years.

Read more about the budget resolutions passed by the House and Senate in March

Posted by Adam Hughes, 10:52:49 AM

House Passes Estate Tax Repeal Bill

Yesterday afternoon the House passed H.R. 8, a bill to permanently repeal the estate tax by a vote of 272 - 162. Forty-two Democrats supported the bill. This total was similar to the vote in 2003 to repeal the tax, which had 41 Democrats supporting it.

2005 estate tax repeal roll call vote
2003 estate tax repeal roll call vote

Rep. Earl Pomeroy (D-ND) offered a substitute to this bill that would have immediately increased estate tax exemption levels to $3 million ($6 million for couples). The Pomeroy substitute would have eventually raised estate tax exemption levels to $3.5 million ($7 million for couples) after 2009 . The Pomeroy substitute would cost less than a fourth ($72 billion) of the cost of full repeal ($290 billion) over the next ten years. The vote on this amendment to reform rather than repeal the tax was closer, but failed 194 - 238, with all but 9 Democrats voting to support it.

2005 Pomeroy amendment roll call vote
2003 Pomeroy amendment roll call vote

A few details of the votes:

Democrats Bean (IL), Cramer (AL), and Gordon (TN) voted against the Pomeroy amendment but for H.R. 8.
Pomeroy had the support of one Republican on his amendment - Michael Castle of DE.
Jim Leach of IA was the lone Republican to vote against H.R. 8.

Read more...

Posted by Adam Hughes, 10:35:36 AM

Tuesday, April 12, 2005

House to Vote on Estate Tax Repeal Wednesday

On Wednesday the House is slated to vote on H.R. 8, a bill to repeal the estate tax. The House has passed this bill in years past, and will most likely pass it again. The cost of repealing the estate tax over a ten year period would come out to be $745 billion. Click here for more information on repeal costs.

President Bush is busy ranting that we don't have enough money to continue Social Security payments as they are, and at the same time Congress is set to pass an extremely austere budget resolution for FY 2006 that cuts billions of dollars from funding for social programs. Yet this push to further gut national coffers and appeal to the interests of the wealthiest in our country exists as a very real threat.

The Washington Post has published two insightful columns this week discussing the issue of the estate tax and how it fits into the larger tax and budget picture. Click below to read the articles.

The Rich Get Richer

The Paris Hilton Tax Cut

Posted by Becky Lewis, 12:47:34 PM

Friday, April 08, 2005

Panel on Tax Reform To Hold Meeting in D.C.

The President's Advisory Panel on Tax Reform announced today that they will hold their next meeting in Washington, D.C. on April 18th. Details on the location will be provided in the near future, but the meeting will definitely be open to the public.

This specific meeting will focus on how the federal tax code interacts with state and local tax systems. The panel will also look at the impacts of the tax code on business investment, including the effect of cost recovery and depreciation rules. For information on the panel's previous public hearings, click here.

The panel also recently announced that they will be accepting proposals to be submitted to them on reforming the tax code. For more information on this, see the panel's web site.

Posted by Becky Lewis, 04:27:45 PM

Thursday, April 07, 2005

Upcoming Social Security Legislation

Next week Sen. John Sununu (R-NH) and Rep. Paul Ryan (R-WI) plan to reintroduce their bill on Social Security reform in Congress. Their bill includes payroll tax-financed individual accounts.

Sen. Lindsey Graham (R-SC) is also moving ahead with work on his Social Security legislation. His bill will also include payroll tax-financed individual investment accounts, but unlike other GOP bills, will most likely propose to raise the retirement age for benefit eligibility. He is considering the age of 68 as of right now (the current retirement age is 67).

Graham is also exploring various approaches to "progressive price indexing," an idea which is touted by in Robert Pozen's Social Security reform proposal. Pozen, a Democrat, was a member of Bush's 2001 Social Security commission. His plan, which is getting increasing favorable attention from President Bush, would protect the lowest-income seniors by keeping them under wage indexing but would gradually blend in price indexing until the seniors at the upper end of the income scale would be subject to full price indexing.

Posted by Becky Lewis, 05:46:50 PM

Wednesday, April 06, 2005

Senator Schumer to Lead Search for Compromise on Estate Tax

It was reported this morning in The Hill newspaper that Senator Charles Schumer (D-NY) has been tapped to lead an effort to find a permanent compromise on the estate tax.

The current law includes a gradual phase-out of the estate tax - only to have it re-emerge in 2011 at 2001 levels. This structure makes estate planning difficult and both Democrats and Republicans have commented that the issue of uncertainty needs to be addressed.

You can read The Hill article here.

Posted by Adam Hughes, 01:22:06 PM

Commissioner Everson Testifies Before Finance Committee

Yesterday, IRS Commissioner Mark Everson testified before the Senate Finance Committee on issues of tax exemption. He said "We can see that abuse is increasingly present in our sector. The twin cancers of technical manipulation and outright abuses are spreading."

The problems the IRS faces with this issue include compensation issues, donor-benefiting charities, questionable charitable trusts, abusive tax shelters, and the misuse of exempt groups for charitable donations. According to Everson, the IRS could use more flexibility in penalizing charitable abuses, coordinating with state and other regulators, and requiring more exempt groups to file electronically. For more information on the issue, see this Washington Post article.

Posted by Becky Lewis, 12:47:09 PM

White House Aide Discusses Raising Payroll Tax Cap

Congress returned from recess this week, during which House Republicans alone held 550 events on Bush's plan to overhaul Social Security. Despite all this talk of privatization accounts, even White House aides are saying that perhaps other reforms should be considered.

On April 5th, Chuck Blahous, an economic advisor to Bush and the administration's top aide on Social Security policy, said that raising the $90,000 cap on wages subject to the Social Security payroll tax would delay the onset of the long term Social Security shortfall. Blahous did not rule out White House support for proposals to raise the cap, but many GOP congressmen are opposed to the idea, including House Majority Leader Tom DeLay (R-TX). Others such as Sen. Graham (R-SC), have been criticized for supporting such an idea.

Also yesterday, the President continued his push to "educate" the public on the need for Social Security reform. On his visit to West Virginia, he commented, "There is no 'trust fund,' just IOUs that I saw firsthand, that future generations will pay -- will pay for either in higher taxes, or reduced benefits, or cuts to other critical government programs." The full transcript of his comments can be found here.

Comments such as these are unnecessarily misleading about the health of our Social Security system, which can pay 100% of benefits for years to come. It is rather the administration's expensive tax cuts and the general decrease of available national revenue that will cause future generations to pay in terms of reduced social benefits and cuts in critical government programs.

In response to Bush's comments, Democratic Congressional leaders Harry Reid (D-NV) and Nancy Pelosi (D-CA), submitted the following comments: "It is simply wrong to suggest that the Social Security Trust Fund does not exist, or that the securities held by the Trust Fund are merely pieces of paper. For a President to even suggest that the federal government might, for the first time, default on a security backed by the full faith and credit of the United States unnecessarily misleads American workers about the health of the Social Security program." For the rest of their comments, click here.

Posted by Becky Lewis, 12:02:35 PM

Tuesday, April 05, 2005

Senate Names Budget Resolution Conferees

Yesterday the Senate named seven Senators to the conference committee for the budget resolution.

The Senators are:
Budget Chairman Judd Gregg (R-NH)
Wayne Allard (R-CO)
Pete Domenici (R-NM)
Charles Grassley (R-IO)
Kent Conrad (D-ND)
Patty Murray (D-WA)
Paul Sarbanes (D-MD)

The House has not named their conferees yet and there are no scheduled meetings for the committee.

Posted by Adam Hughes, 01:48:35 PM

Watcher: April 4th, 2005
Federal Budget

Posted by Becky Lewis, 12:20:23 PM

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