Federal Budget & Tax

Federal Budget & Tax: News Blog Background

Friday, January 28, 2005

Sen. Nelson to Cosponsor Estate Tax Repeal Legislation

According to the news source Congress Daily, advocates of estate tax repeal have enlisted the help of Senator Bill Nelson (D-FL), to provide support for their stance on this issue. Nelson will be the Democratic cosponser of a bill aimed at repeal, along with Senator Kyl (R-AZ), who has sponsored pro-repeal measures in the past.

The estate tax is a progressive tax that affects the wealthiest 2 percent of the population in America. It is currently scheduled to phase out through 2009, not exist in 2010, and then return in 2011. The estate tax provides an important source of revenue; if repealed the government would lose almost a trillion dollars in revenue over the next twenty years.

Bill Nelson is one of seven democratic Senators who has voted in favor of repeal in the past. The others are Baucus (MT), Bayh (IN), Landrieu (LA), Lincoln (AR), Ben Nelson (NE), and Wyden (OR). While these Senators did vote for repeal in 2001, the fiscal health of our country is different today than it was four years ago. The CBO recently projected the budget deficit in 2005 to be around $427 billion. Our economy is not conducive right now to policies that will gut revenue even more.

The above-listed Senators who have voted for repeal in the past need to recognize that our economy cannot handle an even larger squeeze on the budget right now. Voting to cut that much federal revenue annually would be irresponsible in a time when we are already expecting to see very limited domestic discretionary spending, as well as the extension of Bush's first term tax cuts. Repealing the estate tax would further cut taxes for the wealthiest individuals in this country, and make it more difficult for the government to be able to fully fund social programs that a large percentage of the population rely on to get by.

Posted by Becky Lewis, 04:38:28 PM

Wednesday, January 26, 2005

The Truth Behind CBO's Ten Year Deficit Projections

In September of 2004 the Congressional Budget Office (CBO) estimated 10 year deficit levels to be $2.3 trillion. Their recent Budget and Economic Outlook shows this 10 year deficit projection improving, as they now predict deficit levels to be $1.4 trillion over the next ten years. These numbers are misleading.

The reason for this improvement is because in their previous report, the CBO included $115 billion per year through 2014 for supplemental defense expenditures in Iraq and Afghanistan. In their current estimates, the CBO includes no supplemental funding for Iraq and Afghanistan. This discrepancy exists because CBO is required by law to base their projections only on current law. The CBO report acknowledges this and includes adjustments to their previous projections in order to have a fair baseline to compare the ten year deficit. When this adjustment is made, CBO reports that ten year deficit levels will actually increase by half a trillion dollars, or 0.3 percent of GDP; three-quarters of this increase is due to legislation surrounding the extension of tax cuts.

Similarly, CBO projections fail to take into account some costly policies that are widely expected to become law in the near future. These include:

reforming the Alternative Minimum Tax;

extending expiring tax cuts; and

creating private accounts in social security.

Given the potential costs of the policy issues listed above, as well as projected increases in health care costs, it would be foolish and irresponsible for policymakers to think they can sufficiently meet those priorities while attempting to make Bush's tax cuts permanent. To do so would explode deficits far beyond any projections we are seeing today.

For good articles on the Budget and Economic Outlook released yesterday, read this article in the Washington Post and this article from Bloomberg news. To read more about why CBO projections tend to underestimate the real picture of the deficit read this analysis by economist John Irons. Written last fall, Dr. Irons explains his take on why ten year budget deficits will most likely be much greater than any predictions from the CBO.

Posted by Becky Lewis, 03:22:19 PM

Monday, January 24, 2005

Tax Issues to be Addressed in Congressional Agenda

BNA News Services reported today that a package of ten bills reflecting the Senate Republican agenda will most likely include a measure aimed at either repealing or reforming the estate tax. The measure is expected to be sponsored by Senator Kyl (R-AZ), who sponsored estate tax legislation in the the 108th Congress. His last measure aimed to both make estate tax repeal permanent, as well as accelerate full repeal to 2005 (full repeal is currently scheduled to take place for one year in 2010). The estate tax, which only affects the wealthiest 2 percent of the population, is the most progressive tax in place in America.

Also on the Senate Republican agenda is making the 2001 and 2003 tax cuts permanent. Some of the tax cuts are scheduled to expire in the upcoming years, and GOP leaders hope to make those cuts permanent during the 109th Congress. Chuck Collins, cofounder of the group Responsible Wealth, noted the "unseemliness of voting for tax cuts for the rich during a war." Lawmakers should note -- as they vote on provisions to spend more in both Iraq and Afghanistan -- whether or not this country can really afford to be making tax cuts permanent while both fighting a war and contemplating an expensive overhaul of Social Security.

Posted by Becky Lewis, 10:38:55 AM

Thursday, January 20, 2005

Divisions in Social Security Reform Widen
The lack of a proposal from the White House on the President's specific plans for Social Security reform has continued to raise doubts and widen the divide of consensus on the proper way to approach this issues. In yesterday's Washington Post, House Ways and Mean Committee Chairman Bill Thomas (R-CA) was quoted as saying the President's plan would be a "dead horse" upon arrival in Congress and that it "cannot, given the politics of the [Congress]" win passage.

Representative Thomas is one of the most powerful Republicans concerning tax policy and will have a huge influence on the fate of Bush's domestic agenda in his second term - particularly Social Security reform.

Also recently released, a new analysis by Center for American Progress/The Century Foundation senior fellow Ruy Teixeira on recent polls concerning Social Security. It seems not only has Bush lost Congress, but he continues to be unable to sell the American public on his policies.

Posted by Adam Hughes, 01:55:44 PM

Tuesday, January 11, 2005

Who Benefits From Tax Cuts?

Bush's first term was marked by the passage of excessive tax cuts. This year alone, the cost of those tax cuts will be $215 billion. Roughly $47 billion of that amount will go to the top 1 percent, or in other words a group of people whose average income is about $1 million per year. These tax cuts are not paid for, and are significantly more costly than the war in Iraq, Medicare drug benefits, and the projected social security shortfall.

It is no secret that our deficit and national debt are disturbingly high and not on track to be responsibly repaired any time soon. Adding to the deficit burden is the cost of these excessive tax cuts. How will the administration choose to deal with this? When the President releases his budget in early February, we may very likely see that his solution will be to freeze or significantly cut non-defense discretionary spending. Another way to view non-defense disretionary spending is to think of it as services for people paid for by the federal government. This means education, medicaid, medicare, child care, environmental protection, veterans' health care, housing and many other programs.

The administration and Congress seem to think that taking away from these programs to give $47 billion back to the rich this year is how to solve our fiscal problems by "growing the economy." Taking away necessary and vital programs used and depended upon by millions and millions of people in order to give a sizeable chunk of that money to the rich will not grow anything except the size of the gap between the rich and the poor in this country.

Check out this link for an informative editorial in today's Washington Post.

Posted by Becky Lewis, 12:06:17 PM

Friday, January 07, 2005

President Names Members of Citizen's Tax Panel
This morning President Bush announced nine members to his long-awaited tax panel that will recommend changes and simplifications to the U.S. tax system, picking former Senators Connie Mack and John Breaux to lead the panel. The president has highlighted tax reform as one of his top priorities in his second term.

Officially titled the "President's Advisory Panel on Federal Tax Reform," the other members of the panel include:
* former Representative Bill Frenzel, a Minnesota Republican and visiting scholar to the Brookings Institution;
* former Internal Revenue Service Commissioner Charles Rossotti;
* Liz Ann Sonders, chief investment strategist at Charles Schwab & Co. Inc.;
* University of Southern California Professor Elizabeth Garrett;
* former Federal Trade Commission Chairman Timothy Muris;
* Stanford University Economics Professor Edward Lazear;
* MIT professor James Poterba.

The panel will be charged with investigating changes and simplification to the tax code. Bush has given the panel until July 31st to report its recommendations. Click here and here to read more about the announcement of the panel members.

Posted by Adam Hughes, 12:02:54 PM

Thursday, January 06, 2005

New Jobless Claims Jump in Last Week of 2004
The Department of Labor reported today a suprising jump in new unemployment claims. For the last week in December, jobless claims rose by 43,000 to 364,000, the highest level since mid-September.

While unemployment claims tend to be more volitle around the holiday season, the four-week moving average for claims, which is more stable, also rose to 333,000.

The continuing surprising unemployment claims increases and disappointing job creation results continue to cast doubt on claims by the Bush administration that the 2001 and 2003 tax cuts are moving the economy forward and will eventually create move jobs.

Analysts predict the economy will add 175,000 jobs in December - slightly more than needed to to keep up with population growth - but it is certainly possible that number may not be met. The Labor Department will release December job numbers tomorrow.

Posted by Adam Hughes, 11:13:16 AM

Monday, January 03, 2005

Senator Graham's Perspective On Social Security

Retiring Senator Bob Graham has a valid reason for being concerned about social security reform: One dollar out of every 14 dollars in benefits paid by the Social Security Administration goes to a resident of the state he has served for the past eighteen years -- Florida. In a recent article written by Senator Graham he outlines the necessity of a social security safety net, and discusses many of the problems that come with President Bush's ideas for reform, including added risk for people collecting benefits, the embellishment of the crisis facing the system, and the fact that "our grandchilden" could be paying for this overhaul further down the road.

To read the article, titled "Save Social Security From the White House," click here.

Posted by Becky Lewis, 06:15:26 PM

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