Federal Budget & Tax

Federal Budget & Tax: News Blog Background

Thursday, April 28, 2005

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

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

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

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

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

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

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

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

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

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