Taxes, Debt, Spending

Commentary & Community

New Jersey Millionaire Tax Fails

Governor Phil Murphy pushed hard to impose a new tax on millionaires in New Jersey. But on Sunday he signed a budget bill into law without the tax, which kept the government open but dealt the governor’s progressive agenda a defeat.

 

The governor was pushing to increase the tax rate on income over $1 million from 8.97% to 10.75% as part of an overall spending plan for the state. Legislators balked at this tax increase, however, saying that the state already had an overly high tax burden. They removed the governor’s millionaire tax from the budget, and sent it to him for his signature. Gov. Murphy decided to sign the bill without his tax increase. Vetoing the bill would have shut down the state government.

 

Gov. Murphy is a Democrat and the state legislature is controlled by Democrats. However, the governor has pursued a more liberal agenda than many legislators are comfortable supporting. He has advocated legalizing marijuana for recreational purposes, for instance, which failed. This millionaire tax was another proposal that went too far for Democratic lawmakers, and they dealt the governor another defeat on it.

 

The removal of the millionaire tax was noticed by President Trump, who tweeted his approval.

 

Do you think that there should be a special tax rate on income over $1 million?

Sanders Proposed Canceling Student Loan Debt

In his second campaign for the presidency, Sen. Bernie Sanders thinks he has an issue that will attract the votes of millennial voters – student loan debt forgiveness.

 

Under legislation that Sen. Sanders plans to introduce, nearly all individuals who have taken out student loans would see their debt wiped out. His plan includes:

  • Complete forgiveness of outstanding debt for any student loans made, guaranteed, or insured by the federal government;
  • Federal purchase and forgiveness of outstanding private loan debt upon application by the person who incurred the debt;
  • Providing new student loans through the federal government and capping these loans’ interest rates at 1.88%;
  • The elimination of tuition at public colleges; and
  • New subsidies for low-income students attending private colleges.

 

Under this plan, there would be no limits on eligibility based on family income. To pay for this $2.2 trillion plan, Sen. Sanders proposed a new tax on Wall Street transactions.

 

Sen. Sanders says that his plan will be Wall Street bailing out the average American. He argues that debt-free education should be something that every American is entitled to have. Opponents note that his plan would benefit the rich as well as the average American, and would be extremely expensive.

 

Do you think that the federal government should forgive all student loan debt, regardless of the income of the borrowers? Should public universities and colleges be tuition-free?

Rep. Massie Won’t Let Disaster Aid Pass without a Vote

After months of wrangling, there is bipartisan consensus about a disaster aid spending bill. There is only one hang-up preventing its passage – the insistence of a few House members that it receive a vote.

 

The Senate passed a $19 billion aid bill last week before leaving town for Memorial Day recess. There is overwhelming support for the bill in the House of Representatives. But House members left town before they voted on the bill. House Speaker Nancy Pelosi is trying to get the bill passed through the House via unanimous consent during a pro forma session during recess. Such a process requires any House member present to approve. Rep. Chip Roy (R-TX) and Rep. Thomas Massie (R-KY) do not agree, and have objected to the Speaker’s attempts to pass the bill.

 

Rep. Massie justified his actions on the House floor, saying, “"If the Speaker of the House felt this was must-pass legislation, the Speaker of the House should have called a vote on this bill before sending every member of Congress on recess for ten days.”

 

This legislation contains aid for Puerto Rico, money for farmers, and funds for wildfires. An aid package has been the subject of partisan negotiations in Congress for months, and President Trump has weighed in on the subject, too. The president wanted funding for a U.S.-Mexico border wall included in any disaster aid bill and, at times, suggested that Puerto Rico not receive any aid.

 

These differences were worked out in the Senate, with the aid bill passing by a vote of 85-8 on May 23. Most Republicans and Democrats in the House are expected to support the bill, and President Trump has indicated he will sign it.

 

The Senate vote did not leave enough time for the House of Representatives to consider the bill prior to its members leaving for recess. Since Rep. Massie and his allies are preventing the bill from being considered while most members are out of town, it means that its passage will have to wait until recess is over in June. Speaker Pelosi is blasting these members for cruelty. However, Rep. Massie has tweeted that “passing an unbudgeted $19 billion spending bill without a vote of Congress is legislative malpractice.”

 

Do you think that it is wrong for Rep. Massie to insist that a $19 billion aid package receive a formal vote by the House of Representatives?

Deep Dive: Entitlement Programs

Congress is in the thick of budget season, determining how the federal government will spend dollars both borrowed and taxed. A big part of total federal spending is for entitlement programs. With the House of Representatives now controlled by Democrats and the Senate and presidency controlled by Republicans, we may see a more contentious budget process than we have seen in the past two years. Entitlement programs make up a large portion of federal spending. That means there may be a spirited discussion about the future of programs such as Medicaid, Medicare, or Social Security.

 

What’s A Federal Entitlement?

 

The Office of Management and Budget defines an entitlement program as “a program in which the Federal Government is legally obligated to make payments or provide aid to any person who, or State or local government that, meets the legal criteria for eligibility.”

 

In other words, if someone meets certain conditions, that person can receive benefits from a federal entitlement program. This could be a program like Social Security, which has an age qualification and a requirement to have paid into the program, or Medicaid, which requires a medical condition and a low income to qualify for benefits.

 

Here are some of the major entitlement programs:

  • Social Security
  • Medicare
  • Medicaid
  • Supplemental Nutrition Assistance Program (SNAP)
  • Supplemental Security Income
  • Unemployment compensation
  • Federal and civilian employee retirement benefits
  • Veterans’ benefits
  • Children’s Health Insurance Program
  • Student loans
  • Deposit insurance

 

The design of these programs also create a legal obligation on the federal government to provide benefits to everyone who qualifies. If someone is turned down but still thinks that he or she meets the qualifications outlined in the law, that person can go to court to obtain the benefit. This does not mean that the federal government cannot change eligibility or even end entitlement programs, but such changes must happen through the legislative process.

 

How Entitlement Programs Are Funded

 

As discussed in another Deep Dive, many government programs are funded by the appropriations process. Every year, Congress passes and the president signs spending bills that pay for federal government operations. Appropriated entitlements are funded through this process. These include Medicaid and some veterans’ programs.

 

Most entitlement programs are funded through mandatory spending, however. This is when the law authorizing the program sets the spending for the program on an ongoing basis. Programs authorized in such ways do not have to go through the yearly spending process, and continue to operate even when there are government shutdowns.

 

While there are some entitlement programs that are funded through the appropriations process, and there are some non-entitlement programs that are funded through mandatory spending, in general mandatory spending is used for entitlement programs.

 

To pay for this spending, Congress and the president can raise taxes or borrow money. If they want to slow down spending increases for entitlement programs, they could also change the eligibility requirements. That would reduce the amount of money being spent every year on these programs. Some of these options include raising the age at which someone could receive Medicare or Social Security, reducing the benefits offered by Medicaid, adjusting how the inflation increase for federal retirement benefits is calculated.

 

What This Means for You

 

As discussed in a previous Deep Dive, the federal budget deficit is growing. It is expected to continue growing substantially in the future as federal spending rises. The Congressional Budget Office projects that mandatory spending for entitlement programs is a large part of this projected spending growth.


The projected growth of the deficit will mean, at some point in the future, that Congress and the president will face hard choices about what to do regarding entitlement programs. If enacted, these changes would affect current people who receive benefits from these programs or those who are anticipating receiving benefits.

 

 

 

 

Deep Dive: The Appropriations Process and Government Shutdowns

With the longest government shutdown recently behind us, some may think that it’s too early to start talking about another one. But the budget process for the next fiscal year has begun this week. How this turns out will determine if we’ll see a government shutdown again in November or December.

 

During the recent shutdown, there was a lot of news reporting about why the government shuts down and the process for re-opening it. There was even some confusion about what it means for the government to “shut down.”

 

A previous Deep Dive examined the budget process that talks about the overall spending blueprint for the federal government. This Deep Dive will discuss the specific part affecting spending – the appropriations process. This is key to understanding when and why the federal government shuts down.

 

What Happened Recently

 

With the signing of House Joint Resolution 31, President Trump has averted another government shutdown. This avoids a repeat of the recent partial government shutdown that occurred from December 21, 2018, to January 25, 2019. While called a “shutdown,” in reality much of the government kept operating. Government employees working in capacities deemed “essential” had to work. Those in “non-essential” positions could not do any work.

 

Like every shutdown in the past, this one occurred because Congress and the president could not agree on appropriations, or spending, bills. These shutdowns occur when either Congress fails to pass spending bills to keep parts of the government open or the president vetoes these spending bills.

 

The Appropriations Process

 

Article I, Section 9, of the U.S. Constitution states: “No money shall be drawn from the Treasury, but in consequence of appropriations made by law.”

 

Federal government spending is divided into two categories:

  • Mandatory: Programs authorized by Congress that operate outside the regular spending process are entitlement programs, and their spending is deemed “mandatory.” For Social Security, Medicare, and Medicaid, anyone who meets certain qualification is entitled to benefits. Funding for these programs does not have to be authorized yearly by Congress, although the eligibility and payment rules can be changed.
  • Discretionary: To pay for other government activities, ranging from military operations undertaken by the Defense Department to operating national parks to paying congressional staff, Congress must pass 12 appropriations, or spending, bills. These bills operate on a fiscal year basis. If they do not become law, funds cannot be drawn from the U.S. Treasury to pay for the government operations they cover.

 

Appropriations Bills

 

The 12 appropriations bills that should be passed by Congress every fiscal year (October 1 through September 30) are:

  • Agriculture
  • Commerce/Justice/Science
  • Defense
  • Energy and Water
  • Financial Services
  • Homeland Security
  • Interior and Environment
  • Labor/Health and Human Services/Education
  • Legislative Branch
  • Military/Veterans
  • State/Foreign Operations
  • Transportation/Urban Development

 

You can see the progress of the Fiscal Year 2019 appropriations bills through Congress here.

 

The number and title of these bills can be changed by Congress. After the 2001 terrorist attacks, Congress re-organized the appropriations process, which at that time had operated with 13 appropriations bills.

 

Consolidated Appropriations/Continuing Appropriations/Omnibus Appropriations

 

While the spending process is supposed to proceed with the 12 bills being passed separately and signed into law by October 1 of each year, this almost never happens. In fact, since 1977 (when the current spending system was put in place), Congress has passed all of the appropriations bills on time in only four years. The last time it did this was 1997. The usual pattern is that Congress passes some, but not all, of the bills to be signed into law by October 1.

 

When this happens, Congress can take a variety of steps to avoid a government shutdown. It can pass a resolution for continuing appropriations, which fund the government for a specified period of time at the level of the previous fiscal year. During this time, it can then pass a consolidated appropriations act, which combines two or more appropriations bills. An omnibus appropriations bill generally wraps all the outstanding appropriations bills into a single act for the rest of the fiscal year.

 

If special spending needs arise during the fiscal year, Congress can also pass a supplemental appropriations bill, which provides funding more money than what was contained in the original spending bill.

 

The 2018-2019 Government Shutdown

 

Prior to the beginning of Fiscal Year 2019 (which began on October 1, 2018), Congress had only passed these appropriations bills:

  • Defense
  • Energy and Water
  • Labor/Health and Human Services/Education
  • Legislative Branch
  • Military/Veterans

 

Continuing resolutions funded the government agencies covered by the other appropriations bills through December 21. President Trump signaled his opposition to signing any spending bills that did not contain funding for a wall on the U.S.-Mexican border. As a consequence, the agencies not covered by the already-passed appropriations bills were shut down on that date.

 

The parts of the government that were covered by these spending bills could continue to operate as normal, however. Since the Legislative Branch appropriations bill was signed into law, congressional staffers could continue to be paid their salary. So could employees of the Energy Department, Defense Department, the Labor Department, the Department of Health and Human Services, and the Education Department.

 

When President Trump signed House Joint Resolution 28 on January 25, this reopened the portions of the federal government that were shut down until February 15. The signing of House Joint Resolution 31 by President Trump funds the federal government through the end of Fiscal Year 2019, averting any further government shutdowns until then.

 

What This Means for You

 

Because of the agreement that funds the government through the end of this fiscal year, there will be no more government shutdowns until at least October 1. However, if Congress and President Trump cannot agree on spending bills for the next fiscal year by then, they will be forced to resort to a short-term funding measure (a continuing resolution) or the government will shut down. With the House of Representatives being controlled by Democrats and the Senate and White House controlled by Republicans, the prospect of a spending disagreement is relatively high. For those who want to predict whether a government shutdown will occur, keep watching the annual spending bills that are supposed to be moving through Congress during the summer. If some of these bills have not been approved by both house of Congress and signed by the president in September, then there is a greater chance of a government shutdown in October through December.

 

 

 

 

Deep Dive: The Budget Process

President Trump released his annual budget this week, which has led to many news stories about how he plans on cutting certain programs or changing the way the federal government works. President Trump may indeed have ideas about how the federal government should spend money, but he cannot do anything alone. The budget he released is merely the official start of the budget process.

 

The process for determining how much money the federal government will spend in the next fiscal year will take until at least October, more likely longer. There are many steps that Congress must take between now and then until we know how much money individual departments or agencies will receive.

 

The President’s Budget

 

While the law states that the president must submit his budget by the first Monday of February, in many years presidents submit them later (just as President Trump has done this year). The president’s budget has a few parts:

  • Recommendations on spending for the next fiscal year (which runs from October 1 through September 30)
  • Proposals for major policy changes that have budget implications, such as reforms to programs like Social Security or Medicaid
  • Projections for future spending levels, revenue collections, and budget deficits
  • Historical data on spending and revenue amounts

 

It is important to outline a few things that the president’s budget does not do:

  • It does set any spending. It merely recommends what the president would like to see spending levels set at.
  • It is not law. This is not the president announcing how spending will proceed in the next fiscal year. If he recommends the elimination of a certain program or cuts in another program, these eliminations or cuts will not happen unless Congress agrees.
  • It does not bind Congress to do anything. The president’s budget is delivered to Congress, but Congress does not have to adopt any of it. In fact, Congress routinely ignores it.

 

So why is the president’s budget resolution important? Its importance lies in laying out the president’s overall vision for federal spending. It indicates the programs he thinks are important, those he thinks should be cut (or eliminated), and often outlines a path towards a balanced budget.

 

However, as a practical matter, the president’s budget resolution does not directly affect spending. It may indicate that, as Congress finishes up its spending process (described below), the president may veto spending bills that deviate from his priorities. Even that is not necessarily true, however, as negotiations over actual spending bills later in the year often ignore the president’s budget priorities in favor of more immediate concerns.

 

President Trump’s Fiscal Year 2020 budget proposal, released on March 11, 2019, can be found here.

 

Congressional Budget Resolutions

 

Once the president releases his budget, the House and Senate Budget Committees consider them. The Congressional Budget Office (CBO) also analyzes the budget. The committees consider the CBO analysis and are supposed to release their budget resolutions by April 1. The full House and Senate then consider these resolutions and adopt them, usually with amendments, by April 15.

 

The adopted budget resolutions are not laws, so are not subject to presidential veto. However, they do set the funding allocations that the appropriations committees in each house use to set their spending bills. These committees, described in more detail below, set the actual spending levels for the fiscal year for discretionary government programs (that is, for programs that are not entitlements such as Social Security or Medicaid).

 

While passing a budget resolution is helpful in setting a federal spending blueprint, it is not mandatory. In fact, in Fiscal Years 2011, 2012, and 2013, Congress did not pass a budget resolution. When that happens, the prior year’s budget resolution sets the spending blueprint that appropriations committees follow.

 

These budget resolutions can also contain “reconciliation instructions.” These are instructions to committees to make changes to the law that have budget implications. The reconciliation process is not subject to a Senate filibuster, and must be considered on a faster timeframe than other legislation. That makes it a useful tool to enact policy that does not have strong bipartisan support.

 

The Appropriations Process

 

The House and Senate Appropriations Committees are the committees that actually set spending levels for discretionary government programs. These committees each have 12 subcommittees that use the budget resolution allocations to determine how much government departments and agencies spend.

 

These 12 appropriations bills are supposed to be completed by Congress and signed by the president by the beginning of the fiscal year, October 1. That rarely happens. This leads to a variety of maneuvers to fund the federal government for temporary time periods or, failing that, a government shutdown.

 

What Does This Mean to You?

 

The budget process is how the government determines how much it will spend on the programs it administers. It also helps determine how much the deficit will be and how much the government will add to the national debt. If this process breaks down due to disagreement between the President and Congress, it could also lead to another government shutdown. Since President Trump has just released his budget, it remains to be seen what will happen with spending, the deficit, and a possible government shutdown this year.

 

 

 

Deep Dive: The Budget Deficit and Debt

Consider just how large the U.S. economy is – all the products and services that are produced in a single year. Now consider that the national debt – the total amount of debt owed by the federal government – exceeds the total yearly output of our economy.

 

That’s a lot of debt, and it’s caused by yearly budget deficit spending.

 

With news that the current year’s budget deficit increased 77% over the past year, there is renewed attention in Washington, D.C., to federal spending. The annual budget process is also underway, which means even more talk about deficits and debt. So what are deficits, debt, and how are they related? And what about the trade deficit?

 

The Budget Deficit

 

Simply put, the budget deficit is when the federal government spends more than it receives in revenue in one fiscal year. The current fiscal year began on October 1.

 

The Treasury Department recently released spending data for the first four months of this fiscal year.

  • Total money received by the government was $1.111 billion.
  • Total spending, however, was $1.421 billion.
  • This leads to a budget deficit of $310 billion.
  • This compares to a deficit of $176 billion during the same time period last year, or a $135 billion increase.

 

The Congressional Budget Office estimates that the national debt will reach $897 billion this fiscal year.

 

For a few years in the late 1990s, the federal government had a budget surplus – it spent less than it received in revenue. In the years since (and many of the years prior), the government runs a budget deficit.

 

The National Debt

 

Budget deficits lead to debt because the government borrows money to pay for yearly deficit spending. The national debt is the total amount of money that the federal government owes. This is the money it borrowed to finance the yearly deficits. This debt is, in essence, the accumulated total of the budget deficits run by the federal government.

 

The government finances this debt in two ways.

  • Borrowing. This is done by selling bonds to investors who are promised a certain rate of interest.
  • Issuing debt to government trust funds that have surpluses. For instance, in years past the Social Security Trust Fund routinely collected more money than it paid in benefits. The Treasury then used that money to finance deficit spending, issuing notes that promise to repay what it borrowed.

 

As of March 7, 2019, the total federal debt was $22.029 trillion. The national debt has grown dramatically over the past decade. On September 30, 2008, the debt stood at $10.025 trillion.

 

The Treasury Department releases up-to-date figures on the national debt here.

 

Comparisons to Gross Domestic Product

 

The Gross Domestic Product (GDP) is the sum total of goods and services produced in the U.S. economy. The US. GDP in 2018 was $20.891 trillion.

 

Some observers find it useful to compare the yearly deficit and total debt to the GDP, since this gives an idea about deficit spending and debt in terms of our economic size.

  • In 2018, the budget deficit equaled 3.8% of total economic activity. During the Great Recession, the budget deficit had equaled 9.8% of total economic activity (in 2009).
  • In the last quarter of 2000, the national debt equaled 54.2% of the yearly economic activity. In the third quarter of 2018, the debt equaled 104% of the yearly economic activity.

 

The Trade Deficit

 

The trade deficit has also been in the news recently, with reports that it hit the highest level since 2008. This deficit does not involve government spending; instead, it is the gap between the amount of goods and services exported by businesses in the United States and the amount imported for consumers in the United States.

 

The federal government labels this the “goods and services deficit,” although it is generally known as the trade deficit.

 

In 2018, the trade deficit reached $621 billion. That is an increase of $68.8 billion from 2017’s deficit, which was $552.3 billion.

 

What Does This Mean for You?

 

Ultimately, the national debt must be paid. Besides the question of paying back the actual debt, interest payments on the debt replace spending that could go to other programs. The Congressional Budget Office sums up the problems of high long-term debt: “High and rising federal debt would reduce national saving and income, boost the government’s interest payments, limit lawmakers’ ability to respond to unforeseen events, and increase the likelihood of a fiscal crisis.”

 

The solution to these long-term problems is to raise taxes, cut spending, or default on the debt (or a combination of two or three of these options). Any of these options will affect every American, since we all pay taxes, rely on government services, and depend on a sound financial system.

 

The annual budget process helps determine the annual deficit and plays a large role in determining the trajectory of future debt. This process has just begun with the release of President Trump’s budget proposal.

Border Security Deal May Avert Government Shutdown

Democrats and Republicans in Congress have agreed on principles of a border security package that would pave the way for bipartisan support for a bill that would fund the federal government. This would stop a looming government shutdown and provide the government with money to operate through the end of the fiscal year. The only question that remains is if President Trump will support it.

 

Under the proposal, the funding bill will contain $1.375 billion for 55 miles of border fencing and over 40,000 slots in immigrant detention facilities. There is also another $1.7 billion for other border security measures. Democrats had been pressing for a cap on slots in interior immigration detention facilities, but this did not make the final cut.

 

President Trump has pushed for $5 billion in funding for a wall or other border barrier. While this deal does not contain full funding for the president’s request, it does contain funding to begin construction.

 

Currently, the federal government is staying open because Congress passed a temporary funding measure that the president signed. That funding runs out on February 15. Congress has time to work out the details and pass a long-term funding measure prior to this date. If the president vetoes it, however, that would possibly lead to another government shutdown unless Congress overrode his veto.

 

Do you support the plan to fund 55 miles in border fencing? Do you think that President Trump should veto the bill because it does not contain full funding for his border wall?

Democratic Tax Proposals Target the Rich

The Democrats seeking the 2020 presidential nod are betting that the road to the White House is paved with high tax rates for the wealthy. At least, that is how they are designing their presidential campaigns.

 

With high-profile Democrats beginning to announce their candidacies or explore the option of running for president, there is competition to design a plan to tax the rich that will make a candidate stand out in the Democratic primaries.

 

Sen. Elizabeth Warren wants a “wealth tax” on households with a net worth over $50 million. Sen. Kamala Harris wants to target the rich for higher taxes to pay for a tax credit for households making less than $100,000 a year. Sen. Bernie Sanders would hike the estate tax and lower the number of people who are exempt from it. All three of these senators are running or expected to run for president.

 

This desire to impose high taxes on the rich is not limited to presidential aspirants. Rep. Alexandria Ocasio-Cortez has also said that she wants to see a 70% marginal tax rate on incomes over $10 million.

 

While each give differing justifications for their proposals, in general they support these taxes on the rich as a way to reduce the concentration of wealth in the hands of a few. They say that tax policy should break up this concentrated wealth and use the revenue to fund programs, especially services for the lower and middle classes.

 

Opponents counter that these proposals are simply class warfare. They say that hiking taxes in this way would discourage work and wealth creation, which would hurt the economy and kill jobs.

 

These tax plans are designed to appeal to the more liberal part of the Democratic coalition. It remains to be seen if they will have broader appeal as the Democratic primaries approach next year.

 

Do you think that the federal government should dramatically increase tax rates on wealthy Americans?

House of Representatives Votes to Hike Federal Employee Pay


With federal employees returning to work this week after the partial government shutdown, the House of Representatives passed legislation to increase their pay.

Here is the description from VoteSpotter:

 

HB 790

Increase federal employee pay

To increase the base rate of pay for most federal civilian employees by 2.6%. This pay raise would not apply to the vice president or most appointees made by the president.

Passed 259-161 on January 30

 

Rep. Gerald Connolly, a Democrat from Virginia, sponsored this legislation. All the Democrats voting supported it, while the majority of Republicans opossed it. It remains to be seen if the Republican-controlled Senate will consider it.

 

Do you support federal employees receiving a 2.6% pay raise?

Estate Tax Repeal Introduced in Senate

Some call it the estate tax. Others label it the death tax. Whatever name it goes by, the federal tax levied on the transfer of someone’s estate after death a popular topic of discussion in Congress. There has long been a move to repeal it, and legislation will continue that effort during the new session of Congress.

 

Senator John Thune (R-SD) has introduced S. 215, a bill to repeal the estate tax. Twenty-eight senators, all Republicans, have cosponsored it. The current estate tax rate is 40%. The 2017 tax cut legislation raised the amount of an estate that is exempt from this tax to $11.4 million for individuals.

 

When Republicans took control of Congress after the 1994 election, repeal of the estate tax (which they labeled as the “death tax”) was a top priority. The tax cut legislation signed into law by George W. Bush phased out the estate tax, and eliminated it entirely for one year. When those tax cuts expired, however, the federal estate tax came back, too. Farmers have pushed hard for a repeal, saying that the estate tax forces them to break up their farms or go through costly planning to structure their farms to avoid the tax.

 

Supporters of repealing the estate tax point to studies showing that it harms economic growth. They note that it taxes income twice – once when it’s earned and again when it is passed to heirs. They also contend that the tax is easily avoided if people structure their estates in the right way, but that this avoidance is costly and harmful to the economy. Opponents of a repeal say that it helps stop the accumulation of wealth from being passed from generation to generation, something that entrenches income inequality.

 

Do you think that the estate tax should be repealed?

Senate Votes Fail to End Government Shutdown

Senators considered dueling plans to end the partial government shutdown on Thursday. Republicans offered President Trump’s path to re-open the government while Democrats presented their proposal. Neither side received enough votes to pass the legislation, leaving negotiations between Senate leaders ongoing.

 

Senate Majority Leader Mitch McConnell (R-KY) offered an amendment that would have provided $5.7 billion for a border wall and extended protections for illegal immigrants covered under the Deferred Action for Childhood Arrivals (DACA) program. The Senate voted 50-47 to invoke cloture, or end debate, on this proposal. The measure needed 60 votes to move to a final vote, so it failed. Republican Senators Tom Cotton of Arkansas and Mike Lee of Utah joined the Democrats in voting “no.”

 

After the Senate failed to invoke cloture on the Republican measure, it considered a Democratic plan to re-open the government through February 8th. This proposal did not have funding for a border wall. The Senate vote of 52-44 also failed to reach the 60-vote threshold to close debate. Republicans Lamar Alexander of Tennessee, Susan Collins of Maine, Cory Gardner of Colorado, Johnny Isakson of Georgia, Lisa Murkowski of Alaska, and Mitt Romney of Utah joined the Democrats in voting for this proposal.

 

Senator McConnell continues to meet with Senator Chuck Schumer (D-NY), the minority leader, to negotiate a deal that would re-open the federal government and gain enough bipartisan support to pass the Senate.

 

Do you think that members of Congress should re-open the government temporarily while Congress and the president negotiate over a border wall? Or should the government remain shut down until the border wall is funded?

Family Leave Tops Gillibrand’s Presidential Platform

Kristen Gillibrand, New York’s junior senator, is running for president. She is betting that paid federal family leave is her key to gaining the White House.

 

Getting ready to announce her candidacy on “Late Night with Stephen Colbert,” Sen. Gillibrand previewed her campaign platform. One of her highest priorities is a federal policy of mandatory paid family leave, something that she has championed while in the Senate.

 

Under Sen. Gillibrand’s proposal, a new federal program would pay workers who take up to 12 weeks of family leave in a year. This leave could be used to deal with health conditions, pregnancy or childbirth, and caring for family members. The federal government would pay 66% of the parent’s monthly wages, financed by a tax on both individuals and businesses. A new federal agency, the Office of Paid Family and Medical Leave, would be created to administer the program.

 

Supporters of this idea argue that this would promote people entering the workforce who are of child-bearing age, since they would be guaranteed income if they have children. They also note that the U.S. is the only industrialized nation without such a leave guarantee, so it is time that we join the rest of the world in helping working parents. Opponents point out that this would involve a large tax hike on both workers and businesses. They also say that it would hurt smaller businesses who would lose employees when they are needed for work.

 

Sen. Gillibrand’s family leave legislation never received a hearing in the Senate when she introduced it in the previous session of Congress.

 

Do you think the federal government should impose a tax on employees and employers to pay for a federal paid family leave program?

Government May Shut Down over Border Wall Dispute

In what is becoming a semi-regular situation, the nation is facing the possibility of a government shutdown. The issue that may hold up the passage of legislation to keep the government open is also a familiar one – a border wall with Mexico.

 

When the fiscal year ended on October 30, only a few of the necessary government funding bills had been passed by Congress and signed by President Trump. The remaining portions of the government, including the Departments of Justice, Homeland Security, and the Interior, are operating under short-term funding legislation that expires on December 7.

 

President Trump has said that he wants a long-term spending bill to include money for a U.S.-Mexico border wall. Democrats are refusing to go along with this idea. Instead, they are supporting an additional $1.67 billion for border security measures.

 

If President Trump continues to insist that this is inadequate, he could veto legislation to keep the government open past December 7. That would lead to departments deemed “non-essential” to close. Any federal employees in these departments would be on leave without pay, although Congress usually appropriates back pay once the shutdown is over.

 

Senate Democratic Leader Chuck Schumer and the incoming Speaker of the House, Nancy Pelosi, are scheduled to meet with the president on Tuesday. No Republican members of Congress have been invited. It is possible that this meeting will lead to a deal that would avoid a government shutdown.

 

Do you think that the President should veto any funding bill that would keep the government open but not fund a border wall?

Cory Booker: Raise Estate Tax to Fund Opportunity Accounts for Kids

 

New Jersey Senator Cory Booker thinks that he has a way to address inequality in the U.S. He recently proposed a bill that would establish savings accounts for every child born in the U.S. To pay for these “Opportunity Accounts,” booker would increase a variety of taxes, including the estate tax.

 

Under Sen. Booker’s plan, every child would receive an “Opportunity Account” at birth, but after that the federal government would provide payments into that account depending on family income. Those with the lowest incomes would receive $2,000 a year. Those with higher incomes would receive a lesser amount. Children in families with incomes over 500% of the federal poverty level would not receive yearly payments. The money in these accounts could not be used until the child turns 18, and then it could only be spent on certain things such as college tuition or a home down payment.

 

To pay for the estimated $60 billion price tag, Senator Booker’s plan calls on the federal estate tax rate to be set between 45% and 65%. He would also increase the capital gains tax rate.

 

The idea behind these accounts is to provide low-income Americans with a nest egg that is similar to what wealthier Americans already enjoy. Senator Booker argues that this would allow wealth creation by these lower-income families, especially minorities. Supporters of the accounts contend that past government policies prevented minority families from taking actions that would have allowed them to accrue wealth, so this is a way to help right those wrongs.

 

Those opposed to Senator Booker’s plan argue that the high estate and capital gains tax will hurt the economy by taxing productive economic activity. They note that people will take action to avoid the very high estate tax rates, so his plan will likely need other sources of revenue to fund it.

 

Senator Booker’s plan is unlikely to be considered by the Senate. However, if Senator Booker runs for president in 2020, it may provide the basis for a national discussion on what government should do to help low-income families accumulate wealth.

 

Do you think the federal government should provide tens of thousands of dollars in an “Opportunity Account” for low-income children? Should the estate tax be increase to fund these accounts?

Taxes, Government Reform are Big Issues in Wisconsin Governor’s Race

Democrat Tony Evers is trying to unseat Republican Governor Scott Walker in Wisconsin. He thinks that a key part of his appeal will be changing the way the state government operates, from use of the state airplane to redistricting reform. Governor Walker, however, charges that these reform proposals are a way for Evers to distract voters from his proposals to increase taxes. 

 

Yesterday Evers unveiled a government reform package that would affect both the governor’s office and the legislature. Among his proposals were these:

  • Redistricting reform: Evers would like to see a nonpartisan commission draw the state’s congressional and legislative boundaries.
  • Economic development reform: Evers would eliminate the Wisconsin Economic Development Corporation, which provides subsidies to businesses. Instead, he would return the state’s economic development programs to the way they used to be run in the Commerce Department.
  • Inspector general: Evers would establish an inspector general to police the state government, but he was not clear on how this post would operate.
  • “Cool off” legislation: Evers proposed a “cooling off” period between the time that legislative committees consider legislation and the final vote on such legislation. He would like to see a 48-hour delay to give the public time to comment on bills.
  • Reduce use of the state airplane: Evers wants to see the state airplane used less, although he did not give details about the circumstances in which the plane should be used.

 

Governor Walker responded to these proposals by focusing on taxes. He claims that the election of Evers would lead to higher taxes, while Gov. Walker wants to lower taxes. One of the proposals being pushed by Governor Walker is to increase the homestead property tax credit and lower the age at which homeowners would be able to claim it. According to Gov. Walker, this would provide tax relief to homeowners on fixed incomes.

 

Evers has said that he supports “fair taxes,” but has also indicated he would support an income tax hike for some taxpayers, a higher gas tax, and a repeal of some tax cuts for businesses and farmers. Evers has given no detailed plan on what changes he would make to the state’s tax code.

 

Do you support giving a property tax break to senior citizens? Should an independent commission draw legislative and congressional district lines?

 

 

New Jersey Resumes Subsidizing Filmmakers

 

The Garden State is back in the film subsidy business. After a hiatus during Gov. Chris Christie’s term, the state’s subsidy program for filmmakers is being resumed. Proponents hail this as a way to jump-start New Jersey’s film industry, while critics paint it as a handout to wealthy film companies.

 

Governor Christie disliked film subsidies and worked with legislators to discontinue them when he was in office. The new governor, Phil Murphy, came into office stressing a variety of differences with Christie. Film subsidies is one of them. He recently signed a bill into law that revives state tax credits for film companies.

 

Under this legislation, the state can offer $85 million a year in tax credits to companies engaged in film production. For companies operating in northern New Jersey, they can receive a tax credit equal to 30% of their qualified production expenses. Companies in southern New Jersey will receive a credit of 35%. Digital media are also eligible for these credits, but at a 20% or 25% rate. Companies with a diversity program can receive even more state aid.

 

These credits will be applied against a company’s tax liability. Unlike in some states, these credits are not refundable – that is, a company will only receive them if they have a tax liability. Some states provide “tax credits” even if companies do not owe state taxes, essentially turning the credits into payments by the state to the production companies. The New Jersey credits will be transferable, however, meaning that production companies that don’t use them can sell them to other companies that do owe taxes.

 

Gov. Murphy and legislators who support this tax credit program say that it is vital to attracting film production to New Jersey. They say that other states offer companies these credits, so New Jersey must do so, too, if it wants to have a strong film industry. Opponents point to numerous academic studies that conclude these subsidies produce little in the way of new jobs or long-lasting economic impact. They say that these subsidies are nothing more than corporate welfare for out-of-state companies that are not struggling economically.

 

This tax credit program will last for five years, then it must be renewed by the legislature.

 

Do you support states giving tax credits or other subsidies to film companies?

 

Wisconsin Will Collect Internet Sales Taxes, May Reduce Income Tax

 

The U.S. Supreme Court ruled in June that states can begin collecting sales taxes on Internet purchases. Soon after this ruling was announced, Wisconsin Governor Scott Walker said that his state would do so beginning in October. As a result, the state’s income tax rates may be going down.

 

In Wayfair v South Dakota, the high court held that a state could charge sales taxes for items purchased online from out-of-state sellers. A previous court decision said that states could not impose a tax on purchase made by their residents from out-of-state companies, but this ruling occurred prior to the widespread use of the Internet.

 

Many states, including Wisconsin, had long desired to tax these purchases but were held back by the earlier Supreme Court ruling. With the court changing direction, Wisconsin is embracing its opportunity to tax online sales. Governor Scott Walker says that this will not be a tax increase but will merely be treating all sales fairly, regardless of whether they are made in-person or online.

 

A 2013 state budget provision held that if the state began collecting online sales taxes, then the state’s income tax will automatically be cut to offset the new income. It is unclear how this provision will be implemented, but legislative leaders say they are willing to work with the governor to cut the income tax rate in response. One study of the potential effect from taxing online sales concluded that Wisconsin could see as much as $187 million a year in new revenue.

 

Do you support states collecting sales taxes on purchases made online by state residents?

 

California Soda Tax Ban Saves Local Taxing Powers

 

Governor Jerry Brown signed a bill in late June banning local governments from imposing soda taxes, but he was not happy about it. Many legislators who supported the bill were not very keen on it, either.

 

So why are soda taxes now banned in the Golden State? It all has to do with preserving the ability of local governments to raise taxes. The beverage industry was pushing a statewide initiative that would have made it more difficult for local governments to increase all taxes and many fees. In return for a ban on soda taxes, the beverage industry withdrew the initiative.

 

The initiative being proposed would have required that any local governmental body seeking to increase taxes and certain fees could only do so through a two-thirds vote. Then such a tax increase could only go into effect if it was approved by two-thirds of the voters. Any tax increase that would have been proposed under the state’s initiative system would also have had to receive approval by two-thirds of the voters under this proposal.

 

Governor Brown and legislators did not like such restrictions on local governments’ taxing power. They worked with the beverage industry to craft a compromise measure that would end the threat of local soda taxes. Prior to the law being signed, four municipalities in the state imposed such taxes.

 

Some legislators were glad to see the soda tax ban, but were displeased that such a ban would short-circuit the larger tax limitation measure. They said that this compromise bill ignored the voices of the more than one million Californians who signed petitions to place the tax limit measure on the ballot.

 

Those supporting the compromise bill said that the tax limit initiative would have crippled local governments’ ability to raise revenue. They said it was better to stop soda taxes rather than impose new limits on how local governments can increase other taxes.

 

Do you agree with California banning soda taxes? Should local governments be required to get approval from two-thirds of voters before they increase taxes or fees?

 

Congress Acts to Rescind $15 Billion in Spending

 

In Washington, Congress appropriates or authorizes money and the president has the authority to spend it. Or that is how it generally works. President Trump, however, has decided to exercise a little-used presidential power and ask Congress to reverse itself on spending.

 

In early May, President Trump’s budget director sent a letter to Congress asking it to rescind $15.4 billion in spending that the legislative branch had appropriated or authorized. This funding includes:

  • $5.1 billion from the Children’s Health Insurance Program (CHIP) that was never requested by states before the authorization to spend it expired on September 30, 2017
  • $4.3 billion from the Advanced Technology Vehicles Manufacturing Loan Program, a loan program that is no longer being used
  • $523 million from a loan program that was authorized under the Obama Administration stimulus package
  • $133 million from the Railroad Unemployment Insurance Extended Benefits program, which expired in 2012

 

The authority to request these rescissions is authorized under the 1974 budget law that governs the federal spending process. Under this law any member of Congress can introduce a bill to enact the president’s proposal, and Congress has 45 days to act. If it does not act, then the president’s proposal dies. The last time a president requested a rescission was President Bill Clinton in 2000.

 

On June 7, the House of Representatives passed HR 3, the Spending Cuts to Expired and Unnecessary Programs Act, by a vote of 210-206. This bill contains the rescission requests made by President Trump. The Senate Appropriations Committee is now considering this bill. Senate Majority Leader Mitch McConnell has said that he supports the president’s rescission request. Even with the slim Republican majority in the Senate, this bill is likely to pass if it is acted upon within the 45-day limit.

 

Do you support President Trump’s proposal to rescind $15 billion in federal spending? Or is the president being unfair in rescinding funding for children’s health insurance?

 

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