April 26, 2017

The (Tab)ulation

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Tuesday, April 25, 2017 - 10:04 AM

Many elected officials in both parties have long called for tax reform, although they often differ on what tax-related issues need to be addressed.

As President Trump and members of Congress consider tax proposals to pursue this year, a new national survey by the Pew Research Center may provide some useful information -- and perhaps a surprise or two -- on what taxpayers themselves think about the tax system.

Supporting the general idea of reform, the survey found that 56 percent of the respondents viewed the federal tax system as unfair, up from 48 percent in early 2015. The survey had a 2.9 percent margin of error.

But the survey found little change in recent years in how people viewed their own tax burdens, and some lawmakers, media commentators and Trump administration officials might be surprised at how many people had no complaints about how much money they send to Washington.

“Just over half (54 percent) say they pay about the right amount in taxes, considering what they get from the federal government, while 40 percent say they pay more than their fair share,” the survey report says. Five percent thought they should be paying more.

Only...

Monday, April 24, 2017 - 12:26 PM

Congress is again down to the wire on spending legislation for the current fiscal year, which is already half over. Returning to Washington after a 2-week recess, lawmakers need to take action before a stop-gap measure expires at midnight on Friday.

The alternative would be a shutdown for much of the government, wasting tax dollars and further diminishing public confidence in elected officials’ ability to take care of their fundamental budgetary responsibilities.

This spending legislation should have been approved well before last Oct. 1, when Fiscal 2017 began. But Congress has only approved one of the twelve annual appropriations bills that are needed to keep the government running.

Instead, Congress has relied -- as it has in each year since 1997 -- on stop-gap measures known as “continuing resolutions” that generally continue funding for federal programs at current levels, regardless of changing needs and priorities. This reliance on temporary measures also make it difficult for federal agencies and departments to plan and work efficiently.

In addition, lawmakers now find themselves at the start of a new annual budget cycle without having completed their work on the last one.

Congress passed its first stop-gap measure for 2017 in late September, with only two days to spare...

Monday, April 17, 2017 - 12:22 PM

IRS Commissioner John Koskinen warned recently that funding constraints and staff reductions at his agency could result in fewer people paying their taxes and the government running higher budget deficits.

The full-time IRS workforce has shrunk by more than 17,000 since 2010, he said. Meanwhile, the agency’s workload has increased because more tax returns were filed and Congress made the tax system more difficult to explain and enforce.

“At well over 10,000 pages, our tax code is now the most complicated it’s ever been,” Koskinen said.

The partial budget plan that Trump released last month, however, called for cutting another $239 million in IRS funding in the coming fiscal year -- despite concerns that Treasury Secretary Steven Mnuchin had previously expressed about low IRS staffing and how it might reduce tax revenue.

Koskinen said in a speech this month that the IRS audited about a million people last year -- less than 1 percent of the individual returns filed and the lowest number of audits in...

Thursday, April 13, 2017 - 10:32 AM

Experts on the federal budget often warn that excessive federal debt could eventually lead to a fiscal crisis. But what would that actually involve, and how could Washington respond to such a crisis?

The Congressional Budget Office recently sought to answer those questions, among others, in a report following up on CBO Director Keith Hall’s testimony before a Senate Budget Committee hearing in February. CBO’s explanations underscore the importance of putting the federal budget on a more sustainable course.

The federal debt is already quite large by historical standards, equaling 77 percent of GDP, and the budget office has projected that under current law it will grow rapidly in the coming decade and beyond.

At some point, CBO warns in the new report, investors worried about the size and growth of the debt “might become less willing to finance federal borrowing unless they were compensated with high returns. If so, interest rates on federal debt would rise abruptly, dramatically increasing the cost of government borrowing.”

Unfortunately, interest payments...

Monday, April 3, 2017 - 11:17 PM

Many Americans are no doubt struggling to understand some of the latest news from Washington about the federal budget. That’s because elected officials in Washington are approaching their work on the Fiscal 2018 budget with some long-unfinished business: They have yet to agree on most of their spending plans for the current fiscal year.

That year is now more than half over. Congress has approved only one of the 12 regular appropriations bills that were supposed to have passed before Fiscal 2017 began Oct. 1. This is a poor omen for the 2018 budget work that is supposed to be completed in the coming months. It also raises the possibility of a costly government shutdown later this month.

Instead of getting more 2017 spending bills passed, Congress has been relying on stop-gap measures known as “continuing resolutions” that generally continue funding for federal programs at current levels -- regardless of changing needs, new priorities and the government’s growing debt.

In addition, the failure of Congress to make timely final budget decisions makes it difficult for federal agencies and departments to plan effectively, anticipate appropriate staffing levels and commit to important projects and...

Monday, March 27, 2017 - 9:57 AM

The Congressional Budget Office (CBO) has released an overview of certain tax breaks -- known as “tax expenditures” -- that can provide elected officials and the public with helpful information as President Trump and many lawmakers shift their focus to revamping the tax code.

“Tax expenditures, projected to total more than $1.5 trillion in 2017, cause (federal) revenues to be lower than they would be otherwise and, like spending programs, contribute to the deficit,” the CBO said in a recent blog post.

The Concord Coalition has long urged elected officials to reduce or eliminate many tax expenditures to help reduce the deficit while making the tax code simpler and more growth-oriented. Tax expenditures, however, receive far less public attention and congressional scrutiny than direct government spending.

“Current tax law includes an array of exclusions, deductions, preferential rates, and credits that reduce revenues for any given level of tax rates in the individual, payroll, and corporate income tax systems,” says the blog post by CBO analyst Joshua Shakin. “Some of these provisions are called tax expenditures because, like many government spending programs, they provide financial assistance for particular activities or to certain...

Thursday, March 16, 2017 - 4:30 PM

Today the federal debt limit will be reset at a level equal to the outstanding federal debt (roughly $19.8 trillion). The debt limit, which caps the government’s total borrowing authority, has been suspended since November of 2015.

Because the federal government is still running deficits, elected officials will need to once again raise or suspend the debt limit to enable the Treasury to cover federal spending obligations. Failure to raise the limit would do nothing to reduce these deficits or spending obligations – it would be akin to simply refusing to pay the credit card bill when it comes due and could have severe economic implications. (For more background, please see Concord's updated issue brief: Understanding the Federal Debt Limit.)

Thursday is not the day by which lawmakers must act. The Treasury Department has a number of so-called “extraordinary measures” it can deploy to postpone a default. These measures allow the Treasury to reduce intragovernmental debt, such as by temporarily delaying payments to federal employee retirement funds. This create additional borrowing room under the debt limit.

These extraordinary measures cannot...

Wednesday, March 15, 2017 - 11:39 AM

As a result of our nation’s demographics, Social Security is on an unsustainable path under current policy and needs to undergo reform. Fortunately, there are many bipartisan options available to consider, as the Congressional Budget Office (CBO) recently reminded lawmakers.

The Concord Coalition has long urged elected officials to make repairs on a program that is of vital importance to millions of American workers and retirees. The list of options discussed in a recent CBO blog post are a good place to start considering what could be done.

In recent years, CBO has highlighted troubling trends in the Social Security program, providing some indication of what is to come if current policies are left unchanged. The budget office says the costs of Social Security benefits are still projected to rise faster than both economic growth and federal revenue in the next few decades. This means we can expect a worsening of the cash deficits that the program is already experiencing.

According to CBO, longer life spans will result in current and future Social Security beneficiaries, in average, receiving benefit payments for...

Tuesday, March 14, 2017 - 8:58 AM

The Congressional Budget Office (CBO) analysis of the American Health Care Act (AHCA) estimates that relative to current law the House Republican health care plan will decrease spending by $1,219.1 billion and decrease revenue by $882.8 billion, leading to a total deficit reduction of $336.5 over the 10-year budget window from 2017 to 2026.

While it is important to consider the projected loss of health insurance for 24 million people, this post will look at the numerous fiscal risks of the legislation.

The biggest of these risks is also the AHCA’s biggest omission: the absence of any provisions to control overall health care costs, and not just federal payments for those costs.

Although the AHCA reduces federal spending on health care, it doesn’t necessarily reduce the “cost curve” of long-term health care inflation. Ultimately that is a problem because if health care inflation isn’t controlled, long-term health care spending growth will continue to drive up the cost of Medicare, make the Medicaid savings assumed in the legislation more difficult to achieve, and decrease the relative value of the tax credits meant to help people find affordable health care insurance in the non-group market.

The AHCA potentially makes long-term cost...

Friday, March 10, 2017 - 5:10 PM

In recent days, there have been questions raised about the credibility of the Congressional Budget Office (CBO). This is likely a pre-emptive rebuttal in case CBO produces politically problematic estimates of the American Health Care Act (AHCA) -- the House GOP proposal for replacing the Affordable Care Act (ACA). There is no reason, however, to doubt that CBO will apply its usual and critically important “objective, impartial, and nonpartisan” analytical standard in arriving at its AHCA estimates.

This is hardly the first time the budget office has been questioned by policymakers with political agendas. Democrats criticized it during the original debate over the ACA for underestimating the degree to which their proposals could control costs. Republicans similarly criticized CBO in the early 2000s for refuting their claims that tax cuts would spur sufficient economic growth to make them self-financing.

The CBO’s role, admirably maintained over several decades, is not to take sides but to...