Blog: The Fine Print / Revenue & Spending

Commissioner Everson Testifies Before Finance Committee

Apr 6, 2005 by Guest Blogger

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.

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White House Aide Discusses Raising Payroll Tax Cap

Apr 6, 2005 by Guest Blogger

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.

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Senate Names Budget Resolution Conferees

Apr 5, 2005 by Guest Blogger

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.

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Watcher: April 4th, 2005

Apr 5, 2005 by Guest Blogger

Federal Budget
  • Despite Colorado's Disaster, More States Consider Restrictive Budget Rules
  • President's Tax Panel Hits the Road

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Grassley: SS Compromise May Be Necessary

Mar 31, 2005 by Guest Blogger

Yesterday President Bush travelled to Iowa to promote his plan to reform social security. Iowa is the 20th state Bush has visited to promote his plan, which the public is receiving with increasing doubt and skepticism. Notably Senator Charles Grassley (R-IA) -- who is also Senate Finance Committee Chairman -- said yesterday that there is room for compromise on the size of private incestment accounts. While President Bush is promoting a plan to divert four percentage points of the payroll tax into a private account, Grassley believes the amount is negotiable, and stated he plans to make compromise an issue when the Finance Committee meets on Social Security this summer. Grassley also noted that even though he is in favor of establishing these accounts, he does not believe they address the problem of social security solvency. He said, "I like personal accounts.... So you have personal accounts as an issue in and of themselves, and then over here, you've got the solvency problem. I want to deal with both of them." The Finance Panel is planning on holding Social Security hearings in April, however no dates have been set yet. For more details on Bush's visit to Iowa and recent Social Security happenings, click here. Also check this Economic Policy Institute briefing paper on how Social Security fits into the Bush budget. The paper, by Max Sawicky, is aptly titled "Collision Course."

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Where Do Your Tax Dollars Go?

Mar 30, 2005 by Guest Blogger

The National Priorities Project has compiled good state and local data on where your tax dollars go. This publication provides a detailed breakdown of how the government, on average, spent your tax dollars in 2004. There is data for each state and 193 towns, cities and counties. Also, click here to see NPP's assessment of how much the war has cost citizens financially, broken down by state.

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Both Sides Speculate About Private Accounts

Mar 29, 2005 by Guest Blogger

Following up on last week's Watcher article on Social Security, it appears that speculation among conservatives for private accounts continues to grow. Each week it seems more and more conservative economists and analysts break with the administration's view on personal accounts. To read about it, click here. Also, see this article in tompaine.com that discusses how millions of disabled workers, spouses, and child beneficiaries would be left out under the privatization plan. The article is by Nancy Cauthen of the National Center for Children in Poverty. Click here to read a Newsday article on the lobbying efforts of labor organizations on behalf of the Social Security program.

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All PART of the Game

Mar 25, 2005 by Guest Blogger

Click here to read an OMB Watch op-ed on the administration's Program Assessment Rating Tool (PART). The op-ed discusses that despite the existence of PART, budget decisions are guided more by politics and ideology as opposed to program results. Click here for more information on PART and the Program Assessment and Results Act.

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Support for Estate Tax Shaky in Congress

Mar 25, 2005 by Guest Blogger

Although no timetable is set for legislation yet, proponents of estate tax repeal will push this year to gather the 60 votes necessary to clear a measure repealing the tax. This is projected to happen despite widespread concerns about an exploding budget deficit; record-low levels of national revenue; very high potential future costs of Medicare liabilities, Social Security reform, and Alternative Minimum Tax reform; as well as the fact that Congress and the President are looking to further cut taxes. The House has more than enough votes to pass a permanent repeal measure, while the real fight would take place in the Senate to get a supermajority that would back repeal legislation. A new book on estate tax repeal is out, titled Death by a Thousand Cuts: The Fight Over Taxing Inherited Wealth. Written by Michael Graetz and Ian Shapiro, the book seeks to answer how the estate tax, which has been around since 1916 and is paid by less than the wealthiest two percent of Americans, was voted in 2001 to be phased out through 2010 with broad bipartisan support and almost no coordinated opposition. The authors of the book, as well as other supporters of the estate tax, believe that estate tax repeal is not only morally irresponsible (because the tax is extremely progressive) but also economically irresponsible. Len Burman, who is authoring a new report, "Options to Reform the Estate Tax," has noted that permanent repeal would result in both a static annual cost of about $50 billion in revenue, as well as a drop in charitable contributions of about $17 billion annually. He also notes in a recent Tax Policy Center Issue Brief that raising the exemption to $3.5 million would cut the number of farms and businesses liable for the tax by 75 percent, to just over 100, with only about 10 small businesses affected. Given our current deficits, Congress would be wise to consider reform options to the estate tax, as opposed to permanent repeal. When Burman's paper outlining reform options becomes available, it will be posted here.

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Social Security Administration Releases Annual Report

Mar 23, 2005 by Guest Blogger

The Social Security and Medicare Boards of Trustees released their 2005 annual report which states that "exhaustion" of the trust fund will occur one year earlier than predicted, or in 2041 as opposed to 2042. The report also finds that the amount of tax revenues taken in will fall below the amount the trust fund will pay out starting in 2017. The SSA originally stated this would happen in 2018. Now, they predict that the Social Security program will need to supplement trust fund receipts with general revenues in order to pay be able to pay people full benefits a year earlier. The new report also projects a Social Security shortfall of $4 trillion over the next 75 years. This number is up from the $3.7 trillion figure that economists and politicians have been quoting. Max Sawicky of the Economic Policy Institute notes that the Social Security crisis is not nearly as pressing as the problems being created by our large budget deficits, which were largely due to the administration's tax cuts. These deficits will hinder the government's ability pay for any and all of programs down the road, including Social Security and Medicare. The Congressional Budget Office estimates that in 2042, when the Social Security shortfall will supposedly be 1.37 percent of GDP, the overall budget deficit will be much greater than that --10.7 percent of GDP. Sawicky says, "While the administration tries to fiddle with a relatively small-scale Social Security shortfall, it is creating overall budget deficits that are burning a hole as far as the eye can see. Instead of focusing on a relatively small and distant problem, the administration would better serve the nation by fixing the much bigger and more immediate problem it has created." This is a sentiment echoed widely by economists and policy analysts, many of whom see the large costs of tax cuts and future skyrocketing costs of Medicare as much more serious problems. For more information see this Washington Post article and this report by the Center on Budget and Policy Priorities. For more from the Social Security Administration, click here.

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