
Moving Towards Long-Term Action on Tax and Budget Issues
by Guest Blogger, 12/4/2003
Our community must seize the initiative on tax and budget issues if we are ever to succeed in promoting what we stand for -- a fair, simple and equitable tax system that generates adequate resources to implement the government programs and services that Americans want. For the purposes of discussion, this paper lays out a call to action to develop a long-term, proactive strategy on federal tax and budget issues -- one that also directly confronts the negative perception of government programs and the continuous attacks launched by conservatives.
Download Full Version, Adobe Acrobat (.pdf)
src="/sites/default/files/budget/images/Tax_Budget_Call_files/image002.jpg" align=right hspace=12>
style='font-size:16.0pt;font-family:Arial'>Moving Towards Long-Term Action on
Tax and Budget Issues
Gary D. Bass, John S. Irons,
and Ellen Taylor
December 2003OMB Watch
Summary
As a result of huge federal
tax cuts, poor economic performance over the past 2? years, and rapidly growing
outlays for defense and domestic security, the federal budget situation has
deteriorated at an unprecedented rate. States are faced with an equally
bad fiscal situation. This picture is likely to be a long-term problem
and has enormous implications for the role of government in our civil society.
Over the past several years,
the public interest community has primarily engaged in short-term, defensive
battles on federal tax and budget issues. The conservative movement, on
the other hand, has continued to press its tax and budget agenda through
well-funded, multi-year, and multi-level campaigns. Our community must
seize the initiative on tax and budget issues if we are ever to succeed in
promoting what we stand for ? a fair, simple and equitable tax system that
generates adequate resources to implement the government programs and services
that Americans want. For the purposes of discussion, this paper lays out
a call to action to develop a long-term (say, 10-year), proactive strategy on federal
tax and budget issues ? one that also directly confronts the negative
perception of government programs and the continuous attacks launched by
conservatives.
Many conversations in which
OMB Watch has participated during the last few months, with advocates and
funders alike, suggest a broad convergence of opinion around the need for our
community to develop and put into place a long-term strategic effort that is
proactive ? to define and articulate in a concrete way what we are for, rather
than only what we are against. On the issue of what we do want, we may
have broad support from the public in three key areas: tax fairness, the uses
of public revenues for addressing domestic investments, and support for a
government that provides valuable services to its citizens.
One of the strengths of the
progressive network is the large number of nonprofit organizations at the
federal, state and local levels. By engaging those groups ? some who have
never participated in tax and budget issues, but are now seeing the need to do
so ? we can make progress in promoting a progressive, fair, sensible tax system
and a sustainable framework for support of needed and valuable social
investment.
OMB Watch has drafted this
call to action but does not seek to ?own? it. Instead, the plan is
offered to spark discussion and infuse the sense of urgency that we, and many
others, feel. The public interest community cannot be effective acting as
solo, disparate groups ? particularly when funds and resources are so limited.
It is our expectation that if there is energy for a longer-term proactive
campaign, various national, state, and local groups will emerge to provide the
necessary leadership.
To get the ball rolling, OMB
Watch plans on convening a strategy retreat to discuss the elements of a
long-term offensive initiative, discuss lessons learned from current tax and
budget battles at the state and federal level, begin creating a framework of
more specific tax and investment principles and policies, and identify some
immediate strategies to begin moving in this longer-term direction.
12.0pt'>
Arial'>Background
As a result of huge federal
tax cuts, poor economic performance over the past 2? years, and rapidly growing
outlays for defense and domestic security, the budget situation at both the
federal and state levels has deteriorated at an unprecedented rate. At
the federal level, record surpluses have turned into record deficits; and, at
the state level, governments have just faced their worst budget crises since
World War II, with every indication that the problems will be long-term.
In addition, at 16.5 percent of gross domestic product, federal revenue for
FY2003 was at its lowest level since 1959; and federal income tax receipts for
FY2003, at 8.6 percent, were at their lowest level since 1942.
style='font-size:12.0pt;font-family:Arial'>Figure 1: Federal Receipts,
1953-2003
Revenue is at lowest level since 1959
height=235 id="_x0000_i1025" src="/sites/default/files/budget/images/Tax_Budget_Call_files/image004.gif">
style='font-size:9.0pt;font-family:Arial'>Source:
href="http://www.whitehouse.gov/omb/budget/fy2004/pdf/hist.pdf">OMB, 2004
Budget, Historical Tables,
and CBO
Monthly Budget Review.
The combined federal and
state crisis is already affecting programs and services that many Americans
have taken for granted, from higher education to basic social services; from
the arts to the environment. It has all but ended serious congressional
debate on many critical issues such as the long-term fiscal stability of the
Social Security and health care systems. It leaves little hope for the
expansion of needed investments in basic research and infrastructure; and it
leaves states and localities ? often challenged with facing unfunded mandates
from new homeland security responsibilities and education initiatives ? holding
the bag.
Long-term Fiscal Situation
The immediate crisis pales
in comparison with the long-term picture. First, political exigencies
make it unlikely that Congress will significantly curtail federal spending
before the 2004 elections. Second, there will be significant pressure to
extend tax legislation, which, if enacted, will reduce revenue even more than
currently projected. Third, while low interest rates and tax rebates will
help the economy grow and create some jobs in the short-run, current fiscal
policy has created a long-term fiscal imbalance. The current period thus
represents the ?calm before the storm? ? the prelude to a deepening and
unsustainable deficit, lower national savings, a probable increase in interest
rates, and a slowing economy down the road, all in addition to painful cuts in
vital government programs and investments.
style='font-size:12.0pt;font-family:Arial'>Figure 2: Surplus/Deficit, as a
Percent of GDP, 2000-2050
style='font-family:Arial'>As baby boomers come of age, deficits explode
width=309 height=219 id="_x0000_i1026" src="/sites/default/files/budget/images/Tax_Budget_Call_files/image006.jpg">
avoid'>Source:
href="http://www.whitehouse.gov/omb/budget/fy2004/pdf/spec.pdf">OMB, The Budget
for Fiscal Year 2004, Analytical Perspectives, p. 43.
With the increased demand on
Social Security and medical care presaged by the upcoming retirement of
baby-boomers, there will be even more pressure to cut spending in other
areas. The Bush administration illustrated what amounts to a long-term
disaster in its FY 2004 budget. After 2013, when the baby-boom retirement
begins to accelerate, the deficit will soar to levels not seen since the height
of World War II.
According to the Bush
analysis, by 2050, the deficit would be more than 13% of GDP ? which many
believe is well beyond sustainable levels. The deficit will soar even
higher if Congress passes additional tax cuts, if Congress approves necessary
fixes to the Alternative Minimum Tax, if spending grows at current levels, if
there are various unexpected expenses, or if the economy doesn?t do as well as
projected.
The point is not to quibble
about the accuracy of the President?s analysis; rather, it is to draw attention
to the looming fiscal situation and to highlight its implications.
Who Will Define the Role of Government?
The reduction in federal
revenue is no accident, and reflects conscious policy decisions designed to
reduce the size of government. Recently, influential conservative Grover
Norquist asserted, ?I don't want to abolish government. I simply want to
reduce it to the size where I can drag it into the bathroom and drown it in the
bathtub.? Conservatives are very clear about the use of tax policy to
accomplish this objective ? in Norquist?s words, ?kill the taxes, and you kill
the government.?
Realizing the important
implications of reduced federal revenue, the public interest community has
valiantly defended against each new federal tax cut. Throughout the
appropriations and authorization process, issue-based groups work intensively
to protect spending in particular issue areas. Most are clear and united
about what they don?t want ? no more inequitable tax cuts that reduce needed
federal and state revenue and no more cuts in government services and programs,
especially those that benefit low-income and vulnerable populations.
There is much less clarity
and unity in voicing what we dowant for the overall budget, and
specifically for the tax system. Nonprofit organizations, progressive
voices, and civic leaders need to act now to formulate and communicate a
long-term vision of the role of government, so we may effectively compete with
the conservative vision. We need to build upon these ideas to develop
and support the tax and budget policies that support that conception. In
addition, we need to begin to implement a long-term, affirmative campaign based
on that vision.
Opportunity
The conservative vision of a
radically smaller government via tax cuts runs counter to public opinion.
There is consistent public support for increased spending on education and
health care, as well as for a broad range of programs that create opportunities
for everyone, foster healthy families and communities, protect the environment,
and build a strong and vibrant economy. While almost no one likes to pay
taxes, there is also compelling evidence that the majority of Americans see the
connection between taxes and desirable government services, and recognize an
obligation to pay taxes. The dissonance between the conservative vision
and what most Americans want and expect of their government will become even
more pronounced as the inevitable cuts in domestic programs deepen.
Moreover, the public does
not support a central conservative justification for tax cuts ? that government
does very little for ordinary people and wastes tax dollars on the wrong
people. A poll by Greenberg Quinlan Rosner Research conducted in October
of 2003 found that 75 percent of those polled disagreed with the statement ?I
don?t like paying taxes because the government doesn?t do anything for
me.? Additionally, 69 percent disagreed with a statement that ?I don?t
like paying taxes because government spends too much money on welfare and other
handouts.?
Furthermore, 84 percent
agreed that they ?don?t mind paying taxes because my taxes contribute to making
sure we have public schools, clean streets, public safety and a national
defense and a cleaner environment.? More generally, 82 percent agreed
they ?don?t mind paying taxes because my taxes are part of my contribution to
society as a citizen of the United States.?
There is, however, one
difficulty with this rosy picture of happy taxpayers ? 65 percent agreed with
the statement, ?I don?t like paying taxes because the government is too
wasteful and inefficient.? While the public supports a range of programs,
the public also has questions about government?s efficiency. This should
come as no surprise since policy officials, media outlets, and conservative
commentators overwhelmingly focus on stories about waste, fraud, and abuse in
government, rather than on what it does right.
This and other data show
that most Americans support the services and programs that
government can and ought to provide to its citizens, and that Americans are
willing to accept their obligation to pay taxes. Seizing the opportunity,
however, requires addressing the perception of government inefficiency.
Public opinion research also
consistently shows that the public believes the U.S. tax system should
guarantee that everyone ? rich and poor ? pays their fair share. As
conservative tax policy is increasing revealed as benefiting corporations and
the wealthy ? at the expense of increased tax burdens and less government
services for low- and middle-income Americans ? the opportunity beckons to
offer a competing vision of a fair, equitable, and simplified tax code.
To take advantage of this
opportunity, the public interest community must do more than advocate against
conservative tax and budget policies. Rather, it is imperative that we
begin to formulate and support an affirmative alternative vision ? one that
demonstrates the variety of ways in which government services and actions have
proved efficient and effective. The long-term vision must contain the
elements of a fair, efficient, and simple tax plan, in part to counter the
broad plans advocated by conservatives.
This will require a
long-term effort that includes national, state, and local voices. It will
require reaching out to new constituencies. It will require all groups to
work beyond specific issue areas and pursue a common long-range vision and
strategy.
To summarize:
- Due to revenue reductions and demographic changes, government services and programs at the national, state, and local levels will remain under threat.
- The debate about federal tax and budget policy will continue over at least the next decade and will highlight radically different visions of the future of the United States.
- Surveys show that most Americans support government services and programs and that Americans are willing to accept their obligation to pay taxes.
- This presents an opportunity for the public interest community to propose an inclusive positive agenda.
- style='font-family:Arial'>Issue: Taxpayers want a system built on simplicity, fairness, and efficiency in raising public revenues and encouraging economic growth.
- style='font-family:Arial'>Moving Forward: Principles and proposals for a fair tax system.
- style='font-family:Arial'>Issue: Public support remains strong for vital government programs and services
- style='font-family:Arial'>Moving Forward: Blueprint of an investment agenda.
- style='font-family:Arial'>Issue: In talking about what we do want, it is absolutely necessary to specifically address the role of government.
- style='font-family:Arial'>Moving Forward: A concrete, long-term plan to address the role of government and the negative perceptions.
