Weblog. The latest information and insight on the 2006 Federal budget.
Friday, April 15, 2005 9:58 AM
Tax Poll Reflects Real Budget Priorities
In honor of today’s tax deadline, pollsters have been polling Americans to find out what they think of the tax system in the U.S. The findings of the most interesting poll, conducted by Gallup, shows that Americans would make very different decisions about the budget and taxes than the ones Congress is pushing.
Tax cuts for the rich. That’s the major tax initiative of the President and his colleagues in the Senate and House. But Americans think that upper-income people pay too little in taxes already. Two out of three Americans -- that’s an overwhelming majority -- think that the rich pay too little in taxes; a much smaller proportion (22%) think the rich pay their fair share and a tiny minority (7%) think the rich pay too much. Since Congress is bent on including tax cuts for the rich in the budget and paying for them by cuts to programs and services for the rest of us, it looks like Congress isn’t concerned about most Americans. They are really only interested in seven out of one-hundred of us.
In his Washington Post column today, E.J. Dionne Jr. wrote about the “Paris Hilton Tax Cut,” formally known as the estate tax. Paris, the heiress to the Hilton hotel fortune, belongs to one of the few families who pay the estate tax; in 2004, only one percent of those who died had fortunes large enough to require their survivors to pay the estate tax. Still, the repeal or reduction of the estate tax would cost the government trillions of dollars, with far-ranging budgetary effects.
The column focuses on the potential for the estate tax to fill the Social Security financing gap, but the choice is not only about prioritizing Paris Hilton’s inheritance over grandma’s social security check. The choice is just another example of the wrong priorities of too many in Congress who are more concerned with cutting taxes for the super-rich than providing services and supports to the vulnerable, the young, the old, the disabled.
David Lamarre-Vincent, the executive Director of the New Hampshire Council of Churches and part of the Actions Speak Louder campaign, wrote an op ed that was published in the New Hampshire Union Leader, online edition. In his commentary he educates the public about proposed federal budget cuts in Congress and their impact on New Hampshire residents. The op ed calls on Senator Gregg and others to stand up for real New Hampshire values and fight drastic federal budget cuts to adult education and other social programs that will hurt their constituency, saying:
"We don’t think a budget that cuts programs for working families while giving tax breaks to the wealthy and increases the federal deficit measures up to New Hampshire values."
A recent article in the Washington Post described a change of heart among Republican governors. Facing budget shortfalls and a dwindling flow of funds from the federal government, Republican governors -- from Colorado, Idaho, Indiana, Georgia, and Ohio -- have started pushing for state tax increases to compensate for the tax and program cuts in Washington.
What explains this shift from low-tax, limited-government ideologue to tax raiser and program protector? Nevada's Governor, Kenny Guinn, probably put it best when he defended his Republican credentials, saying "I would be a worse Republican, and a worse grandfather, and a worse citizen, if I didn't find enough money to educate our children and fund our Medicaid program ..." Unfortunately, the President seems to fit Guinn's definition of a "worse Republican."
Bush and his colleagues in Congress have targeted the very programs Governor Guinn was trying to protect. Medicaid was one of the hardest hit programs in the Bush budget for 2006, which proposed a $60 billion cut to Medicaid; the House's version of the budget proposal would reduce Nevada's Medicaid funding between $55 and $74 million by 2010. The Senate targeted education and training programs for cuts of $27 billion over the five-year period with the reduction in 2010 amounting to 13%.
It is wonderful that governors are demonstrating true compassion for the young, old, and vulnerable in their states. However, this should not let the President and Congress off the hook. We can not allow the federal government to simply transfer responsibilities over to the states and hope that governors will find the heart to make the tough decisions to raise taxes, not gut programs. We need to help the federal policymakers find their hearts.
Too bad members of Congress didn’t consult the business economists before they drafted their federal budget proposals. Both the House and the Senate budget plans—as well as the President’s—actually increase the federal budget deficit, by approximately $130 billion.
But how can that be, you might ask, when the budget proposals call for such severe cuts in programs that are important to ordinary families? Two simple words: tax breaks.
Take the House budget plan, for example. House members propose to slash $30 to $35 billion from a host of programs that serve low- and moderate-income families, from Medicaid to food stamps to child care. Then they turn around and propose to give America’s wealthiest people and corporations a total of $106 billion in tax breaks. If you think that’s bad, take a look at the Senate plan—it calls for $134 billion in tax breaks for the affluent.
What can you say about a budget plan that takes from poor people to give to the rich? Two simple words: for shame.
Last week, committees in both the House and Senate sent budget proposals to their respective bodies for debate and decision. Both bodies voted and approved their versions of the budget plan, called a budget resolution.
What Happened in the Senate
The full Senate voted to make limited changes to their committee’s recommendations. The final budget resolution—with its slight nod to the pain of budget cuts and its large shrug for the cost of tax breaks—won passage in the full Senate by a vote of 51-49.
Good News: The change that has gotten the most media attention is the Smith-Bingaman amendment, which abolishes a requirement to cut an estimated $14 billion from Medicaid funding. This revision passed 52-48, winning support from all the Democratic Senators, plus Republican Senators Chafee (RI), Coleman (MN), Collins (ME), DeWine (OH), Smith (OR, who sponsored the amendment), Snowe (ME), Specter (PA), and independent Senator Sen. Jeffords (VT). As a result, the Senate budget plan calls for no cuts to Medicaid, while the House plan requires Medicaid cuts of $15 to $20 billion.
Other beneficial changes included the Kennedy (D-MA) amendment to increase discretionary education spending by $5.4 billion, and the Coleman (R-MN) amendment to maintain funding for the Community Development Block Grant at its current level of $4.7 billion. (The President’s plan had been to consolidate CDBG with 17 other programs and give them all a total of only $3.7 billion in funds.)
Bad News: The Senate voted against an amendment offered by Sen. Baucus (D-MT) to protect the Agriculture budget—which includes the food stamps program—from billions of dollars worth of mandatory cuts.
The Senate budget committee had recommended a requirement to give some $70 billion in tax breaks to wealthy people. Senator Carper (D-DE) offered an amendment to delete that requirement. It was defeated. To make matter worse, late on the last night of debate Senators passed a Bunning (R-KY) amendment to nearly double the size of the required tax breaks to $134 billion.
Senators Feingold (D-WI) and Chafee (R-RI) offered an amendment to reinstate a requirement to “pay as you go” (identify budget cuts to balance out any new spending) for both tax cuts, which decrease revenue, and spending on programs. The amendment failed on a 50-50 vote. This means that Congress will have to “pay” for any spending increases by making cuts elsewhere, but will not have to pay for tax cuts.
The House of Representatives
The House also approved a budget resolution, on a near party-line vote of 218-214. Their budget plan features a host of mandatory cuts to programs that are vital to low- and moderate-income families. These include $5.3 billion from programs overseen by the Agriculture committee, which the chairman has suggested should all come out of the food stamps program; $15-20 billion from programs controlled by the Commerce committee, which has jurisdiction over Medicaid; and almost $19 billion from programs handled by the Ways and Means committee, which include TANF, child care, foster care, child support, Medicare, EITC, and SSI. The chairman of this committee has made clear that Medicare will be untouched, and he expects to take most of the cuts from the EITC program.
You may have heard in the media about how hard it will be for the House and Senate to agree on a budget. We don’t think so. We believe that, despite differences such as the Medicaid cuts that will require compromising, the House and Senate budget resolutions are strikingly similar in key, fundamental ways: they both reflect the entirely wrong priorities, and they will both hit low- and moderate-income people the hardest.
Both budget plans include deep cuts to discretionary spending (approximately $202 billion on the Senate side, $216 billion on the House side). Both include mandatory cuts to entitlement programs ($17 billion on the Senate side, $69 billion on the House side). Both include massive mandatory tax breaks ($134 billion on the Senate side, $45 billion on the House side) for the wealthy. And despite claims to the contrary, both would increase the federal deficit (Senate bill by $130 billion, House bill by $127 billion).
What You Can Do
Over the next two weeks, most Senators and Congress members are at home for the spring recess. This is an ideal time to let your representatives know that neither the House nor the Senate budget plan is acceptable—and that no combined version can possibly be acceptable. Tell your elected representatives that you want them to oppose any budget resolution that includes either deep program cuts or increased tax breaks—much less both!
Today the Senate passed an amendment offered by Senator Gordon Smith of Oregon to protect an estimated $14 billion in Medicaid funding from Senate budget cuts. The Republican leadership tried their best to derail this budget change, but with help from a few key Republicans, the amendment passed with a vote of 52 to 48.
Those who voted for this compassionate amendment included Republican Senators Chafee (RI), Coleman (MN), Collins (ME), DeWine (OH), Snowe (ME), Specter (PA), and of course Sen. Smith of Oregon, as well as Sen. Jeffords (VT) and all the Democratic Senators.
The victory came after a heavy push from activists in Oregon, who placed a series of newspaper ads, sent postcards to their legislators, and conducted clever actions that depicted millionaires thanking low- and middle-income people for bearing the brunt of the federal budget cuts. The Oregon Senators heard their call.
But Medicaid is not the only program that needs defending. The President and House and Senate leadership still plan to slash billions of dollars from programs that serve low-income families, while continuing to protect $70 billion in tax breaks for the wealthy.
Thanks to 52 Senators we have one small victory for Medicaid—billions left to go!