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Legislation & Politics | ||
AFSCME's Position - National Budget and Tax PrioritiesAFSCME's Position - National Budget and Tax Priorities
Background The national debate over federal budget, appropriations, and tax policies continues to dominate politics in Washington, D.C. and we expect major battles in 2008. While President Bush and conservative members of Congress continue to talk about fiscal discipline and attempt to cut federal funding, they advocate new expensive tax breaks for the wealthy that have already exploded the budget deficit, increased the federal debt to nearly $10 trillion, and undermined long-term federal revenues. In contrast, the new congressional Leadership, led by Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Harry Reid (D-NV) is working to significantly increase federal investments in health care, child care, workforce training and employment services, education, public safety, infrastructure, and other vital public services. The Democratic congressional leadership is also working to reduce the tax burden on low-income and middle-class families, close corporate tax loopholes, and raise revenues by closing the tax gap, which would ensure those most able to pay taxes are paying their fair share. They also support PAYGO, which would offset any new tax breaks with new equal revenues. In early 2008, President Bush and conservative members of Congress again proposed enormous new tax breaks to millionaires, billionaires, and large profitable corporations. Their top priorities are to permanently repeal the Estate Tax; reduce income tax rates on capital gains and dividends to zero; and reduce the corporate income tax. Altogether, these tax breaks would cost more than $2 trillion over 10 years and almost exclusively benefit the richest taxpayers. They also are working to enact an "Entitlement Commission" and "Sunset Commission", which would have power to review and terminate any federal program. AFSCME opposes new tax breaks for the wealthy, tax reductions that are not paid for, and irresponsible budget policies that defund critical government services in order to pay for unnecessary and unfair tax cuts. Given that Congress already has power to create, eliminate, fund or defund programs, AFSCME opposes an "Entitlement Commission" and "Sunset Commission." In 2008, Congress will work on the annual federal funding or fiscal year 2009 "appropriations" process. Congressional leaders will fight to increase federal funding for programs that fund state and local public services. Unfortunately, in late 2007, President Bush vetoed or threatened to veto many FY 2008 appropriations bills because they would have significantly increased this federal funding. With only a slight majority in Congress, congressional Democratic leaders could not override President Bush's vetoes and thus, he blocked increased funding. This year's FY 2009 appropriations process is likely to force another debate between Congress and President Bush. AFSCME is already working to find the votes to override the President's vetoes and avoid a lengthy fight over funding. AFSCME is fighting to enact adequate funding for domestic needs such as the Child Care Development Block Grant, "No Child Left Behind Act", veterans' health care, and other important needs. In February 2008, President Bush proposed a FY 2009 federal budget which would hurt AFSCME members by cutting total domestic discretionary spending, eliminating scores of programs, including 48 education programs, and significantly cutting many federal programs such as Employment Services, Community Development Block Grant (CDBG), Social Services Block Grant, and others. The Bush budget underfunds the Public Housing Operating Fund and Capital Fund, Head Start, and NIOSH. The proposed budget would cut funds for Medicaid, Medicare, and other entitlement programs. AFSCME strongly opposes these Bush proposals. Another key issue for AFSCME in 2008 is state and local fiscal relief. State and local governments are a vital part of our economy and lives providing health care, education, public safety, and numerous social services to hundreds of millions of Americans. When our economy weakens or times are tough for American families, this vital role increases in importance. With rising unemployment rates, exploding subprime mortgage housing crises, and skyrocketing energy prices, more and more Americans are losing jobs, purchasing power, and housing equity. Simultaneously, the downturn causes painful budget problems for state and local governments and lowers their tax revenues when the need for public service is expanding. As a result, most states are suffering budget deficits. In FY 2008, 16 States and Puerto Rico reported budget shortfalls totaling $11.7 billion. For FY 2009, 28 states project or projected budget deficits totaling at least $47 billion. Given that 49 of 50 states and many local governments are legally required to balance their budgets, the only way they can reduce a deficit is to cut public services or raise taxes. Already, at least 20 states have cut or proposed cutting vital public services, including nine states proposing to cut K-12 education and 13 states cutting or proposing cuts to reduce access to health care services or health insurance. Many states have proposed state employee layoffs, reductions in force, hiring freezes or unpaid leave. Several states have proposed cutting aid to localities. Localities throughout America are also suffering budget deficits. For example, in Atlanta, Georgia, all departments, other than public safety, are planning for 25% budget cuts. Columbus, Ohio faces a budget deficit and needs funds to pay police officers and firefighters. The Flint Michigan School District's budget deficit caused the layoffs of teachers and staff and closed public schools. Recently, in California's Bay Area, the city of Vallejo filed for bankruptcy - the first California city to file for bankruptcy because it didn't have enough revenue to provide basic services. Summary of Current Policy Options and Legislation State Fiscal Relief In 2003, in response to the economic downturn, Congress enacted a $20 billion fiscal relief package for states, including $10 billion to states for increased Medicaid funding and a separate $10 billion to states for flexible anti-recession grants. Congress enacted these funds to stimulate the ailing economy and protect vital public services. Today, many experts think the economy is suffering more difficulties and state and local government problems are worse. AFSCME supports a temporary increase to Medicaid's federal medical assistance percentage (FMAP). Several House and Senate bills have been introduced to accomplish this goal, including the bipartisan H.R. 5268, which temporarily increases Medicaid funding by $13 billion. In the Senate, the bipartisan "Economic Recovery in Health Care Act" (S. 2819) would increase Medicaid funding by $6 billion. AFSCME also supports funding temporary anti-recession block grants to enable state and local governments to continue to provide vital public services. Several Senate bipartisan bills have been introduced to accomplish this goal, including S. 2819, which would increase appropriate $6 billion in anti-recession grants to states. Various House members will soon introduce legislation to fund similar grants to states and localities. Congress should address the crises now to ensure states and localities do not cut vital public services and thereby exacerbate the downturn, make unemployment and poverty worse, and weaken public assistance and infrastructure. Appropriations Every year, as part of the appropriations process, Congress makes important decisions about funding levels for health care, job training, child care, education, and other vital public services that assist middle-class and low-income Americans. While these services are all contained in largest domestic spending bill, Congress needs to enact 12 different bills. Typically, the House starts this process in June. In recent years, the process has routinely extended beyond the start of the new fiscal year (October 1, 2008) and often into the late fall or even winter. Given that 2008 is an election year, it's likely that partisan politics will prevent an early agreement and force Congress to enact a Continuing Resolution to continue funding federal programs without a substantive detailed agreement. AFSCME will be working on a variety of appropriations bills to increase federal funding for vital public services. Taxes As Warren Buffet famously said, a billionaire should not pay a lower marginal tax rate than the billionaire's secretary or the middle class. Unfortunately, America's federal tax policy is full of tax loopholes that disproportionately benefit the richest Americans and large profitable corporations at the expense of working families. Furthermore, the Bush Administration's Internal Revenue Service and Treasury Department have not proposed or implemented effective steps to close the $300 billion annual tax gap, adequately audit corporations and the wealthiest taxpayers, eliminate overseas tax shelters, and reduce tax avoidance and evasion. America needs fair and transparent tax policies. AFSCME supports relief for middle-class taxpayers from the Alternative Minimum Tax (AMT). However, it's wrong to eliminate the AMT for all taxpayers and thus AFSCME opposes full repeal or partial repeal, which disproportionately benefits wealthier taxpayers. AFSCME opposes any AMT patch that lacks offsets because it would harm working families by diverting funds from vital public services. More generally, AFSCME supports PAYGO and opposes proposals that reduce tax revenues without paying for the costs with other revenue offsets because it weakens America's ability to invest in the needs of all Americans and worsens the enormous federal deficit. AFSCME supports increasing the reduced tax rates on carried interest, capital gains, and dividend income to standard income tax rates because these reduced rates disproportionately benefit the wealthy. AFSCME opposes reducing corporate income tax rates because it is too costly and does not stimulate the economy. More generally, AFSCME opposes tax proposals that benefit a few wealthy families at the expense of America's working men and women. For example, AFSCME opposes repeal of the estate tax or other "reform" proposals, which would gut the estate tax. The estate tax is a fair and progressive tax and focuses on those most able to pay - the richest one percent of all estates pays almost 50 percent of all estate taxes. In 2008, it only affects estates larger than $4 million per couple and in 2009 this will rise to $7 million. A recent congressional report ended the myth about family farms by demonstrating that in 2006; only 15 farm estates would be required to pay taxes. AFSCME supports Senate Finance Chair Baucus' efforts to develop and implement a detailed plan to close the tax gap and achieve a 90% voluntary compliance rate by 2017, significantly above today's 84%. AFSCME supports increased investments in the Internal Revenue Service's tax collection personnel and information systems to enhance oversight, auditing, and enforcement. It's important to reinvigorate the culture of IRS' corporate auditors and rebound from FY 2007, when the IRS audit rate for corporations exceeding $250 million in assets declined to an all-time low of 26%. The IRS should increase audit rates, audit thoroughness, and time per audit on large corporations and the wealthiest taxpayers. What You Can Do Contact your Senators and Representative and urge them to support federal funding for state and local fiscal relief to protect public services through increased funding for Medicaid and anti-recession flexible grants. Urge your members of Congress to support increased federal funding for vital public services in the House and Senate Appropriations bills. Tell them the importance of these public services, including child care, Employment Services, health care, "No Child Left Behind" school programs, and other federally funded public services that AFSCME members deliver at the state and local level. Urge your members of Congress to support a fair tax system, impose equitable tax rates, and treat income from carried interest, capital gains, and dividends the same as regular income tax rates. Department of Legislation |
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