Week Ending August 3, 2012
Congressional Leaders Reach Short-Term Spending Agreement
This week, congressional leaders agreed to a spending level of $1.047 trillion to guide funding for the first six months of fiscal year 2013 which begins on October 1. The details are not final, but it is expected that the funding package, known as a continuing resolution (CR), will set spending levels through March 2013. This spending level is $4 billion higher than FY 2012 and is the level agreed to in the Budget Control Act (BCA) passed last summer and that has guided Senate spending bills. The House, however, passed a budget with significantly lower spending levels, so this deal will avert a fiscal crisis just prior to the elections. The CR is expected to be “clean” without any extraneous policy additions and will be voted on in early September after the details are ironed out during the August recess. While the CR is expected to fund the government through March, the funding levels could change in January if automatic spending cuts, known as “sequestration” are not averted. Because congressional GOP leaders have blocked efforts to create a balanced budget plan, including higher taxes for wealthy Americans and businesses, the sequester would result in approximately an 8% across-the-board cut to non-defense spending.
House Rejects Allowing Bush Tax Cuts to Expire for Income Above $250,000; Approves One-Year Extension of Tax Cuts for All Income Levels
On the top tax issue of the day, the House voted 170 to 257, largely along party lines, to reject the Democratic leadership’s plan to let the Bush-era tax cuts expire on income levels above $250,000 for joint filers and $200,000 for single filers. No Republicans voted to support this proposal, and 19 Democrats opposed it. This measure also would have extended several Obama-era tax cuts to help low-income and middle-class families, including the Child Tax Credit, the Earned Income Tax Credit for families with three or more children, and the American Opportunity Tax Credit for college tuition and related expenses. The House Democratic substitute bill was identical to legislation that the Senate approved last week. The House then voted 256 to 171 to approve the GOP leadership’s proposal for a one-year extension of the Bush-era tax cuts for everyone, including millionaires and billionaires. Only one Republican opposed this measure, and 19 Democrats supported it.
Lawmakers now enter their August district work period in full campaign mode promoting distinct GOP and Democratic tax agendas. Pundits expect no deals on tax issues until after the November elections. Some observers predict no action until next year after all the Bush-era and Obama-era tax cuts expire as scheduled on December 31.
The House also voted 232 to 189 along party lines to approve tax legislation that would establish a fast-track process for comprehensive reform of corporate and individual federal taxes. This troubling proposal would create an expedited process for tax reform outside of regular procedures and then restricts it to legislation meeting conservative tax priorities. For expedited consideration, legislation must cap the corporate tax rate at 25%, consolidate all individual income tax rates into two brackets no higher than 10% and 25%, repeal the Alternative Minimum Tax (AMT) and meet other troubling standards. AFSCME opposes this legislation because it stacks congressional rules against working families, and would be highly regressive.
New Reports by Tax Groups Highlight State-Level Effects of Bush Tax Cuts
New reports released this week by Americans for Tax Fairness, Citizens for Tax Justice and the National Women’s Law Center illustrate how working families across the country would benefit if Congress ended the Bush tax cuts for the richest 2% of Americans versus the giveaway that those richest Americans would get under the plan the House GOP majority passed on Thursday. For example, the richest 2% of Arkansans would receive an average tax break worth $35,000 under the House plan. In contrast, Arkansans earning less than $25,000 a year would get an average tax cut from the Senate-passed bill roughly two times larger than from the House GOP’s plan because the latter would end improvements in the Earned Income Tax Credit and Child Tax Credit for lower-income working families while the Senate plan would extend them.
This week, AFSCME members in Arkansas, California, Iowa, New York and other states around the country participated in events that highlighted the effects of these competing tax plans as well as Rep. Paul Ryan’s (R-WI) House-passed budget, which includes an extension of the Bush tax cuts for the richest Americans and then hands them an additional $265,000. Presidential candidate Mitt Romney has publicly endorsed the Ryan budget. AFSCME members spoke out against the massive cuts to Medicare and Medicaid contained in the Romney-Ryan budget, which would leave millions of people without access to the health care they need, and urged Congress to make everyone pay their fair share in taxes, including the richest 2% of Americans.
AFSCME members around the country will participate in town hall and community events during the August congressional recess to hold members of Congress accountable for their votes on these critical issues. To find out about upcoming events in your area with your members of Congress, please contact Karl Stark in the Federal Government Affairs Department.
(Congress will be in recess until September 10. The next Legislative Weekly Report will be on September 14.)
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