Please enter your email address to receive a password reminder.
Log into Tax-News+
Senate and House negotiators have reached agreement on a budget plan for fiscal year 2008 which Democrats say will fund critical national priorities while returning the budget to surplus by 2012 - and all without raising taxes.
“This budget provides a fiscally responsible plan for our country,” stated Senate Budget Committee Chairman Kent Conrad (D-ND). “It balances the budget by 2012. It provides for an extension of middle-class tax cuts. And it funds the nation’s priorities, including a strong national defense, improving veterans’ health care, expanding children’s health care, and increasing our investment in education. We’ve been placed in a deep hole. This plan will begin to dig us out.”
“On all the basics, our budget is better than the President’s,” added Congressman John Spratt (D-SC), House Budget Committee Chairman. “It moves us in the right direction and to balance in five years. It posts smaller deficits than the President’s budget over five years; adheres to the Pay- As-You-Go principle and contains no new mandatory spending not paid for; and it adds ‘program integrity initiatives’ to root out wasteful spending. Within this framework, our budget does more for veterans’ health care, more for education, and more for children’s health care.”
The Democrats claim that under the budget resolution, the budget will reach a surplus of $41 billion in 2012, spending as a share of the economy will fall in every year after 2008, and gross debt as a share of the economy will fall in every year after 2010. The plan also restores budget enforcement provisions, such as spending caps, a strong Pay-As-You-Go rule, and allowing reconciliation for deficit reduction only.
The plan rejects the President’s proposals to cut domestic priorities and restores resources in areas that Democrats say have been underfunded by the Bush administration, such as child health, education, and veterans’ health care. In total, it provides $954 billion for discretionary programs in 2008.
Notably, the budget resolution does not include any tax increases, and the agreement supports tax relief that would benefit the middle class – including extension of the child tax credit, 10% bracket, and marriage penalty relief – and provides for estate tax reform. The plan also provides for an additional year of Alternative Minimum Tax relief, preventing nearly 20 million middle-class taxpayers from being hit by the tax.
Over the five years of the budget, revenues total $14.828 trillion, almost identical to the President’s level of $14.826 trillion. Democrats say that the revenue numbers in the budget can be achieved by closing the tax gap, addressing offshore tax havens, shutting down abusive tax shelters, and without raising taxes.
Revenue legislation is subject to House and Senate Pay-As-You-Go rules, and a House only “trigger” mechanism in a bid to ensure fiscal responsibility. The House trigger mechanism limits tax cuts to 80% of the projected surplus in 2012, based on Office of Management and Budget estimates.
“The American people sent new leadership to Congress for a reason,” said Conrad. “They want Washington to change course, and that includes changing failed fiscal policies that have exploded our nation’s debt. This budget shows that Democrats can govern; and they can do it in a fiscally responsible manner.”
Senator Judd Gregg (R - NH), ranking member of the Senate Budget Committee, however, believes that the budget builds in a number of roadblocks to extending even the most basic tax relief, and would put the US economy on a "dangerous and unstable path".
“The House trigger mechanism and a watered-down version of Pay-go are new hurdles that will delay any consideration of tax relief that has done so much to expand the economy," he said in response to the new proposals.
Gregg claimed that the budget resolution would actually increase taxes by $736 billion over the next five years, and jeopardize economic growth.
“I cannot support this budget, which will dramatically increase spending and return to an era of big government, passing the bill along to taxpayers and increasing the debt by $2.5 trillion,” he stated. “This budget spends 100% of the Social Security surplus in every year but 2012, and does not include any of the Social Security protection enforcement mechanism contained in the Senate-passed version."
“A more fiscally responsible approach would be to restrain spending, reduce the deficit, extend a strong economy through a fair tax system, and begin to focus on how best to address our unfunded obligations. American taxpayers, now and down the road, deserve a government they can afford," Gregg remarked.
IMPORTANT NOTICE: Wolters Kluwer TAA Limited has taken reasonable care in sourcing and presenting the information contained on this site, but accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, users of the site are advised to take appropriate professional advice before committing themselves to involvement in offshore jurisdictions, offshore trusts or offshore investments.
All rights reserved. © 2017 Wolters Kluwer