Breaking Down the Proposals in the President's FY 2024 Budget
The FY 2024 President’s budget includes policy changes that it estimates would reduce budget deficits by $3 trillion over a decade, the net effect of $2.8 trillion of new spending and tax breaks more than offset by $5.5 trillion of revenue increases and savings and $330 billion of net interest savings. Below we break down the major proposals in the President’s budget.
Policy Proposals in the President’s FY 2024 Budget
|Education and Family Support||$1.1 trillion|
|Expand access and funding for pre-K and child care||$600 billion|
|Establish national paid family and medical leave||$325 billion|
|Offer free community college and increase other higher education spending||$215 billion|
|Expansion of Health Programs||$880 billion|
|Extend and expand Affordable Care Act subsidies and coverage||$385 billion|
|Increase Indian Health Service funding||$185 billion|
|Increase other health care and long-term care spending||$310 billion|
|Other Initiatives||$215 billion|
|Invest in affordable housing||$105 billion|
|Enact other spending increases||$110 billion|
|Tax Breaks||$615 billion|
|Expand Child Tax Credit (CTC) for 2023 through 2025 and make CTC permanently fully refundable||$435 billion|
|Expand Earned Income Tax Credit (EITC)||$155 billion|
|Expand other tax cuts, credits, and breaks||$25 billion|
|Subtotal, Gross Costs||$2.8 trillion|
|Corporate Taxes||-$3.0 trillion|
|Increase corporate income tax rate from 21 to 28 percent||-$1.4 trillion|
|Reform international tax rules||-$1.1 trillion|
|Increase tax rate on corporate stock buybacks from 1 percent to 4 percent||-$240 billion|
|Enact other business tax increases||-$200 billion|
|High-Income Taxes||-$985 billion|
|Establish 25 percent billionaire minimum tax on unrealized income||-$435 billion|
|Increase top individual income tax rate from 37 to 39.6 percent||-$255 billion|
|Increase capital gains and estate taxes||-$290 billion|
|Additional Medicare Taxes and NIIT||-$680 billion|
|Apply Net Investment Income Tax to pass-through business income||-$320 billion|
|Increase NIIT and Medicare tax rate for taxpayers making over $400,000||-$360 billion|
|Medicare and Medicaid Savings||-$225 billion|
|Lower prescription drug costs||-$205 billion|
|Require remittance of medical loss ratios in Medicaid/CHIP||-$20 billion|
|Other Taxes||-$325 billion|
|Close various fossil fuel, digital currency, and other tax breaks||-$205 billion|
|Reduce tax gap||-$120 billion|
|Other Spending Reductions||-$350 billion|
|Reduce future growth of defense discretionary spending||-$210 billion|
|Expand user fees and spectrum auctions||-$70 billion|
|Extend the mandatory sequester||-$50 billion|
|Reduce fraud and abuse, along with other spending reductions||-$20 billion|
|Subtotal, Net Savings||-$2.7 trillion|
|Net Interest||-$330 billion|
|Total, Policy Savings in the President’s FY 2024 Budget||-$3 trillion|
Sources: Office of Management and Budget and Committee for a Responsible Federal Budget. Numbers may not sum due to rounding.
Education and Family Support ($1.1 trillion). The largest proposal in this category is $600 billion to expand access to affordable, quality child care for low- and middle-income families and by providing free, universal preschool through a federal-state partnership. The President’s budget also proposes $325 billion for a national paid family and medical leave program administered by the Social Security Administration. Finally, the Administration proposes $215 billion for higher education by doubling the Pell Grant, funding free community college, and making investments in Historically Black Colleges and Universities, Minority Serving Institutions, and Tribally Controlled Colleges and Universities.
Expansion of Health Programs ($880 billion). The President’s budget proposes several expansions to federal health care programs, including $385 billion to permanently extend the enhanced Affordable Care Act subsidies in the Inflation Reduction Act as well as to create a new program to offer Medicaid-like benefits to those who live in states that have chosen not to expand Medicaid. It also includes $185 billion to close service gaps within the Indian Health Service and shift roughly half of that funding from discretionary to mandatory. Another $310 billion in health care spending would cover policies such as the improvement of Medicaid home- and community-based services ($150 billion), new behavioral health initiatives ($75 billion), establishment of a National Hepatitis C Elimination Program ($5 billion) and a Vaccines for Adults Program ($10 billion), investments in innovative antimicrobial drugs ($10 billion), and doubling funding for health centers ($20 billion), among others.
Other Initiatives ($215 billion). The budget includes a $105 billion investment in affordable housing, most significantly through an expansion of the low-income housing tax credit as well as several new programs to increase the housing supply and improve access to homeownership. The Administration also proposes $110 billion in other spending increases, including $30 billion in community policing and other justice programs, $15 billion for an extension of expanded school meal programs, $10 billion for a new Outcompete China Initiative, and $10 billion to establish a Federal Capital Revolving Fund, among other proposals.
Tax Breaks ($615 billion). Under the President’s budget, the Administration proposes reviving the expanded child tax credit for 2023 through 2025, after which it would expire alongside the $1,000 expansion included in the Tax Cuts and Jobs Act, at a cost of $435 billion. This includes expanding the credit to $3,000 per child over 6 and $3,600 per child under 6 while permanently extending full refundability of the credit. In addition, the President’s budget would permanently extend the enhanced Earned Income Tax Credit for childless workers ($155 billion). The Administration also proposes to expand another $25 billion in tax breaks, including $15 billion to make the adoption tax credit refundable and allow certain guardianship arrangements to qualify and $5 billion to make the New Markets Tax Credit permanent.
Corporate Taxes (-$3.0 trillion). The budget would raise a total of $3.0 trillion from raising taxes on corporations, including $1.4 trillion from an increase in the corporate income tax rate to 28 percent from the 21 percent and $1.1 trillion from reforms to international tax rules – most significantly, adopting the global framework for undertaxed profits. The Administration also proposes increasing the tax rate on corporate stock buybacks, recently enacted in the Inflation Reduction Act, from 1 percent to 4 percent, raising $240 billion. Another $200 billion would come from the enactment other business tax increases, such as tightening tax rules for partnerships and noncorporate taxpayers, among other proposals.
High-Income Taxes (-$985 billion). The President’s budget proposes a 25 percent billionaire minimum tax on unrealized income ($435 billion) and increasing the top individual income tax rate from 37 to 39.6 percent ($255 billion). It also proposes an additional $290 billion in revenue from increases in capital gains and estate taxes, most significantly by taxing capital gains as ordinary income for those earning over $1 million and taxing capital gains at death.
Additional Medicare Taxes and NIIT (-$680 billion). The President’s budget proposes $320 billion in revenue increases by applying the net investment income tax (NIIT) to pass-through business income of taxpayers making over $400,000, which would be deposited into the Medicare Hospital Insurance (HI) trust fund. It would raise another $360 billion by increasing the NIIT and the Medicare tax rate for taxpayers making over $400,000 to 5 percent. The combined effect of both proposals would extend the life of the Medicare HI trust fund by over 25 years according to an analysis by Medicare’s Chief Actuary.
Medicare and Medicaid Savings (-$225 billion). The President’s budget would expand the Medicare prescription drug price negotiation provision from the Inflation Reduction Act (IRA), apply the IRA’s drug inflationary rebates to the commercial market, authorize negotiation of Medicaid supplemental rebates on behalf of states, and apply Medicaid drug rebates to separate Children's Health Insurance Programs, for a combined savings of $205 billion. It would save another $20 billion by requiring remittance of medical loss ratios in Medicaid and CHIP managed care and extending surprise billing protections to ground ambulances and the No Surprises Act implementation fund.
Other Taxes (-$325 billion). The President’s budget would raise another $205 billion in revenue through a variety of other policies, including by closing various fossil fuel, digital currency, and other tax breaks. It also proposes measures to further narrow the tax gap such as extending the enhanced Internal Revenue Service resources provided by the IRA beyond 2031, enhancing the accuracy of tax information, increasing penalties, and further addressing noncompliance.
Other Spending Reductions (-$350 billion). The budget proposes reducing future growth of defense discretionary spending ($210 billion), extending and expanding user fees and expiring radio frequency spectrum auction authority ($70 billion), extending the mandatory sequester ($50 billion), and savings from reduced fraud and abuse and other spending reductions ($20 billion).
The President’s FY 2024 budget proposes various policies that would increase spending and tax breaks that are more than offset by revenue increases and spending reduction, resulting in a net $3 trillion of deficit reduction. Policymakers should look carefully at the President’s proposals as they consider how to move forward with putting the national debt on a sustainable downward path; the nation’s finances should be made sustainable before enacting further spending increases or tax cuts. Lawmakers should use the President’s $3 trillion savings proposal as a minimum in upcoming fiscal negotiations.