Think Tanks Weigh In Before Budget Fights
Even though Washington slows down in August, several think tanks are staking out positions in advance of this fall's pending fight over the debt limit and next year's budget. For example, today two organizations - Americans for Prosperity and Americans for Tax Fairness - have put forward two different approaches.
Americans for Prosperity, a conservative group, is encouraging legislators to maintain federal funding at reduced, post-sequester levels. In making their case, AFP highlights the fact that several appropriations bills that have stalled in the House over a seeming lack of Republican consensus regarding how to live within the existing, post-sequester caps. They express concern that if lawmakers remove the sequester without finding any offsetting savings, federal spending will be $1.2 trillion higher over the next 10 years. As the Financial Times reported,
AFP is raising its concern amid signs that a small number of Republican legislators are starting to balk at the tough austerity line the party has adopted since gaining the majority of the House of Representatives in 2010, including the budget mechanism known as "sequestration."
By contrast, Americans for Tax Fairness, a progressive group, released a report today comparing the price of certain corporate tax expenditures with the impact of various spending cuts under the sequester. Their plan suggests repealing certain corporate tax breaks and ending deferral of foreign-source income to raise revenue and offset some of the sequester's spending cuts. Their policy proposals include:
- Repealing accelerated depreciation for corporate jets
- Eliminating oil and gas preferences
- Taxing carried interest as ordinary income
- Limiting the size of retirement accounts for millionaires
- Closing stock option and performance bonus loopholes in rules for the deduction of executive compensation
- Marking derivatives to market and taxing related income and other financial institution reforms in the President's budget
First, we've said before that the corporate tax code is in need of reform, and there are many options on the table for consideration, including those listed above. However, we believe reforming the corporate code should be done as part of comprehensive tax reform that addresses both the individual and corporate side in order to make our tax system more efficient, effective, fairer and contribute to deficit reduction.
Second, we've said the sequester is not a smart way to cut the deficit, and therefore policymakers must come together on a comprehensive debt reduction package that replaces part of the sequester with smarter cuts, coupled with meaningful entitlement and tax reforms. It is encouraging to see think tanks acknowledge that repealing the sequester without offsetting replacements would be costly, and that any replacement should be fully offset. But given the opportunity over the coming months, we hope lawmakers go even further than addressing the sequester, and an agree upon a comprehensive plan that includes entitlement and tax reform that meaningfully addresses our long-term debt problem.