Unpaid-For Veterans Provisions Piggyback on Transportation Bill

Before Congress leaves for August, they must pass a transportation bill extending highway programs and transferring additional money into the Highway Trust Fund. The House posted a revised version of their transportation bill yesterday, which continues to responsibly offset the transfer to the Highway Trust Fund but adds in two deficit-financed tax cuts for veterans. The bill is expected to be voted on today, and Senate Majority Leader Mitch McConnell (R-KY) says the Senate will consider the bill after it is passed by the House.

The previous House bill used a variety of programs to pay for transferring $8.1 billion into the Highway Trust Fund, projected to be enough to continue current highway spending for five months, and presumably, allow Congress to continue negotiations over highway spending when they return in September. The revised bill keeps the same transportation section, although it only extends programs for three months, rather than five. Highway programs would need to be reauthorized by October 29, but Congress would likely be able to pass another extension through December without transferring additional money into the Highway Trust Fund.

However, the revised transportation bill also includes a new section on veterans, which refines and expands some veterans health programs, limits others, allows $3.3 billion of the Veterans Choice program to cover shortfalls within the VA health system, and enacts two small tax cuts. One of these cuts would exempt employers from counting veterans against the employer mandate, so veterans that already have access to health care will not count against the 50 employees that normally would require an employer to offer health insurance to their employees. The other tax cut allows veterans with service-connected disabilities to obtain health savings accounts, despite having medical coverage that would normally disqualify them.

Provisions in July 28 House Transportation & Veterans Bill
Policy Savings/Costs (-)
Transportation Section $0 billion
Transfer $8.1 billion into the Highway Trust Fund -$8.1 billion
Extend current budget treatment of TSA fees from 2023 to 2025 $3.2 billion
Require lenders to report more information on outstanding mortgages $1.8 billion
Close an estate tax loophole about the reporting of property $1.5 billion
Clarify the statute of limitations on reassessing certain tax returns $1.2 billion
Adjust tax-filing deadlines for businesses $0.3 billion
Allow employers to transfer excess defined-benefit plan assets to retiree medical accounts and group-term life insurance $0.2 billion
Equalize taxes on natural gas fuels -$0.1 billion
Veterans Section  -$1.2 billion
Transfer funds from Veterans Choice program to cover VA shortfall $0 billion
Exempt from the employer mandate servicemembers and veterans who already have health insurance -$0.8 billion
Allow veterans to qualify for health savings accounts, even if they receive VA care -$0.4 billion

Source: House Ways & Means Committee, Congressional Budget Office

The funding to cover the shortfall in the VA health system is transferred from previously appropriated funds and would not increase total spending. Nonetheless, since the 2014 legislation funding the Veterans Choice program was designated as an emergency and not subject to budget discipline, those funds can't be used as an offset for new spending. As a result, the provision allowing those funds to be spent on the VA health system is also designated as emergency funding. On the other hand, the $1.2 billion cost of the two tax cuts is not designated as an emergency and is subject to normal budget discipline. Under PAYGO rules, if this bill passes, Congress will be required to find another $1.2 billion in mandatory savings or revenues sometime this calendar year to offset the cost.

We previously commended the House bill for finding responsible offsets, rather than budget gimmicks, to pay for a short-term highway bill (although a long-term bill that resolved the structural gap between highway revenues and spending would be even better).

Unfortunately, the House is poised to add an unpaid-for section expanding veterans benefits that will add to the national debt. If lawmakers are committed to expanding benefits for veterans, they should be equally committed to paying for those expansions. Lawmakers could consider finding another small offset to pay for the $1.2 billion cost, or shrink the size of the Highway Trust Fund transfer so that some of the existing offsets can also cover the cost of the new veterans' tax benefits.

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