The Bottom Line

July 1, 2014

The Tax Policy Center and Urban Institute have issued a new report entitled "Flattening Tax Incentives for Retirement Saving." Authors Barbara Butrica, Benjamin Harris, Pamela Perun, and Eugene Steuerle examine three different options to change the tax treatment of 401(k)s and describe their effects on the annual income distribution of taxes along with the lifetime distribution of taxes and income.

The three options are:

  • Reduce the 401(k) combined employer/employee contribution limit from $51,000 to the lesser of $20,000 or 20 percent of income
  • Expand the saver's credit so middle-income earners can take greater advantage of it
  • Replace the income and payroll tax exclusions for 401(k) contributions with a 25 percent refundable credit
July 1, 2014

Our recent paper Trust or Bust: Fixing the Highway Trust Fund called on lawmakers to identify a long-term fix to the funding gap in the Highway Trust Fund (HTF). Unfortunately, it appears unlikely that there is sufficient time to enact a fix before funds fall too low and disrupt construction this summer. A short-term patch can be enacted by transferring funds from general government revenue. To be fiscally responsible, however, this transfer should be fully offset elsewhere in the budget.

Previously, we discussed long-term options to restore highway solvency by cutting spending, raising more from current highway taxes, and raising new taxes. Below are tax, spending, and other options that could pay for upfront general revenue transfers to shore up the HTF in the short-term, although they leave the HTF's chronic imbalance in place. These options can buy time, but they do not replace the need to identify a long-term solution to bring dedicated revenue and spending in line.

Options To Offset a Transfer of General Revenue
Policy Ten-Year Savings Trust Fund Extension
Dedicate one-time "deemed repatriation" tax to the HTF $125 billion 8 years
Dedicate temporary transition revenue from repealing LIFO to the HTF $90 billion 6 years
Repeal certain oil and gas tax preferences^ $35 billion 30 months
Eliminate tax exclusion for new private activity bonds $30 billion 24 months
Require filers to have a SSN to file for a refundable child tax credit $20 billion 16 months
Eliminate Amtrak subsidies* $15 billion 12 months
Eliminate "Capital Investment Grants" for the rail system* $15 billion 12 months
Reduce farm subsidies $15 billion 12 months
Close Section 179 "luxury SUV loophole" $10 billion 8 months
Reduce Strategic Petroleum Reserve by 15 percent $10 billion 8 months
Increase sequestration by $1 billion/year $10 billion 8 months
Repeal tax deduction for moving expenses $10 billion 8 months
Clarify worker classification $5 billion 4 months
Prevent "double dipping" between unemployment & Social Security Disability $5 billion 4 months
Allow drilling in ANWR and the Outer Continental Shelf $5 billion 4 months
Reduce federal research funding for fossil fuels and nuclear energy* $5 billion 4 months
Repeal or phase-out tax credit for plug-in electric vehicles $1.5 - $5 billion 1 - 4 months
Require inherited IRAs to be paid out within 5 years $4 - $5 billion 3 - 4 months
Extend current Fannie/Freddie fees through 2021 $4 billion/year 3 months
Extend customs fees through 2024 $4 billion 3 months
Deny biofuels credit for black liquor (retroactively) $3 billion 3 months
Increased mortgage reporting $2 billion ~2 months
Require the IRS to hire private debt collectors $2 billion ~2 months
Enact federal oil and gas management reforms in the President's Budget $2 billion ~2 months
Devote mandatory aviation security fee to deficit reduction through 2024 $1.5 billion ~1 month
Make coal excise tax permanent $1.5 billion ~1 month
Make Travel Promotion Surcharge permanent $1.5 billion ~1 month
Clarification of statute of limitations on overstatement of basis $1.5 billion ~1 month
Close the "gas guzzler" loophole $1 billion ~1 month
Revoke passports for seriously delinquent taxpayers  < $0.5 billion <1 month

Sources: CBO, OMB, JCT, and CRFB calculations
All numbers are rounded and calculated by CRFB based on a variety of sources.
*These discretionary changes would need to be accompanied by reductions in the discretionary spending caps.
^Includes expensing for exploration and development as well as the “percentage depletion allowance” 

June 27, 2014

The Obama Administration yesterday released the details of its request for war spending (Overseas Contingency Operations, or OCO), with a grand total of $66 billion of funding – $60 billion new funding in addition to $6 billion of State Department/international program funding already in the President's budget.

June 26, 2014

Continuing our series of transportation-focused blogs, this blog discusses the budgetary treatment of the Highway Trust Fund (HTF). While most of the attention regarding the HTF has focused on proposals to address the impending exhaustion of the HTF, the need to reauthorize highway programs by the end of September presents an opportunity to reform the budgetary treatment of spending from the HTF to provide greater transparency in highway spending.

June 26, 2014

As we approach the twin deadlines to reauthorize surface transportation spending and shore up the Highway Trust Fund (HTF), policymakers should note the importance of addressing the structural imbalance between highway spending and dedicated revenue.

June 26, 2014
CRFB Releases Updated Budget Simulator

Over the past few years, lawmakers have engaged in a series of budget showdowns trying to avoid fiscal speed bumps and reduce deficits. However, debt projections continue to show an unsustainable outlook, and there appears to be little appetite for the kind of deal that would be necessary to put it on a downward path as a percent of GDP. That's where you come in.

June 26, 2014

The Senate Finance Committee is beginning a markup of a short-term patch to the Highway Trust Fund, providing funding through the end of the year. Without additional funds, the Highway Trust Fund will run low this summer, disrupting funding for highway projects, and eventually run out of money entirely. If that happens, all revenue coming into the trust fund for 2015 will be used to pay for current projects, meaning no new projects would receive funding next year.

June 25, 2014

The Ways & Means Committee today marked up new and extended tax breaks costing more than $210 billion of lost revenue and increased outlays over the next decade, plus another $35 billion in interest payments.

June 25, 2014

CBO published its score of the Postal Reform Act of 2013 (H.R. 2748), a bill introduced by House Oversight Committee Chairman Darrell Issa (R-CA), on Monday. The bill would deliver net unified budget savings of $17 billion over the 2015-24 period, reflecting a $23.6 billion reduction in off-budget spending and a $6.6 billion increase in on-budget spending.

June 25, 2014
5 Ways to Fix the Broken VA

Jim Nussle, Co-Chair of the Committee for a Responsible Federal Budget, served as the Director of the Office of Management and Budget from 2007-2009. Prior to his time at OMB, Mr. Nussle represented the 1st District of Iowa in the U.S. House of Representatives for 16 years. He recently wrote an opinion featured in the CNN Opinion section. It is reposted here.

June 25, 2014

As we've been writing about various ways to improve the state of the Highway Trust Fund (HTF), the Senate Finance Committee has been discussing options to do just that.

June 25, 2014
House Rules Subcommittee Hearing on H.R. 1869

This morning at 10 a.m., the House Rules Subcommittee on Legislative and Budget Process will hold a hearing on the Biennial Budgeting and Enhanced Oversight Act (H.R. 1869), sponsored by Rep. Reid Ribble (R-WI). Maya MacGuineas, President of the Committee for a Responsible Federal Budget, will provide expert testimony.

Watch the hearing live here.

Read her written testimony here.

June 25, 2014

We've written many times on the need to reform Social Security well before it becomes insolvent in the 2030s.

June 24, 2014

We released a new paper, Trust or Bust: Fixing the Highway Trust Fund, which showed the Highway Trust Fund (HTF) faces a $170 billion shortfall over the next decade and provided numerous options to close that shortfall. In a previous blog, we explored options for doing that by increasing revenue from sources that are currently dedicated to the HTF.

June 23, 2014

Without a fix soon, the Highway Trust Fund (HTF) will run out of money this summer, slowing down infrastructure projects across the nation.

June 23, 2014

Last week, Senate Majority Leader Harry Reid (D-NV) indicated his plans to bring up the Medicare Protection Act for a vote on the Senate floor.

June 20, 2014

Both the House and Senate have passed bills reforming the VA, and a conference committee must now meet to hammer out differences between the two bills. Yesterday, CRFB President Maya MacGuineas sent a letter to the 28 conferees, calling for the resulting bill to take a fiscally responsible approach and honor our nation's commitment to veterans without adding to the national debt.

June 19, 2014

One of the wonkier fiscal debates that arises from time to time concerns the accounting method used to measure the size of the budget deficit. This week, the U.S. Government Accountability Office (GAO) published an online primer that explains the different ways to measure the deficit and what these measures say about the government’s fiscal health.

June 19, 2014

Senators Chris Murphy (D-CT) and Bob Corker (R-TN) announced a proposal this week to close the Highway Trust Fund (HTF) shortfall by increasing the gas tax by 12 cents a gallon over the next two years and indexing it to inflation. As we highlighted in our transportation paper this week, Congress should come up with a long-term solution to permanently solve the structural imbalance between current spending from the HTF and dedicated revenues into the HTF.

June 18, 2014

The Highway Trust Fund (HTF) is scheduled to run out of money this summer, threatening to slow down construction projects around the country as federal funding dries up. CRFB has just published a new analysis showing the problems facing the HTF, and listing both options to extend the HTF in the short-term and to prevent a similar crisis in the future. You can read the full paper here.

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