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Latest Taxpayer's Tab: Debt Ceiling Debate Looming
Posted By: Michael Tasselmyer - 10/07/13

Tab Insert

The federal government is currently in the second week of its shutdown, due to Congressional disagreements over which parts of the government to fund -- and more importantly, at what levels. However, a larger and potentially more disruptive issue is looming should Congress fail to act in the coming days. The U.S. Treasury says our debt will eclipse the statutory debt limit of nearly $16.7 trillion on October 17, and that could have negative ripple effects throughout the global economy.

In the latest Taxpayer's Tab, NTUF offers a bit of background on the debt limit and how recent spending patterns have played into the budgetary debates on Capitol Hill. Research and Outreach Manager Dan Barrett put together an infographic with some perspective on the composition of our debt and where it's been over the years. There's also discussion of a blog post on mandatory vs. discretionary spending trends and how the steady rise in mandatory spending as a percentage of federal outlays has shaped the debate over how heavily we should finance government activities with debt.

In addition, NTUF continues to score bills as part of our BillTally project & the latest tab features some of the research that's been happening on that front. In this week's edition, NTUF looked at:

  • Most Expensive: Rep. George Miller's H.R. 2721, the Pathways Back to Work Act of 2013, proposes $12.5 billion over five years to fund job training and economic stimulus programs.
  • Least Expensive: Sen. David Vitter's S. 902 would deny certain Executive branch employees (including Congressman, theirs staffs, the President & Vice President, and various appointees) the taxpayer-funded subsidy afforded them to purchase health insurance through the Affordable Care Act. The bill would save $489 million over five years, an average of $98 million per year.
  • Wildcard: Senators Susan Collins (R-ME) and Tom Carper (D-DE) introduced S. 1528, the Comprehensive National Mercury Monitoring Act, to monitor changing mercury levels in U.S. soil and water systems. It would require $95 million over three years, or $32 million per year.

You can check out the most recent edition of the Taxpayer's Tab online here. Sign up to receive future issues in your email inbox here.

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A Roadmap to Tax Reform in Nebraska
Posted By: Lee Schalk - 10/07/13

With the Nebraska Legislature’s 2014 session only three months away, the Tax Foundation and Platte Institute have teamed up to release a new book detailing powerful tax reform options for the Cornhusker State. Like their conversation-starting publication on North Carolina tax reform (which helped Tar Heel lawmakers achieve historic tax relief), Tax Foundation’s Building on Success: A Guide to Fair, Simple, Pro-Growth Tax Reform for Nebraska should help get the ball rolling in Nebraska.

While the state currently enjoys low unemployment and a high quality of life, there is plenty of room for improvement. Tax Foundation’s Joe Henchman explains that “beneath that success are anxieties: worries about the future of agricultural prices, the outward migration of young people and retirees, the cultural perception of the Plains states, and heavy reliance on tax incentives.” The state currently ranks 31st on the State Business Tax Climate Index.

To address these concerns about Nebraska’s future, the guide offers the following tax reform options:

• Option 1: Revenue-neutral plan that would lower the top individual income tax rate from 6.84 (highest among neighboring states except Iowa) to 5.5 percent, simplifying the current system from four brackets to two. This plan would also impose a single corporate income tax rate of 5.5 percent (top rate is currently 7.81 percent), slightly expand the sales tax base, and strengthen caps on property taxes. 

• Option 2: In addition to the lower rates detailed in Option 1, this plan includes “triggers” that would further reduce the corporate income tax rate if revenue surpasses stated goals. The first trigger would lower the rate to 4 percent, and the second trigger to 3 percent.

• Option 3: Builds upon Option 2 by adding individual income tax “triggers.” The first trigger would reduce the rate to a flat 4 percent, and the second trigger to a flat 3 percent personal income tax.

Each of these plans is discussed in further detail in the book, along with in-depth study of Nebraska’s economy and previous tax reform efforts in the state. Moving forward, this guide should serve as a valuable resource for Nebraska lawmakers looking to implement a more growth-oriented tax system. As Washington continues to rack up debt and increase taxes, it’s up to state lawmakers to grant relief to overburdened taxpayers. If Cornhusker tax reform is successful, citizens will be able to keep more of their hard-earned pay and businesses will enjoy more of their profits, allowing for greater investments, new jobs, and a higher quality of life for all Nebraskans.

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Infographic: Where We're at with the Debt Ceiling
Posted By: Dan Barrett - 10/04/13

As Congress continues to play budgetary chicken, prolonging the government shutdown, another debate is brewing that might or might not be fixed with a budget deal: the debt ceiling. The last time we came close to the federal borrowing limit, Congress pushed through the Budget Control Act, which put in place budget caps in exchange for an increase in how much debt the government can issue. However, BCA lacked any real entitlement reform and taxpayers are again looking at a divided and dysfunctional Congress as the debt ceiling deadline ticks down to zero. If the ceiling is not raised, the U.S. could default on our debt, sending shockwaves through the global economy. However, it might be the jump start that the U.S. needs to bring about true reforms and fiscal sanity.

To supplement this week's Taxpayer's Tab, NTUF compiled some information so that folks can get a read on where the government is at on the debt and how we got in this position (hint: entitlements).

Do you think the U.S. should raise the debt ceiling? If not, how would you get the country's finances back in order (especially because a default would likely lower our credit rating)?

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Obama's Canceled Asia Trip Saves Taxpayers $8.4 Million
Posted By: Michael Tasselmyer - 10/04/13

In the wake of the government's shutdown, the White House announced on Thursday that President Obama would no longer be traveling to Asia this week.

The trip, which was scheduled to begin today and last through October 12, would have taken the President to two regional conferences (the Asia-Pacific Economic Cooperation summit and the East Asia Summit) and four different countries, including Indonesia, Brunei, Malaysia, and the Phillippines. White House Press Secretary Jay Carney cited "the difficulty in moving forward with foreign travel in the face of a shutdown" as the primary reason for cancelling the trip.

The full extent of what that trip may have cost U.S. taxpayers remains unknown. However, NTUF was able to compile a partial estimate consisting of the cost to fly Air Force One from Washington, D.C. to the countries President Obama had planned to visit.

Flight Time (hours)
Washington, D.C. to Jakarta, Indonesia 20.83
Jakarta, Indonesia to Bandar Seri Begawan, Brunei 2.38
Bandar Seri Begawan, Brunei to Kuala Lumpur, Malaysia 2.35
Kuala Lumpur, Malaysia to Manila, Phillippines 3.57
Manila, Phillippines to Washington, D.C. 17.65
Total Flight Time: 46.78
Cost Per Flight Hour: $179,750
Total Cost:  $8,408,705

Flight times were estimated via The $179,750 cost per flight hour reflects the latest figure given to the Congressional Research Service (CRS) by the U.S. Air Force.

It should be noted that these estimates do not take into account any refueling stops, additional aircraft support, cargo transport, hotel and lodging costs, or any of the other myriad security and logistical measures taken anytime a President travels abroad. Many of these costs are unknown but are estimated to amount to tens of millions of dollars, in some instances.

For more on what it takes to move the President overseas, as well as the general lack of transparency when it comes to those costs, check out NTUF's latest study on Presidential Travel, "Up In The Air".

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The Late Edition: October 3, 2013
Posted By: Curtis Kalin - 10/03/13

Today’s Taxpayer News!

Shutdown web pages: In what may have been the final pre-government shutdown act by the National Park Service and the Department of Agriculture, the departments used their time to come up with new web site splash pages saying their website was to be inaccessible during a “shutdown”.  More details on the Daily Caller.

Dependant disaster: A Philadelphia County is reeling after the revelation that employees had been committing insurance fraud on a massive scale for over 20 years. The officials were packing their taxpayer funded insurance plans with ineligible dependants, and pocketing the money. The total loss was estimated at $200,000. More details at Phillyburbs.

Duplicate waste: North Carolina’s New Hannover County government is advocating a significant investment in recycling centers.  The issue is private companies have already invested about $60 million into landfills and recycling in and around the community.  Read more at the Star New Online.

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The Late Edition: October 2, 2013
Posted By: Curtis Kalin - 10/02/13

Today’s Taxpayer News!

Low Voltage: General Motors reported that the brand’s much hyped and subsidized Chevy Volt continued its dismal sales pace in September. Volt sales saw a 38% decline from year to year. Taxpayer funded credits for September were over $13 million. The National Legal Policy Center has more details.

Corruption crackdown: After more than 30 lawmakers from New York State have been embroiled in ethics issues over the last seven years, a commission appointed by Gov. Andrew Cuomo has proposed new rules that would strip corrupt politicians of their taxpayer funded pension. Read more from today’s New York Times.

Taxpayer toilet: The Federal Bureau of Land Management used spent over $98,000 for a single outhouse on a park trail in Alaska. CNSNews has more.

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Government Shutdowns Then And Now
Posted By: Michael Tasselmyer - 10/01/13

As the clock struck 12:01 this morning, the federal government found itself in a situation we haven't seen since 1996: a shutdown. Because Congress was unable to come to an agreement on how to fund certain federal agencies whose budgets depend on annual appropriations, they've been forced to "shut down", and in some cases completely halt all activity.

While the term does sound dramatic, this is actually the 18th time since 1976 that the government's been forced to temporarily shut down. The other 17 episodes have lasted anywhere from a single day to nearly three weeks, stemming from political squabbles over issues like abortion to budgetary debates that simply couldn't be settled in time.

So what will happen until Congress is able to pass a budget or agree to a short term fix? Under federal law, all government agencies are required to have official contngency plans that specify which employees and duties are "essential" and "non-essential" (or "excepted" and "non-excepted"). This ensures that the government will still act in limited ways to protect public health & safety, and it continues benefits like Social Security and certain types of assistance for veterans. The Congressional Research Service has an excellent overview of the legal issues the government must consider during a shutdown, as well as examples of how certain government services and functions were affected. Some 800,000 federal employees are likely to feel the effects of the latest shutdown either in the form of furloughs or unpaid leave. The Departments of Health and Human Services, Commerce, and Interior are expected to be among the hardest hit.

While the last shutdown in 1995-1996 may offer some precedent when it comes to how the current one might play out, there are contextual differences to consider.

  • For one, federal employment has increased substantially since then: in 1996, there were a little less than 1.9 million full-time civilian employees in the Executive branch. In 2012, that number was closer to 2.1 million, which means an additional 200,000 federal workers and their families could be affected this time around.
  • President Clinton's 1996 budget request, over which the disagreement began that ultimately lead to two government shutdowns in late 1995, included $1.6 trillion in outlays and a $196.7 billion deficit. President Obama's latest budget request, submitted in April, consisted of $3.03 trillion in outlays and a $744 billion deficit.

The charts below (using Office of Management and Budget data) illustrate U.S. spending on mandatory & discretionary programs in 2012 compared to 1996:


A major point of contention in the most recent budget battle that caused today's shutdown was how (and whether) to fund the President's health care reform law. Mandatory spending -- which includes funding for entitlement programs like Social Security, Medicaid, and Medicare -- has increased dramatically in recent years, and will likely remain a primary focus of budget debates as long as it makes up the majority of federal spending.

There is also growing concern over the amount of funding required to keep up with interest payments on America's debts. As the government borrows more to finance its existing programs, interest payments have increased significantly. So far, the government has spent about $396 billion on these payments in Fiscal Year 2013 alone, not including the month of September. In 1996, that total was $344 billion.

While the debate over budget priorities and even the shutdown itself aren't new on Capitol Hill, this time around, the fiscal trends framing the discussions are.

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The Impact of Past Government "Shutdowns"
Posted By: Curtis Kalin - 09/30/13

The federal government officially runs out of funding at midnight tonight.  While a good amount of attention will be devoted to political blame, it’s helpful to understand what a shutdown really means and what will actually happen in its wake.

First, the name, “shutdown” is not entirely accurate.  The situation can more cogently be described as a funding gap.  Between which one stream of funding ends before another is approved.  The drastic nature of these once normal bureaucratic snafus were exacerbated in 1980 when President Carter’s new Attorney General, Benjamin Civiletti issued a couple legal opinions interpreting the obscure 1884 Antideficiency Act: One saying the work of government cannot continue through a funding gap, and another modifier saying that only essential government services and personnel could legally remain working.  To allow non-essential government employees to work without being paid meant they would be “illegal volunteers”. 

After the consequences of funding gaps became clear, politics gradually asserted itself.  Throughout the end of Carter’s term and on through the Reagan and Bush terms, temporary shutdowns of anywhere between one and five days were commonplace and were precipitated by an outside political issue.  The gap and the subsequent standoff between President Clinton and House Speaker Newt Gingrich in 1995, which dragged on 21 days, holds the modern record.  Due to the political backlash that engulfed Washington in the months following the ’95 shutdown, America has not seen such an event since. 

Another note about the term “shutdown”: Civiletti’s second legal opinion allowing “essential” workers to remain on the job means many impactful government services will continue.  Medicare and Medicaid reimbursements will not stop.  Social Security checks will continue to be mailed. There is also a current statute stating that military personnel will continue to accrue pay which will be reimbursed after funding is restored.  However, the term “essential” does not apply to national parks, zoos, and museums like the Smithsonian.  They will close if there is a funding gap. 

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Learning the Cost of Lois Lerner's Pension
Posted By: Pete Sepp - 09/30/13

Even before she retired last week, scandalized IRS official Lois Lerner’s compensation was already attracting attention.  While on administrative leave, federal rules allowed her to keep collecting a salary, one that reportedly totaled $177,000. So it was no surprise when speculation arose over how much Lerner could collect in federal pension benefits.

Unfortunately, that speculation, which initially projected a benefit of over $50,000, might be off by about half … and in the wrong direction. National Taxpayers Union calculations show that Lerner could qualify for a starting pension at the annual equivalent of as much as $102,600, and up to $3.96 million over her lifetime.

The individual retirement choices of federal employees are not a matter of public record. However, precisely because NTU has been denied this information in the past (specifically pertaining to Members of Congress), we’ve developed the most accurate method available to provide solid estimates of how much federal employees can collect.

And now, the caveats for Lerner. NTU assumed she:

1) Joined the Civil Service Retirement System (CSRS) from the very beginning of her federal employment, and left the IRS with 34 years of service in various posts;

2) Had a “high-three” average salary of $177,000;

3) Opted for a reduction in her current benefits so that her spouse could receive part of the pension after she died;

4) Receives annual Cost of Living Adjustments of 3 percent; this is the level that CSRS’s own actuaries have employed when projecting future liabilities for the system;

5) Lives to the age of 87 years, which is the average age of death for a female who is currently age 62 under standard mortality tables used by the life insurance industry.

Some may wish to quibble with these assumptions, but even under other scenarios, Lerner’s retirement benefit could be quite generous. Want to assume she joined CSRS after she left the judicial branch, and signed on with the Federal Election Commission in 1981? The annualized benefit would drop … to $96,200, and the lifetime total to $3.7 million. Want to be ghoulish, and project a lifespan of 80 years instead of 87? The lifetime amount would be less … but still a considerable $2.57 million. Or, suppose she decided to leave CSRS and transfer into the newer Federal Employees Retirement System (FERS) when offered the chance during one of the “open seasons.” The pension benefit would be significantly smaller, just under $60,000 annualized to start. However, with FERS, she would also participate in and be eligible for Social Security benefits, and could take advantage of a government salary match of up to 5 percent through the Federal Thrift Savings Plan, which works like a 401(K) defined contribution arrangement. In the end, her FERS package could still be quite lucrative.

But didn’t Lerner pay into to her pension plan out of her own salary? Yes, though the contribution rate during Lerner’s career was generally 7 percent. As we have noted with lawmakers’ pensions, taxpayers pick up the lion’s share of a typical lifetime CSRS retirement payout.

According to media reports, prior to her decision in favor of voluntarily retiring Lerner was in danger of being removed from her job due to findings from an IRS inquiry board citing “neglect of duties” and mismanagement. But to taxpayers, this latest sordid episode in the history of the tax agency has but one lesson: any way it’s sliced, they’re the ones left to bleed.

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The Late Edition: September 30, 2013
Posted By: Curtis Kalin - 09/30/13

Tweet tutoring: The Food and Drug Administration is paying over $182,000 of taxpayer money to an outside group for the expressed purpose of “better understanding” their social media. The agency is currently far behind other agencies in the number of Facebook “likes” and Twitter “mentions”. Read more at the Washington Free Beacon.

Paycheck hypocrisy: An Illinois judge ruled that members of the general assembly will indeed get their taxpayer funded paychecks after Illinois Gov. Pat Quinn forced members of the state legislature to forfeit their salaries until they solved the state’s unfunded pension liability crisis. On top of that, the back pay will have to come with interest.  The Herald Review has more details.

Paper waste: The staff of Florida Rep. Alan Grayson used a bit of their time on the job to pull a prank on a fellow employee.  A member of Rep. Grayson’s district office staff posted a picture of a chair wrapped I toilet paper and a note admitting the deed on an office phone on Facebook.  Presumably, all of this occurred during business hours. Bizpac Review has more.

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