Foundation

Taxpayer's Tab: Debt Tops $18 Trillion As Deadline Approaches

by Demian Brady, Michael Tasselmyer, Timothy Howland / /

 
April 15 is fast approaching, and you might be wondering how the federal income tax affects taxpayers preparing to file their returns. NTU Foundation has compiled decades of data from the IRS that illustrates how each income tax bracket has changed over time, and how much of the overall tax burden filers must shoulder depending on their incomes.
For a full historical breakdown of the data from 1980 to 2012, check out our special "Who Pays Income Taxes?" feature online

 

Most Expensive

The Bill:
H.R. 1027, the Healthy Climate and Family Security Act
 
Cost Per Year: $48.4 billion ($241.3 billion over five years)
 
Until we finish calculating the estimate for H.R. 676, the Expanded & Improved Medicare For All Act - a single-payer, universal health care proposal - the legislation with the distinction of having the highest price tag so far in the new Congress is H.R. 1027, the Healthy Climate and Family Security Act. The bill, introduced by Representative Chris Van Hollen (D-MD), would institute a “cap-and-trade” program on carbon emissions.
 
Starting in 2016, the program would set a limit on carbon emissions at 10 percent less than the total metric tons of carbon dioxide emitted in the U.S. in 2005. Over subsequent years, the cap would be steadily tightened. By 2050, the target would be 80 percent less than 2005 levels. Each year, the Department of the Treasury would auction off the allowable emission permits. Any entity found to be noncompliant with the regime would be assessed a penalty three times the market value of the permits for the volume of emission that exceeded the permissible level.
 
This part of the proposal is not new and related bills were voted on in previous Congresses, including H.R. 2454, the American Clean Energy and Security Act of 2009, which passed the House. H.R. 2454 would have used the revenues generated by the federal auctions to fund energy tax credits and alternative energy and vehicle technology programs.
 
However, this proposal, and the McCain-Lieberman bill of 2003, were unable to muster enough votes for passage into law. Supporters were unable to convince the skeptics that the benefits of the bill would outweigh the costs. Unless many other wealthy and rising countries implemented similar programs, the new tax burdens would provide a strong disincentive to maintain manufacturing and other energy-intensive industries within the United States. Correspondingly, as industry is pushed overseas, the long-term environmental benefits of reduced carbon emissions - already a source of great debate - would be lessened. This latest proposal would attempt to shift the nature of the debate of the benefits by promising a payout.
 
Instead of using the money from the emission permits (scored as comparable to tax revenues) for new spending on alternative energy programs, H.R. 1027 would offer quarterly “Healthy Climate Dividend Payments” on a pro-rata basis to individuals with a valid Social Security number. The dividends would not count toward an individual’s gross income for tax purposes, and anyone could opt not to receive it.
 
Supporters of the proposal tout that the plan would rake in over half a trillion dollars over 10 years. An official cost estimate is not currently available, so given that this figure is comparable to the revenues forecast by the Congressional Budget Office for its analysis of H.R. 2454, NTUF assumes that the “dividend” outlays under this proposal would also correspond to that related bill.

The Bottom Line: The Healthy Climate and Family Security Act would establish a national cap-and-trade program on carbon emission and provide quarterly payments to individuals with a Social Security number. Based on cost estimates for related proposals, outlays could reach $241 billion over the first five years, or $48.4 billion annually.

 

Least Expensive
 
The Bill: H.R. 58, to make 5 percent across-the-board rescissions in non-defense, non-homeland-security, and non-veterans-affairs discretionary spending for each of the fiscal years 2015 and 2016
 
Savings Per Year: $19.87 billion ($39.74 billion over two years)
 
In February of last year, Congress passed legislation that suspended the limit on the amount of debt the government can legally incur. That suspension is set to expire on March 16; if lawmakers can’t agree on a new debt limit, the ceiling will automatically be set to account for all new borrowing over the last 13 months (nearly $900 Billion). At that point the Treasury Department will need to employ so-called “extraordinary measures” to free up money, using various accounting tricks and fund transfers in order to avoid exceeding the limit while keeping the government running. Even then, the CBO estimates that Treasury will have exhausted its ability to avoid breaching the debt ceiling by October or November.
 
The scenario might invoke a sense of déjà vu for taxpayers: the government shutdown crisis of 2013 resulted in a 16-day temporary furlough of 800,000 "nonessential" federal workers, as Congress debated not just the debt ceiling but also whether to strike some or all of the provisions in the Affordable Care Act.

Just this month, lawmakers avoided a partial shutdown by extending funding for the Department of Homeland Security through September; negotiations ran up against the deadline after debate over whether to include language in the legislation that would have revoked some of the President’s immigration reform measures.

Discretionary Spending Cuts in FY15 and FY16

In any event, government spending continues to rise year after year, requiring continual suspensions of or increases to the debt ceiling and resulting in a ballooning debt: as of March 12 it had topped $18.1 trillion, more than $56,634 per U.S. citizen and $154,000 per taxpayer. As a direct response, Congresswoman Marsha Blackburn (R-TN) has introduced three bills that would make across-the-board cuts to discretionary spending not related to defense, veterans’ affairs, or homeland security functions. H.R. 39, 49, and 58 would reduce such spending by 1, 2, and 5 percent, respectively, in fiscal years 2015 and 2016.
 
According to data from the budget, total non-defense discretionary spending will amount to $528.3 billion in FY 2015 and $543 billion in FY 2016. After subtracting homeland security- and veterans-related spending from those amounts, NTU Foundation determined that 1, 2, and 5 percent cuts would save $3.97 billion, $7.95 billion, and $19.87 billion per year, respectively.

Discretionary Spending Cuts
($ in Millions)
BillCut (percent)FY15 SavingsFY16 SavingsTotalAnnualized
HR 391%-$3,921-$4,027-$7,948-$3,974
HR 492%-$7,841-$8,054-$15,896-$7,948
HR 585%-$19,604-$20,136-$39,739-$19,870
Source: OMB
Note: excluding discretionary spending related to defense, homeland security, veterans affairs

NTUF has scored identical versions of Rep. Blackburn’s legislation in previous years. In the 113th Congress, her 5 percent across-the-board cut (H.R. 59) would have resulted in lower savings: $17.98 billion per year on average, indicating the extent to which non-defense discretionary spending is growing even as Congress is faced with ongoing debt ceiling crises.

The Bottom Line: H.R. 58 would reduce discretionary spending not related to defense, veterans affairs, and homeland security by 5 percent in each of fiscal years 2015 and 2016 for a total savings of $39.74 billion over two years.

 

Wild Card
 
The Bill: H.R. 1003/S. 507, the Rewarding Achievement and Incentivizing Successful Employees (RAISE) Act
 
Cost Per Year: “No Cost” – Regulatory
 
Earlier this week, Wisconsin Governor Scott Walker (R) signed legislation that prevents organized labor unions from requiring all workers to pay dues or fees. That makes Wisconsin the 25th state to enact such right-to-work laws, a contentious issue that is already drawing legal challenges from unions in the Badger State.
 
Opponents of the law claim that it allows workers who don’t pay union fees to benefit from some of the collective bargaining agreements that they offer – essentially forcing union members to subsidize non-members. They argue that right-to-work laws weaken the union’s effectiveness, requiring it to invest time and resources in workers that aren’t paying for its efforts.
 
However, supporters of right-to-work legislation point out that forced collective bargaining agreements can have a detrimental impact on workers’ salaries and benefits. Under current U.S. labor laws, companies with a unionized workforce can be prevented from giving raises or bonuses to productive employees without first re-negotiating their agreements with the union. That creates a disincentive to reward employees financially, because doing so requires additional time and effort to navigate the legal hurdles associated with the contract adjustment. Unions can also impose artificial pay ceilings that prevent one employee’s salary from being too much higher than another’s.
 
To address these problems directly, Congressman Todd Rokita (R-IN) and Senator Marco Rubio (R-FL) introduced H.R. 1003 and S. 507 in their respective chambers. The RAISE Act would allow employers to give a unionized worker a merit-based pay raise beyond what the union negotiated in his or her contract.
 
Rep. Rokita and Senator Rubio have introduced the bill in previous years, including in the 113th Congress, when Rokita said “[n]early eight million Americans are now prohibited from ever getting a performance-based raise, no matter how well they do their jobs… We can’t expect American businesses to be competitive in a globalized economy under a system that forbids individual raises and discourages hard work.”
 
The bill would not require any additional federal funding, as it is a regulatory measure that amends existing laws.

The Bottom Line: The RAISE Act would allow employers of unionized workers to offer merit-based pay increases above the salaries negotiated in their union’s contracts.
                  

National Taxpayers Union Foundation is a nonpartisan research and educational organization dedicated to helping Americans of all ages understand how taxes, government spending, and regulations affect them. Through our timely information, analysis, and commentary, we’re empowering citizens to engage in important policy debates and hold officials accountable.

Our findings are provided for educational purposes only and are not intended to aid or hinder the passage of legislation or as a comment on any Member’s or Candidate's fitness to serve. Photo Credits: Wiki Commons


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