Taxpayer's Tab: Should Congress Get an Automatic Annual Raise?

In this week’s edition of the Taxpayer’s Tab, NTU Foundation details our latest research on legislation that would impose new taxes on sportswear, address Congressional cost-of-living adjustments, and fund new missile defense programs in Israel.

Most Expensive

The Bill: H.R. 1915, David’s Sling Authorization Act for 2016

Cost Per Year: $287 million (one-year cost)

According to a 2014 report from the Congressional Research Service, “Israel is the largest cumulative recipient of U.S. foreign assistance since World War II.” The United States has appropriated about $121 billion in bilateral assistance in that time, including just under $2.5 billion for collaborative Israeli missile defense projects over Fiscal Years 2006-2014.

Over the past few years, the Israel Defense Forces (IDF) have collaborated with the U.S. government and Massachusetts-based defense contractor Raytheon to develop a missile defense program known as David’s Sling. The system is one of a number of U.S.-backed projects designed to provide varying levels of protection from short-, medium-, and long-range missiles. The IDF is pushing to develop the technology for more efficient defense against weapons launched by militant terrorist groups like Hezbollah along the Israeli border. David’s Sling can counter missiles launched from up to 180 miles away.

U.S. military sources have indicated that recent tests of the system have been successful. However, the project will require significant financial resources to operate (it’s been estimated that each missile fired from the David’s Sling system will cost about $1 million). To that end, Representatives Derek Kilmer (D-WA) and Jim Bridenstine (R-OK) recently introduced the David’s Sling Authorization Act for 2016, which would provide about $287 million in funding to ensure the project continues through next year. Of that total nearly $150 million would be set aside for procurement, and another $137 million would go towards research, development, and testing. For FY 2016, the U.S. Department of Defense’s Missile Defense Agency requested $103 million for procurement costs related to “Israeli Cooperative Programs” – the funding in H.R. 1915 would be in addition to any of those appropriations.

Rep. Bridenstine said in a press release that “David’s Sling will provide additional protection by intercepting incoming missiles too far out of range for the Iron Dome. U.S.-Israeli co-development of David’s Sling demonstrates the unshakable American commitment to Israel’s security.” Rep. Kilmer claimed that the investment could “create 21st century jobs in both countries.”

Least Expensive

The Bill: H.R. 1585, To eliminate automatic pay adjustments for Members of Congress, and for other purposes.

Savings Per Year: $3 million (first-year savings)

Washington, D.C. has largely thrived while much of the rest of the nation continues to struggle with the consequences of the economic downturn and slow growth stemming from the 2008 housing bubble and ineffective "stimulus" measures. We noted earlier this year that the compensation and benefit costs for full-time federal civilian employees stood at an average of $116,828 per year in 2012. The Congressional Budget Office compared private and public sector labor costs and found that, “Overall, the federal government paid 16 percent more in total compensation than it would have if average compensation had been comparable with that in the private sector.” The federal workforce’s bosses serving in Congress also collect substantial salaries for their work.

The current base salary for Members of Congress is $174,000. The Speaker of the House earns $223,500 and the House Majority & Minority Leaders receive $193,400. Many in Congress have also accumulated significant personal wealth. Each year Roll Call digs through the financial disclosure forms released by Members of Congress in order to calculate each one’s net income. In their latest tally last October, they found at least 188 millionaires – about 1/3 of Congress.  By OpenSecret’s reckoning, the median net worth of a member of Congress was $1,029,505 in 2013, while the average American household’s was $56,355.

Members are eligible for an automatic annual adjustment in pay (a cost of living adjustment or COLA) equal to the change in the government’s Employment Cost Index for the fourth quarter of the prior calendar year compared to the year before that (this constitutes a one-year time lag between when the pay raise is measured and when it actually takes effect). The pay increase goes into effect unless Congress votes to block it. The COLA was rejected in 1994, 1995, 1996, 1997, 1999, 2007, and each year since 2010.

Members are due for a potential raise next January of 1.7 percent – about $3,000 per Member, and a combined total increase in salary costs of $3.2 million. Several bills introduced in Congress would amend the law so that Members would have to actively vote to receive an increase instead of having to vote to block it. The most recent, H.R. 1585, introduced by Representative Robert Latta (R-OH) and seven cosponsors, would repeal the automatic COLAs after 2016. Other bills in the 114th Congress to nix the automatic COLA include H.R. 513 (12 sponsors and cosponsors) and S. 17 (with 2 sponsors).

Wildcard

The Bill: S. 952, the United States Optimal Use of Trade to Develop Outerwear and Outdoor Recreation (OUTDOOR) Act

Cost Per Year: $11 million ($55 million over five years)

Outdoor recreation in the U.S. is a massive industry: a 2012 report from the Outdoor Industry Association estimates that it provides nearly 6.1 million jobs and generates about $79.6 billion in local, state, and federal tax revenue. The same report cites data from the Bureau of Economic Analysis indicating that the $646 billion spent on outdoor recreation in 2010 was more than the total amounts spent on gasoline & fuel, pharmaceuticals, and even household utilities. When people suit up to partake in the great outdoors, they do so largely with products made overseas that are subject to high tariffs.

A specific category of textiles known as “recreational performance apparel” includes clothes like wind- and water-proof jackets designed specifically for outdoor recreational use. Most such performance apparel purchased in the U.S. is no longer produced domestically, but instead is manufactured overseas at lower cost. Manufacturers pay tariffs that average about 14 percent but can be as high as 28 percent any time they import such clothing.

Although the tariffs were originally implemented in order to protect domestic producers, many trade groups within the industry (including the aforementioned Outdoor Industry Association) oppose them on the grounds that they are “outdated” and pass on unnecessary costs to consumers. Other smaller companies that still manufacture outdoor performance apparel in the U.S. have lobbied to keep the tariffs in place, arguing they can’t compete with the cheaper outsourced labor that larger producers typically utilize.

Senator Kelly Ayotte (R-NH) has reintroduced legislation that would eliminate the tariffs and instead institute a new, lower tax on outdoor gear. The OUTDOOR Act would levy a 1.5 percent tax on the value of imported outdoor performance apparel. The revenue would be deposited into a new Sustainable Textile and Apparel Research (STAR) Fund and used to finance projects that support the development of eco-friendly outdoor apparel production. Her office claimed in a press release that the bill “would make outdoor apparel … more affordable for consumers and help outerwear retailers to create jobs, import goods, and invest in research and development of new cutting-edge performance apparel.”

The legislation was first introduced in the 111th Congress and has been reintroduced in each session since. NTUF expects the bill would increase federal spending by $11 million per year.