Taxpayer's Tab: H.R. 4117, the EITC for Childless Workers Act of 2014


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Happy Memorial Day!

Presidential TravelFrom the staff at National Taxpayers Union Foundation, we wish you a happy and safe Memorial Day! We salute those who have made the ultimate sacrifice to defend America and who are making sacrifices everyday to ensure our freedoms.


Most Expensive Bill of the Week

The Bill: H.R. 4117, the EITC for Childless Workers Act of 2014

Cost Per Year: $4.4 billion ($22.2 billion over five years) -- Partial Estimate

Congressman Charlie Rangel (D-NY)The Earned Income Tax Credit (EITC) is a benefit established in 1975 and awarded to lower-income individuals and households to help reduce poverty. EITC benefit levels vary depending on how many children a recipient claims as well as his or her income: parents are generally eligible for more money for longer periods of time than childless recipients. The credit reflects a fixed percentage of income up to a certain level of earnings; the benefit rate then plateaus, and eventually begins to fall with each additional dollar earned beyond a certain point. It is what is known as a “refundable” credit, which means that an individual can claim it regardless of his or her tax obligation. In its first year, 6.2 million families claimed total credits of $1.25 billion, of which $900 million was refunded as outlays. By 2011, the most recent year with detailed information, nearly 28 million families and individuals claimed the credit, with refundable outlays totaling $55.7 billion. The latest budget projects outlays of nearly $59 billion for FY 2014 to support 32 million filers.

Backers of the program often cite how many “working families” the program supports, but childless workers are also eligible. Low-wage workers without children are able to claim the credit but at lower levels, faster phase-in/out rates, and lower award amounts. There is also an age restriction for workers under age 25.

Congressman Charlie Rangel (D-NY) has proposed to expand the tax-based welfare program via the EITC for Childless Workers Act. H.R. 4117 would seek to extend some of the benefits enjoyed by families to single low-wage individuals, many of whom are having fewer children and getting married at a slower rate than previous generations. The Great Recession has also compounded income disparity issues as higher, longer unemployment rates and decreasing labor participation rates persist.

Rangel’s plan would start with lowering the EITC eligibility age from 25 to 21. The minimum age was originally established to avoid having low-wage college students apply for the credit while simultaneously relying on their parents for financial assistance; new capabilities within the Internal Revenue Service allow officials to identify when that occurs.

H.R. 4117 would also change the phase-in and out rates, which would affect the total amount one could receive from the EITC. Currently, once a childless worker earns $6,600, he or she has reached the maximum amount of credit earned under the EITC, with a decreasing percentage earned until they make $15,000. Under today’s system, one can earn a maximum $496 from the EITC. Rep. Rangel’s bill would institute a higher phase-in rate, which would mean that a worker could get as much as $1,500 in benefits. They would receive 23.15 percent for each dollar earned until $16,900 and then the rate would be phased out up to $23,500. Married childless workers would also receive increase benefits as well.

NTUF was only able to determine a partial estimate for the EITC for Childless Workers Act due to a lack of economic analysis specific to H.R. 4117. President Obama proposed a similar set of measures in his most recent federal budget (page 199) but his phase-in and out rates are lower, as is the maximum allowable credit. The President’s budget estimates his plan would increase spending on refundable outlays by $22.2 billion over five years. If H.R. 4117 was enacted, the cost to taxpayers would be higher, but it is unclear by how much. The measure does not include any spending offsets. capitol_dome_tinytaxtabhaticonalpha.png

The Bottom Line:  The EITC for Childless Workers Act would make the Earned Income Tax Credit available to Americans 21 years of age or older, increase benefit rates, and expand benefits for childless workers. H.R. 4117 would increase spending by at least $22.2 billion over five years.


Least Expensive Bill of the Week

The Bill: S. 2201, a bill to limit the level of premium subsidy provided by the Federal Crop Insurance Corporation to agricultural producers

Savings Per Year: $100 million ($500 million over five years)

Senator Jeanne Shaheen (D-NH) Throughout the heated debate surrounding the Farm Bill, which was enacted in February, many legislators -- but not enough -- were adamant about fundamentally reforming the federal crop insurance program. The program was established in the 1930’s in order to temper the economic effects of large-scale downturns in agricultural productivity. To some extent, the U.S. is experiencing those effects now -- higher prices and lower supply of certain crops -- due to severe and widespread drought in California.

The program has proven to be a major financial burden for the government. In FY13, the government spent $6 billion on the program; poor weather and higher prices in 2011 and 2012 resulted in costs of $11.3 billion and $14.1 billion in those years, respectively. Part of the problem is that the government subsidizes much of the premiums that farmers pay, so even in the absence of environmental hardships, taxpayers bear most of the program’s costs. On top of that, some experts argue that the program incentivizes production at the expense of risk mitigation, making it more likely that farmers will require insurance payouts and damage their land in the process.

Instead of reducing reliance on taxpayers through the crop insurance system, the Farm Bill law could easily end up increasing costs over the long-term. The bill included a bipartisan agreement to limit direct payments to farmers but much of that savings will be re-directed to an enhanced crop insurance system. Expenses could be pushed further upward if agricultural prices, currently at historic highs, return to their average, triggering additional new federal revenue support programs.

In an attempt to head off some of the program’s costs, Senators Jeanne Shaheen (D-NH) and Tom Coburn (R-OK) introduced S. 2201. According to a press release from Senator Shaheen’s office, “[t]he bipartisan legislation would cap crop insurance premium subsidies at $70,000 per farm each year.” The federal premium subsidy is by far the program’s most significant cost: in FY 2013, premium subsidies totaled almost $7.3 billion. However, the provision would go largely unnoticed by many farmers. A 2011 Government Accountability Office study found that 1.3 percent of farms would be affected by the proposed cap.

Senator Shaheen wrote that, according to agricultural policy analysts, the Act would save approximately $1 billion over ten years. NTUF only scores bills in the first five fiscal years, resulting in a $500 million savings to taxpayers. capitol_dome_tinytaxtabhaticonalpha.png

The Bottom Line: S. 2201 would limit crop insurance subsidies to no more than $70,000 for each farm annually. It would save taxpayers an average of $100 million per year.


The Wildcard

The Bill: H.R. 4632, the If Our Military Has to Fly Coach Then so Should Congress Act of 2014

Cost Per Year: “No Cost” -- Regulation

Congressman Paul Gosar (R-AZ) With a few exceptions, employees of the Executive Branch -- including members of the Armed Forces -- are generally prohibited from traveling first class. The goal of these regulations is to contain costs where possible. In 2008, the White House had to issue a memorandum to the heads of all agencies and departments reminding them to strictly adhere to the regulations after a Government Accountability Report uncovered a “breakdowns in internal controls and a weak control environment [that] resulted in at least $146 million in improper first and business class travel government-wide.” In the interest of containing spending and out of fairness to the military flying coach, legislation in Congress would seek to extend the ban on first class travel to Members of Congress.

When our Representatives and Senators are elected to office, they are provided a fund to assist them with their representational duties, known as a Member Representational Allowance (MRA) in the House and in the Senate as the Senators' Official Personnel and Office Expense Account (SOPOEA). Members can spend tax dollars on numerous things, such as buying office equipment, paying staff salaries, and official travel for Members going to and from the District.

For FY 2014, $554 million was provided for MRAs (and on May 1, the House approved the same funding level for FY 2015), and $394 million was provided for SOPOEAs. However, because costs and distances vary for Members, individual allotments can vary significantly: Each office’s allowance is based on factors such as population within the district, prevailing rents, and the district's distance from Washington, DC. Last year, the average MRA was $1.2 million, with the highest being $1.4 million and the lowest $1.2 million. The allowances are offered in addition to a Member’s salary, which is at least $174 ,000 annually.

Over the years, Congress has been more forthcoming in providing transparency regarding how exactly legislators spend their representational funding. Prior to 2009 House data was available only book form. Now citizens can download the reports through the Office of the House Clerk or the Secretary of the Senate. For example, for the Fiscal Year through December of 2013, Congressman Jim Moran (D-VA), representing a district just across the river from Washington, D.C., reported $933.55 in travel expenses while his colleague Congresswoman Colleen Hanabusa (D-HI) reported $32,520.82 on travel.

Congressman Paul Gosar (R-AZ) would seek to limit how Members can spend their travel allowances: “Congress should not be using taxpayer’s hard-earned money to buy luxury airline seats. If members of our military can’t fly first class using taxpayer funds, neither should members of Congress.” H.R. 4632 would change U.S. regulations to limit travel by members of the Legislative Branch similar to employees of the Executive Branch.

The Act would not on its own affect federal spending; although it adjusts the rules governing how Members could use their office funds, the bill does not alter the total amounts available to each office on Capitol Hill. H.R. 4632 would not prevent officials from spending the money it might save from buying coach tickets on other approved activities, like new computers or better district office space. However, it is possible that if offices refrain from spending the travel expense savings, the amounts could be deposited back into the Treasury at the end of the Congressional term, resulting in real savings. Currently, unspent MRAs remain available for two years for expenses for the year for which they were originally appropriated. Related legislation, S. 2313, the Do Your Job Act, includes a section to automatically rescind unspent travel funds from a previous fiscal year, while H.Rs. 106 and 496 would direct all unspent MRA funding to deficit reduction. capitol_dome_tinytaxtabhaticonalpha.png

The Bottom Line: The If Our Military Has to Fly Coach Then so Should Congress Act would prohibit Members of Congress from using federal funding to buy airline tickets above coach class.