Total Net Spending Agenda: $68.076 billion per year
Economy, Transportation, and Infrastructure: $8.1 billion per year
A. Enact Comprehensive Tax Reform:
1. General Statement:
“Tax reform, which has been on the agenda for some time, also has a key role to play [in boosting long-term growth]. … The Chairman of the House Ways and Means Committee [Representative David Camp] … issued a comprehensive proposal in 2014, which provides a basis on which to move the discussions forward.” (pg. 21)
2. Corporate Income Taxes:
“Reforms [of corporate income taxation] to combat base erosion and profit shifting (BEPS) would go a long way towards … supporting overall tax reform efforts by levelling the playing field.” (pg. 21)
“Cut the marginal corporate income statutory tax rate and broaden its base, notably by phasing out allowances.” (pg. 27.)
“Act towards rapid international agreement and take measures to prevent base erosion and profit shifting.” (pg. 27)
3. Individual Income Taxes and Deductions:
“The recovery in the housing market provides an opportunity to reduce or remove mortgage interest relief for owner-occupiers, which is one of the costliest tax expenditures and is not matched by the taxation of owner-occupied imputed rental income. … Experience in other countries such as the United Kingdom and France demonstrates that phasing in caps (or phasing out the deduction altogether) can be successful.” (pg. 22)
“Simplify personal income taxes to reduce compliance costs and improve transparency.” (pg. 27)
“Make the personal tax system more redistributive by restricting regressive income tax expenditures [including mortgage interest deduction].” (pg. 27)
“Reform the housing finance system to ensure access to mortgage credit of creditworthy homebuyers while providing better guarantees of financial stability and avoiding again exposing taxpayers to costly bailouts.” (pg. 27)
- Comprehensive Tax Reform: Unknown. A streamlined Tax Code would almost certainly entail lower administrative and enforcement costs, and some of those savings are reflected in the Joint Committee on Taxation’s (JCT) analysis of Congressman David Camp’s (R-MI) Tax Reform Act of 2014. However, the JCT’s analysis of the legislation is largely focused on revenue effects and a complete outlay estimate for all of the bill’s provisions, either from the Congressional Budget Office (CBO) or Committee staff, is currently unavailable.
JCT’s analysis does include an estimate of outlay effects in the Camp tax reform plan. On net, the fourteen items included JCT’s report could reduce federal spending by as much as $67 billion over the five years from 2014-2018. However, that figure includes a provision that would modify the Earned Income Tax Credit (EITC) and reduce associated outlays by $110 billion in that time. The OECD’s Economic Survey includes a recommendation (listed separately below) to expand the EITC, running directly counter to the Chairman’s proposal. Excluding these savings, the remaining items analyzed by JCT could increase spending by $43 billion over five years.
It is important to note that simplifying the Tax Code would result in significant savings not reflected through NTUF’s BillTally methodology. According to a 2014 report by the National Taxpayers Union, the compliance costs associated with the most recent tax filing cycle totaled over 6.1 billion hours in lost productivity and $224.3 billion in deadweight economic losses.
- Corporate Income Taxes: Unknown. The OECD notes, “At 39.1%, the statutory corporate income tax rate (when combined with the average of state taxes) is the highest in the OECD and well above the OECD average of 25.5%. However, the corporate income tax base is narrow and effective rates vary widely across business sectors, limiting revenue and imposing large investment distortions.” (pg. 21)
The comprehensive tax reform proposal put forth by Congressman Camp includes a provision to gradually lower the corporate income tax rate to 25 percent. According to the JCT’s analysis, doing so would reduce revenues by $169.5 billion over the 2014-2018 period.
- Taxation of Corporations’ Foreign Income: Unknown. The OECD’s Economic Survey does not specify which specific reforms it would encourage the U.S. government to make regarding BEPS, and the extent to which additional federal funding may be required. In 2013, it published an Action Plan on Base Erosion and Profit Shifting that establishes goals for “an international coherence of corporate income taxation” and would also seek to prevent double taxation.
- Individual Income Taxes and Deductions: Unknown. Under current law, taxpayers who itemize their tax deductions can deduct mortgage interest payments made towards a maximum of $1 million of mortgage debt on their first and second homes. Eliminating or reducing these deductions, then, would result in more tax revenue for the federal government. The Joint Committee on Taxation estimates that over the five year period from 2014-2018, individuals will claim $405.2 billion in mortgage interest deductions.
B. Standardize and Expand Adult Job Training Programs:
“The economic benefits of [state-funded job training] is [sic] constrained by the limited transferability of training credentials … The federal and state governments should engage in a dialogue with employers and educators to strengthen the credentials of training programmes, possibly through standardised curriculums and external evaluations.” (pg. 24-25)
“Developing partnerships between education institutions and the private sector, as is done in some states, with a particular emphasis on those between local employers and community colleges, would be particularly helpful.” (pg. 26)
“Strengthen the portability and recognition of training by involving employers in programme design.” (pg. 35)
Cost: $1.5 billion per year ($6 billion over four years)
Note: The President’s Fiscal Year 2015 Budget proposal outlined similar plans. According to the Office of Management and Budget (OMB), the Community College Job-Driven Training Fund “will offer competitive grants to partnerships of community colleges, public and nonprofit training entities, industry groups, and employers to launch new training programs and apprenticeships … .The fund will also help to create common credentials and skill assessments to allow employers to more easily identify and hire qualified candidates.” The program would receive $6 billion over four years, or about $1.5 billion per year.
C. Reform Disability Insurance Eligibility Requirements:
“International experience shows that early intervention programmes that help individuals who are capable to return to work quickly, as in the case of Switzerland, can be effective in avoiding disability recipients permanently exiting the workforce. Re-examining eligibility rules, notably for disability related to mental illness, is also warranted to prevent possible misuse. …
“In the United States, disability recipients are normally reassessed every 3-7 years depending on the nature and severity of the condition. Providing sufficient funding to ensure such reviews occur more frequently would reduce the budgetary burden of the programme and increase employment.” (pg. 26)
“Provide comprehensive work supports to encourage disability recipients to work, in particular with pilot programmes aimed at evaluating the effectivess of measures facilitating the return to work.” (pg. 27)
Note: It is possible that more frequent reviews of disability insurance (DI) recipients’ eligibility statuses could result in net budgetary savings, whether because of a reduction in fraud or in the amount of time recipients continue to receive benefits despite not qualifying. According to testimony from the Social Security Administration before the House Ways and Means Committee, every dollar invested in continuing disability reviews (CDR) yields $9 in savings on average and there was a backlog of 1.3 million CDRs as of February 2014. It is unclear from the OECD’s statement how much additional funding it would support in order to expedite those CDRs. http://www.ssa.gov/legislation/testimony_022614.html
CBO also noted in a 2010 report that while early intervention programs may reduce federal spending on DI benefits themselves, they may actually increase costs for the government overall “... because such an option would result in some spending for interventions directed toward people who would not have applied for DI benefits in any case.”
D. Establish a Federally-Funded National Family and Medical Leave Program:
“The federal government could build on the successful experiences of California and New Jersey to develop a social insurance programme for paid leave for all workers funded by a small increase in the payroll tax, as proposed by the Family and Medical Insurance Act recently introduced in Congress.” (pg. 34)
“Provide support to parents with young children by expanding access to paid family leave nationally.” (pg. 35)
Cost: $2.2 billion per year ($11.2 billion over five years)
Note: The Family and Medical Insurance Leave (FAMILY) Act was introduced in the 113th Congress as H.R. 3712 and S. 1810. The legislation would establish within the Social Security Administration a new Office of Paid Family and Medical Leave in order to administer caretaker benefit payments for eligible individuals. To qualify, applicants would have to be insured for federal disability insurance benefits, have earned income in the 12 months prior to filing, and engage in caretaking duties either 90 days prior to or 30 days after submitting an application. All benefit payments would be financed using revenues from a 0.2 percent payroll tax, deposited in a new Federal Family and Medical Leave Insurance Trust Fund.
NTUF examined OMB’s estimates of total social insurance program receipts for years 2015-2019 and increased those amounts by 0.2 percent to approximate the revenue increase that might result from a new payroll tax. Based on those calculations, the FAMILY Act could increase federal spending by $11.2 billion over five years.
E. Expand the Earned Income Tax Credit (EITC)
“[The EITC] could become even more effective in helping to bring non-participating and irregularly-participating people to the labour market, for instance by extending it to childless workers (who receive very little EITC, or none), non-custodial parents and lowering the age eligibility threshold from 25 to 21.” (pg. 29)
Cost: $4.4 billion per year ($22.2 billion over five years)
Source: The President proposed these measures in his Fiscal Year 2015 Budget Proposal. According to the Office of Management and Budget, expanding the EITC to workers without qualifying children would increase federal spending by $22.2 billion over the five-year 2015-2019 period. The President’s proposal also included other adjustments to the EITC, including simplifying eligibility rules for childless workers specifically (a $290 million cost over four years according to the Joint Committee on Taxation) and for all applicants generally ($1.4 billion in 2019), but it is unclear whether OECD would support these additional reforms.
F. Increase the Minimum Wage:
“... [G]radually increasing the minimum wage to USD 10.10 by 2016, as currently proposed … would benefit a large majority of low-wage workers and raise earning for an estimated 12 million people now in poverty.” (pg. 31)
Cost: Low Cost ($1 million over five years)
Source: Similar legislation has been introduced in the 113th Congress in the form of S. 2223, the Minimum Wage Fairness Act. The bill would increase the federal minimum wage to $10.10 per hour within two years after enactment, and tie its increase to inflation in each year after that. Additionally, it would gradually raise the minimum wage for tipped workers to 70 percent of the wage for other workers.
The Congressional Budget Office estimated that S. 2223 would increase federal spending by less than $500,000 per year, given the relatively few number of federal workers making minimum wage. However, the higher wage would require private sector employers to pay an additional $15 billion in wages by 2017 (when it would reach the $10.10 per hour target) and, according to CBO, could reduce total employment by 500,000 jobs. This could also potentially increase reliance on joblessness programs. The proposal was included in the President’s 2014 State of the Union Address, after which he signed an Executive Order mandating the minimum $10.10 per hour wage for workers on federal service contracts.
Education, Science, and Research: $8.28 billion per year
A. Expand Access to Early Childhood Education:
“[B]etter wraparound services, such as childcare … support could improve [education] completion rates, in particular for workers who support their families and cannot participate in long periods of training while working and attending to their caring responsibilities.” (pg. 25)
“Expanding effective targeted interventions - such as Head Start, Early Head Start and evidence-based home visiting programmes - to more children would also help to offset the negative effects of poor socio-economic backgrounds on children, including weak parental involvement.” (pg. 33)
“Increase access of low and moderate-income families to quality preschool and childcare.” (pg. 35)
“Define and enforce minimum quality benchmarks for preschool and childcare.” (pg. 35)
“The Administration plans to increase access to pre-school education for 4-year-olds, but there is insufficient access among younger children as well.” (pg. 35)
Cost: $8.28 billion ($41.399 billion over five years).
- Pre-K: $5.187 billion ($25.934 billion over five years). The President has proposed expanding pre-K access to all four year-old children (particularly those in low- and moderate-income households) along with the extension and expansion of home visitation programs, designed to help families pay for in-home learning assistance. According to the Summary Tables in OMB’s Fiscal Year 2015 budget, this initiative would cost nearly $26 billion over the over its first five years of full implementation between 2016-2020.
- Early Head Start: $2.48 billion ($12.4 billion over five years). A related measure was included in current legislation. S. 2452, the Strong Start for America’s Children Act. Title II of the bill would authorize the creation of “Learning Quality Partnerships” designed to improve existing Early Head Start childcare programs for children aged 0-3 years. A CBO analysis estimated that provision would require an additional $12.4 billion in spending over five years.
- Head Start: Unknown. A lack of specificity from OECD prevents NTUF from compiling a cost estimate. Outlays for the Head Start program were just under $8.6 billion in 2014. It should also be noted that for this significant level of money spend on Head Start, tracking studies have not been able to find a significant post-kindergarten impact on student achievement and behavior.
- Home Visiting Program: $613 million ($3.065 billion over five years). The President has proposed extending and expanding home visitation programs which are designed to help families pay for in-home learning assistance. According to the Summary Tables in OMB’s Fiscal Year 2015 budget, this initiative would cost over $3 billion over its first five years of full implementation between 2016-2020.
B. Improve Tuition Assistance and Income Support for Workers with Families:
“[B]etter wraparound services, such as … tuition assistance, and other types of income support could improve [education] completion rates, in particular for workers who support their families and cannot participate in long periods of training while working and attending to their caring responsibilities.” (pg. 25)
Note: It is unclear from OECD’s recommendation what specific policies it would support to assist workers with families in paying tuition. The proposal could entail increased spending on existing programs designed to assist low-income families, including the EITC, Medicaid, the Supplemental Nutritional Assistance Program, and/or the Child Tax Credit.
Energy, Agriculture, and the Environment: $51.696 billion per year
A. Pursue Export-Oriented Energy Strategy:
“Limited export-oriented infrastructure also currently constrains natural gas exports. … Investment in pipelines and other transportation infrastructure, which are undertaken by the private sector, will be important to ensure the economy can reap the full benefits of the shale boom.” (pg. 38)
“Export of natural gas to countries without free-trade agreements with the United States requires prior approval from the Department of Energy, for which there is an established authorization process. The Administration should ensure that energy exports are promptly approved.” (pg. 38)
“Ensure that trade restrictions do not hamper energy exports.” (pg. 43)
Cost: (No new funding required)
Note: Related legislation was introduced in the form of H.R. 6, the Domestic Prosperity and Global Freedom Act. The bill would require the Department of Energy to issue a decision on applications to export natural gas within 90 days of their receipt. According to CBO, the bill would not impact the federal budget as it does not significantly alter the Department’s regulatory responsibilities.
B. Invest in Renewable Energy Development:
“Additional investment in [electricity grids] will be needed to ensure that the grids can cope with large variations in renewable supply.” (pg. 41)
“To achieve further emissions reductions in the absence of an emission tax, some subsidisation of innovation in energy saving technology is warranted. At the federal level, the Administration proposed to create an Energy Security Trust Fund, which would also work in this direction.” (pg. 41)
“Promote innovation in energy saving and low carbon technology.” (pg. 43)
“Promote investment in infrastructure for energy transportation, taking into account safety concerns.” (pg. 43)
Cost: $156 million per year ($780 million over five years).
Note: OECD’s broad recommendations to “subsidise innovation”, stated in several different ways in the excerpts above, do not include a specific amount of funding the group believes is necessary. However, it does explicitly endorse President Obama’s Energy Security Trust Fund proposal as outlined in his FY 2015 Budget.
According to OMB, the Fund would use revenues from federal oil and gas development to “provide a reliable stream of mandatory funding for R&D on cost-effective transportation alternatives utilizing cleaner fuels such as electricity, homegrown biofuels, renewable hydrogen, and domestically produced natural gas that reduce U.S. dependence on oil.” OMB’s Summary Tables estimate the Energy Security Trust Fund would result in $780 million worth of new spending over the five year period from 2015-2019.
The budget also requests $180 million to “facilitate the transition from the current electricity delivery infrastructure to a Smart Grid”, an increase of $33 million above the $147 million appropriated in 2014.
C. Institute Emissions Pricing Policies:
“Further lower emissions with efficient policy tools as part of the climate-change strategy, notably by putting a price on greenhouse gas emissions, though well-designed regulation and investment in renewables also have a role to play.” (pg. 43)
Cost: $51.54 billion ($257.7 billion over five years).
Source: Related legislation was introduced in the form of H.R. 2454 (111th Congress), the American Clean Energy and Security Act of 2009. H.R. 2454 would establish a cap-and-trade system to regulate carbon emissions. According to CBO, “The bill would limit or cap the quantity of certain greenhouse gases (GHGs) emitted from facilities that generate electricity and from other industrial activities over the 2012-2050 period. The Environmental Protection Agency (EPA) would establish two separate regulatory initiatives known as cap-and-trade programs – one covering emissions of most types of GHGs and one covering hydrofluorocarbons (HFCs). EPA would issue allowances to emit those gases under the cap-and-trade programs. Some of those allowances would be auctioned by the federal government, and the remainder would be distributed at no charge.” The funds would support the development of clean energy projects, establish a renewable electricity standard, and provide loans to auto manufacturers to make capital improvements that would lead to the production of vehicles that have greater fuel efficiency, among other programs.
D. Study, Regulate New Energy Resources:
“Study the environmental impacts of hydraulic fracturing and develop regulations to address any negative impacts including, if necessary, legislative action to harmonise regulation across states and strengthen ex ante environmental impact assessments for drilling projects.” (pg. 43)
“Study the problem of fugitive methane emissions, and develop regulations to address any negative impacts.” (pg. 43)
Note: It is unclear from OECD’s Economic Survey the degree to which it would recommend expanding or altering existing studies of these issues. According to the EPA, “EPA, DOI, and DOE are working together to research the impacts of hydraulic fracturing activities to support the state and Federal agencies that oversee this growing energy extraction method.” The Agency’s Fiscal Year 2015 budget justification noted a $3.8 million increase in funding for a study on hydraulic fracturing and air quality, and another $4.3 million increase for research related to its impact on water quality and aquatic ecosystems. A report on fracking and drinking water issues is expected in December 2014. The EPA also administers the National Emissions Inventory, which conducts some research and studies related to fugitive emissions; no budget data for those studies is available.
Government Reform: Unknown.
A. Implement Pre-filled Income Tax Statements:
“Income tax statements pre-filled by the tax administration based on information available to them, as in France, Sweden and other OECD countries, would go a long way towards easing the burden of taxpayers.” (pg. 22)
Note: In FY 2014, the Internal Revenue Service spent $2.299 billion on taxpayer service programs and an additional $5.013 billion for the examination of returns.
Related legislation was introduced in the 111th Congress by then-Congressman Anthony Weiner (D-NY) as The Auto File Act of 2009, which would set up a program through which certain filers who qualify for the Earned Income Tax Credit could be mailed a pre-filled income tax return. It would be administered by the Internal Revenue Service. In the 112th Congress, Congressman Jim Cooper (D-TN) introduced H.R. 1069. That bill would have given unmarried taxpayers, with no business or trade income and who do not itemize any deductions, the option to allow the IRS to prepare their returns for them. NTUF has not obtained cost estimates for either bill.
The IRS’s National Taxpayers Advocate included some discussion of this proposal in its 2013 Annual Report, specifically addressing previous recommendations from the OECD. “Almost half of the revenue bodies surveyed for a 2013 OECD study reported some use of pre-filling in 2011,” the report said. However, the Advocate did not recommend the U.S. follow suit, stating that “a fully populated return for most taxpayers is not possible in the United States given the current state of the Internal Revenue Code. There are too many unverifiable provisions in the Code…” Instead, the Advocate suggested allowing taxpayers to download third-party data submitted to the IRS and Social Security Administration into commercial software or the IRS’s existing online forms.
Health Care: Unknown.
A. Increase Federal Government’s Role in Promoting Work-Life Balance:
“Prevention efforts could be stepped up by monitoring prolonged sick leaves, job losses and disability-benefit claims. Engaging employers could improve awareness about the possible negative side effects of job stress on mental and physical health and improve health outcomes and productivity.” (pg. 35)
“Work with employers in preventing the negative effects of job strain on mental health, prolonged sick leaves, job loss and disability-benefit claims.” (pg. 35)
“Information campaigns to increase awareness of the benefits of policies to improve work-life balance and supporting states in the development of right-to-ask policies, which allow employees to ask for flexible working times to accommodate caregiving responsibilities, could help [increase productivity].” (pg. 35)
“Help states develop right-to-ask policies to support flexible working arrangements.” (pg. 35)
Note: It is likely that awareness campaigns designed to promote the benefits of a more flexible work schedule could entail costs associated with administration and marketing materials. However, it is unclear from OECD’s statements above what methods they would recommend to the U.S. government to address issues of job-related stress.
H.R. 2559, introduced in the 113th Congress, would institute a federal “right-to-ask” policy. The bill authorizes employees to ask for changes to their terms of employment related to hours and/or location worked, notification given ahead of assignments, and shift times, and penalizes employers who violate that right. NTUF does not expect the bill to require any additional government spending although the mandate could trigger private-sector compliance costs.
Homeland Security: Unknown.
A. Pursue Immigration Reform:
“[P]olicies such as immigration reform … reduce the mismatch between the supply and demand of skills.” (pg. 24)
Note: CBO estimated that the comprehensive immigration reform bill passed by the Senate, S. 744 (113th Congress), the Border Security, Economic Opportunity, and Immigration Modernization Act, would increase spending by $101 billion over the next five years. It would streamline and overhaul the current immigration system, and provide for additional border security and infrastructure. CBO expects border security costs to increase by $46.3 billion over the next decade, and entitlement spending by about $258.1 billion in that same time. It is unclear whether the OECD would support all of the provisions in that legislation.
“... [G]rowth-friendly reforms come with a certain degree of urgency. In addition to tax reform, this includes progress to raise labour-force participation, change immigration laws, help parents with young children and ease access to quality education for lower-income groups.” (pg. 21)
“The exclusion of employer-provided health insurance from individuals’ taxable income encourages costly insurance premiums and causes and excessive consumption of health care services.” (pg. 22)
“Fiscal policy needs to remain cautious and prepared to take actions to ensure longer-term sustainability.” (pg. 27)
“Gradually reduce and ultimately remove monetary accommodation as the economy approaches full employment and inflation returns to the Fed’s 2% target.” (pg. 27)
“Continue to roll out macro-prudential policy tools, including those associated with the Dodd-Frank Act and those that address vulnerabilities in wholesale funding, repo market and money-market mutual funds.” (pg. 27)
“By capturing some of the resource rent, governments can address the needed adjustment once the resource boom has run its course. This could take the form of investing in education to help workers become more adaptable, financing productive infrastructure, establishing endowment funds or putting government finances on a better footing by paying down debt. … Federal and state governments may capture some of the resource rent through various taxes and use the revenues to support spending or funds that will raise future well-being.” (pg. 42)
“Profit taxation, which has been implemented in Alaska, … can potentially capture a large share of the resource rent without distorting investment and production decisions. With this approach, a tax is levied on all real transactions on a cash flow basis. The government reimburses the firm for negative cash flows, which are typical in the early stage of a project, and retain [sic] a share of total revenue when the project is generating a positive cash flow.” (pg. 42)