President’s FY 2024 Budget Request

House Budget: President’s Fiscal Year 2024 Budget Request, March 23, 2023 

The Center does not have an opinion on the following proposals. We hope that they may be enacted on a bipartisan basis, especially as they make life better in lower income states which are represented by members of the Majority:

• Two years of pre-K.
• Insulin Cost Cap for Private Insurance.
• Negotiate drug prices in Medicare Part D, $2 copays, SCHIP rebates and price negotiation on behalf of states.
• Improves long-term and home care for seniors and the disabled.
• Improve IRS customer service (not additional auditors).
• Increased WIC (also see child tax credit proposals below), renewable energy for farmers, and electrification loans.
• Increase Title I spending and support for pre-K, student healthcare, mental health services and educator shortages,
• Increased healthcare spending and medical research, especially regarding cancer. 

Two years of Pre-K

Childcare arrangements should be the responsibility of the employer. Tax incentives should thus be an offset to an employer-paid tax, preferably one on total value added (both labor and capital),  with either neighborhood care or care at or near the workplace financed by the employer rather than through creating a new federal program.

Free community college tuition

The President’s Budget includes funding the first two years of education at community college. The same level of funding should be provided to students in technical training after grade ten and should be available to students at both public and accredited private schools, including religious schools. In Espinoza v. Montana, prohibitions on funding private schools (Blaine Amendments) were found to be unconstitutional. New (and existing) funding should reflect that fact.

A main problem with current training regimes is that potential students have opportunity costs that are not covered by training. TANF is simply too narrowly tailored and directs too many people to low wage work, especially in the dirtiest jobs in the medical field. The woke among us do not have to look hard for the intrinsic sexism and racism in this scheme.

Payments for tuition, stipends and family support would be funded by employer-paid subtraction value added taxes. Ideally, both state and federal subtraction VAT will be enacted. A federal VAT would be levied to assure that a minimum amount of funding is available should states underfund their programs, which some will.

Extend ACA premium support permanently, extend low cost care in states that have not expanded Medicaid

ACA subsidies are too low and are funded by taxing the wrong people (investors). Families in the Silver Plan still have problems meeting copays and paying premiums. The funding is also unfortunate. Rather than expanding Medicaid, replace it for the non-elderly with the  Public Option proposed in 2009.  The public option should also be extended to individuals who are denied coverage under pre-existing condition rules. Such rules must be revoked as the price of passing the bill. Such a trade-off is necessary for enactment of such a proposal on a bipartisan basis. 

Increase Affordable Housing Supply

We disagree with the President’s proposed subsidies. The best cure for housing affordability is higher income. The President’s budget is on the right track regarding the Child Tax Credit. I would treble down on his amounts and distribute these funds through Old Age, Survivors, Disability and Unemployment Insurance payouts or with wages. 

Urban renewal, which relocates poor and largely non-white people, leads to redevelopment that chases the 90th percentile. The tax incentives in the President’s budget are exactly the wrong approach. Instead, reform the entire tax system so that most families do not have to file income taxes. By most, I mean 99%. 

Paid family leave

The free market cannot provide such benefits universally, so they must be required. To aid marginal firms, these benefits can be paid for as an offset to employer-paid taxes as above.

Increase Child Tax Credit

We agree with increasing the CTC to at least American Rescue Plan Act levels and refundability. We would make it $1,000 per month and phase it out from the median income to the 90th percentile. 

Some of the bipartisan opposition in the Senate came from those who consider direct subsidies from the IRS to have the “stink of welfare.” I advise such Senators in both parties to raise the minimum wage so that no one is having to work just to receive this credit and that the best way to distribute the credit is with wages.

For middle income taxpayers whose increased credits are less than their annual tax obligation, a simple change in withholding tables is adequate. Procedures are already in place to deliver refundable credits to larger families. 

Employers can work with their bankers to increase funds for payroll throughout the year while requiring less money for their quarterly tax payments (or estimated taxes) to the IRS. The main issue is working out those situations where employers owe less than they pay out. This is especially true for labor intensive industries and even more so for low wage employers. A higher minimum wage would make negative quarterly tax bills less likely. Again, no one should have to subsist mainly on their child tax payments.

This approach is superior to the prebate mechanism proposed for the Fair Tax and for the same reason. The government should not be the national paymaster for every family.

Extends Medicare Solvency: Strengthen Medicare by increasing NIIT (ACA-SM) and limiting pass through income reforms

As above, taxes to support Medicare should be broad based, funded either by an employer paid subtraction VAT or a border adjustable goods and services tax (credit invoice VAT). This would allow for the repeal of the ACA-SM surtax on higher income individuals enacted as part of the Affordable Care Act. Tax increases on higher income individuals should be dedicated toward fully funding net interest, eventaully reducing the national debt, funding veterans healthcare and overseas military and ocean deployments. 

State governments were under financial pressure as a result of the pandemic, especially in the area of healthcare costs, most especially for seniors in nursing homes who are “dual eligibles.” The heart of President Reagan’s Federalism Proposal was the transfer of state Medicaid expenses to the federal government, largely to fund baby boomers who would become dual eligible with time. Time is now up, or will be shortly. 

Welfare has been reformed, allowing state and federal governments to save money - which was part of the New Federalism bargain that was not accepted at the time. We will address this part shortly, but the irony is that federal money was reduced without the second part of the trade-off. Finish the process and create Medicare Part E for low income disabled and retirees.

Tax Reform: Reform Business Taxation/ Makes the Wealthy Pay Their Fair Share

Corporate income taxes and collection of business and farm income taxes will be replaced by the subtraction value added tax proposed in our attachement on tax reform.

Individual income tax rates proposed by the President are packaged incorrectly.They should be split between subtraction value added tax surtaxes on salaries, interest and dividends and an asset value added tax enacted to replace both the estate tax and capital gains taxes.

See our tax reform plan in the attachment for details. This plan does not close loop holes, it eliminates them. Consumption taxes proposed in our plan don’t care how cash is obtained. When it is spent, the tax obligation is between 13% and 19.25% (or more, depending on how contributions to FICA formerly paid by employers and Medcare taxes are included). 

Enacting an asset value added tax would allow the end of the inheritance tax. Inherited assets would be taxed when sold - and not until then - so that family businesses and farms would be held harmless. This would also end the need to retain preferred retirement accounts and life insurance policies designed for tax avoidance (aside from those favoring employee-ownership). 

The National Debt

The national debt is the issue of the hour. The limit needs to be abolished. It was only established because previously, each bond issue was authorized by Congress. That day has long since passed. In the first attachment, we detail who owns the national debt by income class. 

The bottom 60% of households own the debt held by Social Security as beneficiaries. The top 0.1% of households hold about a third of managed fund and bond assets, with the rest of the top 10% holding half and the bottom 90% one sixth. Federal Reserve, bank and long term assets are divided in roughly half between the top 20% and the bottom 80%. 

If the debt were to be defaulted on, a great deal of the damage would be to the top 10% of households. Managed fund and bond holders in the top 1% would take the biggest hit. The debt itself is owed by income tax payers. For every dollar of income tax paid, nineteen are owed. Those who pay and those who owe are the same people: capitalists. Without the national debt, leveraging private banking, debt and investment - especially  the intrinsically worthless assets in secondary markets - is impossible. This is far above historical averages and is unsustainable. The answer to this is increased revenue. 

Reforming Cost of Living Adjustments for Federal Employees, Beneficiaries and Contractors to deal with inflation

Inflation is the other big economic issue of the day. As Dodd-Frank rules are being restored, the NYMEX oil trading floor is again an honest market. Prices will go down and stay down to reflect the real availability of oil and gas. This is not to say that higher interest rates were not needed, but this is only so that families, especially retirees, earn a fair return on their savings.

How the pain of inflation is borne is more important. Households making under the 90th percentile have been losing ground for almost half a century,while incomes above that amount have increased on a regular basis.

The source of inequality, aside from abandoning the 91% top marginal tax rate, is granting raises at an equal percentage rather than by an equal amount. When the 91% rate was repealed, incomes were fairly equal, so it was not an issue. 

The federal government plays an outsized role in how salaries are determined through percentage based cost of living adjustments to government workers, beneficiaries, government contractors. The government can change this with the stroke of a pen.  The private sector will follow suit with a higher minimum wage, adequate child tax credits (as described below) and paying individuals in training from ESL to community college the minimum wage to purse their studies.

From here on in, adjust for cost of living on a per dollar an hour rather than on a percentage basis (or dollars per month or week for federal beneficiaries). Calculate the dollar amount based on inflation at the median income level. No one gets more dollars an hour raise, no one gets less dollars per hour in increases. Increase the minimum wage as above and consider decreasing high end salaries paid to government employees and contractors. Even without decreases, simply equalizing raises will soon reduce inequality. Why is this necessary?

Prices chaise the median dollar. The median dollar of income is actually at the 90th percentile, rather than the 77th percentile (which is about where the median is). This strategy will reduce inflation in both the long and short terms as prices adjust to decreases in higher salaried income.. Let me repeat this - prices chase income dollars, not income earners.

The Budget Process

Amend the Budget Control Act to include realistic, rather than punitive spending caps and automatic enactment of a budget resolution by a date certain a new one is not passed. Consider creating a Joint Budget Committee to expedite consideration and automatically pass current service amounts adjusted to these caps should appropriations legislation not be passed by the start of the new fiscal year. Amounts would be adjustable by supplemental appropriations and rescissions.

Budget Act Line Item/Appropriations Subcommittee Reorganization

Agriculture

Add consumer protection functions performed by Consumer Product Safety Commission and Federal Communications Commission. Transfer the Commodity Futures Trading Commission to the Commerce, Financial Services and the Treasury Subcommittee. 

Commerce, Financial Services and the Treasury 

Add the Department of the Treasury; Financial Service agencies, including CFTC,  Federal Trade Commission, Federal Deposit Insurance Corporation (Office of the Inspector General), the National Credit Union Administration, (Community Development Revolving Loan Fund), the Securities and Exchange Commission, Small Business Administration and the United States Tax Court. 

Transfer the Department of Justice and related agencies to the  Justice and General Government Subcommittee. 

Transfer NASA and the National Space Council from CSJ to the Defense Subcommittee so that reductions to defense research and procurement would be offset with increased budget for space exploration.

Energy, Water Development, Transportation and Related Agencies

Add the Department of Transportation to create synergies between energy and transportation activities, especially research.

Homeland Security - No change unless some agencies are spun off to Justice and General Government.

Justice and General Government

Add the Department of Justice and related agencies from CSJ. Transfer Treasury to CSJ. Transfer Financial Services agencies to CSJ. 

The following general government agencies are included: Administrative Conference of the United States, Federal Labor Relations Authority, Federal Permitting Improvement Steering Council, General Services Administration, Merit Systems Protection Board, National Archives and Records Administration, Office of Government Ethics, Office of Personnel Management and Related Trust Funds, Office of Special Counsel, Privacy and Civil Liberties Oversight Board, Public Buildings Reform Board, Selective Service System, United States Postal Service, Payment to the Postal Service Fund and Office of Inspector General, General Provisions, Government-wide.

Transfer District of Columbia, the Executive Office of the President and the Judiciary to the Legislative Branch Subcommittee so that the DC budget will be passed by the start of its fiscal year without interference, the White House is funded with the same staff levels as the Congress in case of government shutdown and the Judiciary is respected as a co-equal branch whose salaries may not be reduced (or unsupported) by Congress. Add D.C. related agencies now funded by the Interior and Environment Subcommittee to Legislative Branch.

Labor, Education, Housing and Related Agencies

Add Housing and Urban Development and Veterans Affairs Housing functions to reinforce synergies between housing, education and workforce development.  

Transfer out Health and Human Services to decrease the size of the LHHSE Appropriation package.

Health and Human Services and Veterans Affairs

Create synergies between human services and veterans health and other DVA functions.

Military Construction and Veterans Affairs

Remove Veterans Affairs

State, Foreign Operations, and Related Programs - no change

Transportation, Housing and Urban Development and Related Agencies 

Disband. Sever the link between developing freeways and warehousing the poor.

Attachment: Tax Reform Videos included

Attachment: Debt Limit as Class Warfare Video