POTUS Budget FY25

HBUD, Finance, House Appropriations, March 21, 2024

General Approach

For obvious reasons, this year will be more hectic than the last. The budget and appropriations process needs to be simple. To do this, please just pass a consensus caretaker budget with two draft partisan supplemental bills, one of which can be enacted during the Lame Duck Session or at the beginning of the next Congress for the President-Elect to sign upon taking office, depending on who wins. Details are provided in our comments to the full Ways and Means Committee on the HHS budget.

If such a budget is enacted, use it as the basis for spending caps for a new Budget Control Act. Make the targets realistic and self-enforcing for purposes of Appropriations Committee allocations. 

Contingencies

In the event the majority in the House shits due to early retirements or insurrection indictments, the Senate majority and the House minority should have legislation ready to enact a Public Option, including reconciliation instructions for the FY24 budget year. Please see the second attachment for details. 

Any change in control will only last through the special election cycle, this should be the second priority. The first must be amending the Electoral Count Act and the jurisdiction of the Ethics Committees to provide for the enforcement of the Fourteenth and Twentieth Amendments, including provisions for removing and related disability for members and the president-elect.

THE PRESIDENT’S BUDGET

The President’s budget priorities have not changed to a great extent.  We will address these proposals in the order presented by OMB.

Lowers Costs for the American People

The title was more a preamble than a set of proposals. Regardless, please see these comments from last year, which have been repeated several times in the interim, on what drives inflation and how to stop it.

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 When the 91% rate was repealed, incomes were fairly equal, so it was not an issue.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. 

Increasing stock market values in the speculative sector are 100% inflationary, according to how inflation is defined in economics: higher prices for the same goods. When such speculation is extreme, bad things can happen. Adopting an ASSET VALUE ADDED TAX (see the attachment) will control such nonsense. 

In the case of labor pull inflation, lower tax rates on executives were effective in 1982. These cuts, and their setting in stone in the 1986 tax reform, were an overcorrection. The 2013 tax bill by President Obama showed that increasing taxes on the wealthy is the most effective way to correct any economic slowdown. Then Vice President Biden should have let taxes increase in 2010, as doing so lengthened the slowdown caused by the Great Recession. 

The idea that tax increases should be limited to income over $400,000 is not supported by economics. The system should have everyone pay more, especially for broad based programs like healthcare.

Cuts Taxes for Families with Children and American Workers

Increase Child Tax Credit

We agree with increasing the CTC to at least American Rescue Plan Act levels and adding refundability. Further, we applaud the House for passing compromise legislation addressing this issue.

This is still not enough, but is a start. We would make it at least $800 per month and phase it out from the median income to the 90th percentile. 

The opposition from a retiring Senator in the last Congress, as well as among a current Senate Committee Ranking Member comes  from those who consider direct subsidies from the IRS to have the “stink of welfare.”  The proposal to distribute refundable payments on a monthly basis has not changed. If the minimum wage were increased, no one would use receipt of the child credit to avoid work. To better distribute the credit (at full value rather than as an advance) distribute it with wages or other benefits, such as Unemployment Insurance and Survivors Insurance. 

UI  and disability insurance should match increased minimum wage levels on a full-time basis (but assuming  26 hour work week), while payments to dependent children for survivors and the disabled should be abolished and replaced with an enhanced CTC at the $1,000 per month level

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.

Strengthen the Earned Income Tax Credit for low-paid workers who aren’t raising a child in their home

There should be no such thing as low-paid work. Raising the minimum wage (and mandating that franchise agreements provide for higher returns to franchisees when - not if - this increase occurs) and making this increase automatic will assure that all workers can make ends meet

Lowers Child Care Costs for Hard-Working Families, Universal Pre-K and Head Start

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 new federal program, such as $8.5 billion for the Child Care and Development Block Grant (CCDBG). See our attached Tax Reform proposal details on the elements of this tax. 

Increases Affordable Housing Supply to Reduce Housing Costs

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%. 

Reduces the Cost of College

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.

Lifts the Burden of Student Debt

The President is feeling guilty for using student debt revenue as an offset to baseline for passage of the Affordable Care Act. New and prior borrowers should not bear this burden. The best way to do this is to forgive all capitalized interest and eliminate this provision. Any forbearance or deferral should stop further interest from accumulating.

Lowers Health Care Costs, making permanent the expanded premium tax credits that the Inflation Reduction Act extended, providing Medicaid-like coverage to individuals in States that have not adopted Medicaid expansion, paired with financial incentives to ensure States maintain their existing expansions.

The President is forgetting his promise to create a  Public Option. It is time to at least study how this would work. Our analysis is provided in our comments on the HHS Budget.

Protects and Strengthens Medicare,  extending the solvency of the Medicare Hospital Insurance (HI) trust fund indefinitely by modestly increasing the Medicare tax rate on incomes above $400,000, closing loopholes in existing Medicare taxes, and directing revenue from the Net Investment Income Tax into the HI trust fund as was originally intended. 

We disagree. All healthcare should be funded through broad based tax reform, as specified in our attached proposals. HI and the public option (which replaces Medicaid for the poor and those with pre-existing conditions) should be funded by a credit invoice VAT, premium reforms funded by the employer-paid subtraction VAT. Again, see the HHS budget proposal.

Protects the Social Security Benefits:  strengthens Social Security in a way that ensures no benefit cuts; extends solvency by asking the highest-income Americans to pay their fair share; and improves financial security for seniors and people with disabilities. Please see our comments to the testimony of Director O’Malley.

Requires Billionaires to Pay at Least 25 Percent of Income in Taxes

Our tax reform plan specifies a high income surtax for income wage, dividend and interest income above $400,000 per year (while incorporating taxes for this income at lower levels, ranging from 6.5% to 26% into a subtraction VAT surtax), which could be remitted through a tax prepayment bond program and the enactment of a 26% ASSET VALUE ADDED TAX to replace capital gains, inheritance and gift taxes.

Raises Tax Rates for Large Corporations

Eliminate Corporate Profits taxes and taxation of business income on Form 1040 with a Subtraction VAT (with offsets for employee and retiree healthcare) and a credit invoice tax on both labor and profit. The combined rates of these taxes will burden both profits and labor costs, raising much more money.

This tax will be levied for all income earned in the country of production (for subtraction VAT) and of sale (Credit Invoice VAT). A new agreement on rate uniformity for our proposed Asset VAT will prevent rate shopping for stock trading. 

Provides National, Comprehensive Paid Family and Medical Leave and Calls for Paid Sick Days. Both programs should be offsets to the proposed subtraction VAT, with SVAT rates set accordingly. Sick leave should be ten days.

Empowers, Protects, and Invests in Workers. Workers power America’s economic prosperity. Absolutely. This should be funded by the national credit invoice VAT.

Confronts the Climate Crisis While Spurring Clean Energy Innovation, Increasing Resilience, and Protecting Natural Resources

Enforcement of pollution, as well as research into new energy sources (such as small nuclear reactors), development of tethered electric vehicles in urban areas and stepped up enforcement of all point-source pollution - both past and present, should be funded by a Carbon-Added tax, as well as fines.

Rural areas should receive Rural Electrification Administration style subsidies for investing in renewable energy, however for areas outside of urban and suburban areas, use of gasoline and biodiesel are practical where tethered electric vehicles are not.

Supports a Strong Nutrition Safety Net

The best safety net for families is paying adequate minimum wages, child tax credits and possibly converting disability programs into Long Term Unemployment Insurance for those for whom additional education is not practical.

Protects Americans at Home and Abroad

Active denial systems, such as the microwave radiation system developed by Raytheon, are superior to any border wall, but installing such a system should only happen if existing immigrants are granted amnesty, with eligibility the program most applicable (permanent residency, student visa, H-1B) without residency restrictions.

Tackles Crime, Reduces Gun Violence, and Makes America’s Communities Safer

The DFAR (Defense Federal Acquisition Regulations) and FAR should specify that any firm that sells ammunition to the public cannot provide services to defense or police agencies, nor can any of their licensees. 

Salva Ukraini and hold any members who refuse to do so out of support for Insurrectionist Trump be held accountable by the Ethics Committee if they also participated in organizing the actions of January 6, 2021.

Feed Gaza, regardless of funding or permission from Israel

Treasury Funding

See the second attachment regarding sunsetting funding for the IRS.

Attachment: Tax Reform Videos included

Attachment: Tax Administration Video