The Democrats' First Hundred Hours
The 110th Congress
was sworn in Thursday and the new Democratic majority is rushing ahead to
make good on its campaign pledges. House Speaker Nancy Pelosi has set the
House Democrats on a course to enact some high-profile legislation within
the first "hundred hours" of the Congress. The Senate will take more time to work on most of them because of the slower procedures in that chamber. The items on this agenda relate to ethics reform, homeland security, raising the minimum wage, negotiating drug prices under Medicare, closing tax loopholes for energy companies and
other issues.
Congressional Republicans May Try to Attach Tax
Giveaways for Business to Minimum Wage Bill
Polls indicate that at least 80 percent of Americans — including majorities of Democrats, Republicans and Independents — want to see the minimum wage increased. One poll even shows that three out of four small business owners think a
minimum wage increase will have no effect on
them. Yet President Bush and his Republican allies in Congress have come
to the strange conclusion that in order to pass both chambers of Congress,
any bill increasing the minimum wage must include new tax breaks for business
in order to compensate companies for the alleged damage it will cause
them. As Jared Bernstein and Lawrence Mishel explain in the American Prospect, the idea that business needs to be compensated because Congress is raising the minimum wage from its lowest inflation-adjusted level in 50 years is nonsensical.
PAYGO Is Back
One hurdle any new tax breaks would have to overcome is the pay-as-you-go (PAYGO)
rules that the Democratic leadership is restoring today. PAYGO rules basically require that any new entitlement spending or any new tax breaks be paid for by either revenue increases or spending cuts. PAYGO was waived and then replaced with weaker rules while President Bush and his allies in Congress enacted deficit-financed tax cuts. Now, as lawmakers consider large tax proposals such as adjustments to the Alternative Minimum Tax (AMT) or large spending proposals, PAYGO will make it harder for Congress to take any action that increases the federal budget deficit.
Energy Tax Loopholes to Be Targeted
In two weeks the House Democrats plan to pass a bill to encourage the use and development of alternative fuels, funded by closing tax loopholes currently enjoyed by large oil and gas companies. The idea that these companies need tax incentives to produce fuel at a time of record prices and record profits no longer seems credible. A recent analysis from CTJ lists the most egregious tax loopholes for energy companies that should be eliminated by Congress.
Don't
Do It
Senate Finance Committee Leaders Propose Repealing the AMT
at a Cost of Hundreds of Billions
It
would be comforting to believe that the Democrats who are now running Congress
don't
need to be convinced to support tax fairness. It would be comforting, but
not entirely right. Senator Max Baucus (D-MT), the new chairman of the Senate
Finance Committee, has joined forces with the now-ranking member Charles
Grassley (R-IA) to again propose fully repealing the Alternative Minimum Tax (AMT). The Center on Budget and Policy Priorities finds that full repeal, if not offset by other revenue, could cost $790 billion over ten years and even more if the Bush tax cuts are extended past their expiration date in 2011.
It's
true that if Congress doesn't do something, the AMT, which was originally
intended
to ensure that the wealthiest Americans pay at least some tax, will
start applying to people it was never intended to affect. This
is partially because President Bush's tax cuts were not accompanied by adjustments
to the AMT and also partially because the exemptions that keep the AMT from applying to most people have not kept pace with inflation.
But the solution to this problem is to reform the AMT in a way that is budget-neutral
and concentrates the costs among the very wealthiest households, who were
the targets of the AMT in the first place. Citizens for Tax Justice has proposed such a solution, which is both budget-neutral and progressive.
State News
Cigarette Tax Plan May Be Hazardous to Health in SC
In a disappointing development for tax fairness in South
Carolina, Governor Mark Sanford has proposed that revenue from an increased cigarette tax be used to reduce income taxes for individuals and businesses instead of for funding Medicaid or other health programs.
Sanford's plan would make South Carolina's tax system dramatically more unfair by increasing the cigarette tax (which is disproportionately paid by persons of low income) and reducing income and business taxes (which would disproportionately aid higher income tax payers). Fortunately the state legislature seems hesitant to go along with these plans.
A better and fairer plan is the one proposed by
Governor Daniels of Indiana — using a cigarette tax increase to subsidize
health care. This would allow the State to gain matching funds from the Federal
Government. Also, while an increased cigarette tax would disproportionately
affect low income persons, increased Medicaid funding could offset this because
of its disproportionate benefit for those with low incomes.
Will New MD Governor Face Fiscal Facts?
In two weeks, Democrat Martin O'Malley will take the helm as Maryland's new
top executive. The Governor will have his plate full with many pressing issues,
but his highest priority should be the state's fiscal situation. As the Washington Post explains,
past elected officials have never really tackled the state's structural deficit and have done little to modernize the state's outdated income tax. Maryland's income tax rates and brackets lack true progressivity, and the state's sales tax needlessly exempts most services. Mr. O'Malley's proposals have been rather vague to date. But at least he hasn't hamstrung the state by taking a no-new-taxes pledge, unlike his Democratic counterparts in Illinois and New Hampshire.
A Morality Tale in Louisiana
Property
assessors in Louisiana are elected and (surprise!) those who make very
low assessments tend to get elected. They have routinely under-assessed home values for decades, resulting in homeowner property taxes that are among the lowest — and least predictable — in the nation. Now, in the wake of Hurricane Katrina, elected officials have created a "Road Home" program, designed to reimburse homeowners for hurricane-related losses to uninsured property. But there's just one problem. The reimbursement is based on the assessed value of the property, which everyone knows is not always right. What comes around goes around. The
Times-Picayune has more here.
Should the People Appointed to Interpret the State Constitution Be Allowed to Interpret the State Constitution?
New
Hampshire courts have ruled that the state's school funding system is unconstitutional,
and has given the legislature until July to remedy this. Predictably,
some anti-tax advocates are making noise about amending the state constitution
to bar the state's supreme court from ruling on this matter. A new Concord Monitor poll takes the public's pulse on this question. The good news: 53 percent of New Hampshire residents think it would be a bad idea to take away the court's ability to monitor the constitutionality of education funding. The bad news: 40 percent think it's a great idea.
