Budget and Debt Limit Fights Heat Up
President Biden’s revenue provisions throw down the gauntlet. TPC’s Howard Gleckman shares the highlights. The revenue measures won’t be approved, since even last year’s Democratically controlled Senate and House would not adopt Biden’s most ambitious tax increases. Instead, Biden’s plan “lays down a marker for what will be difficult budget negotiations later this year.”
House Freedom Caucus lists its demands. Saying President Biden’s budget is “dead on arrival,” the conservative members would cap non-defense discretionary spending at fiscal 2022 levels for the next ten years to save an estimated $3 trillion, and impose work requirements on Medicaid and other federal assistance programs to save another $30 billion a year. If their proposals are enacted, they “will consider raising the debt ceiling.”
What if Biden’s proposed increase to the stock buybacks excise tax went into effect? Publicly traded companies spend over $1 trillion a year to buy back their stock, rather than pay higher dividends or invest in workers or their companies. As of this year, those that do must pay a 1 percent excise tax on those buybacks. President Biden has proposed to increase that tax to 4 percent. TPC’s Steve Rosenthal and Thomas Brody examine the potential impacts of the increase. They conclude that a higher tax would mainly lead to the payment of more dividends. While that doesn’t benefit workers, “the US could collect more taxes, which are sorely needed, largely from foreign investors.”
Georgia’s tax revenues are still coming in strong. Some economists had forecast an economic slowdown in the state, but the Department of Revenue collected over $2.12 billion in taxes last month. That’s up 8.7 percent compared to February 2022. For the first eight months of fiscal year 2023, tax revenues were up 5.9 percent compared to the same period in fiscal year 2022.
After tax cuts, Iowa’s revenue losses are not as severe as predicted. Iowa enacted legislation in 2022 that eliminates the income tax on retirees and gradually cuts the top income tax rate until 2026, when all Iowans will pay a 3.9 percent flat rate. Its Legislative Service Agency expects revenues to fall by $1.9 billion when the law is fully phased in. Its Revenue Estimating Conference said Friday that Iowa will collect 0.5 percent less revenue than it did last year due to the 2022 tax cuts. The panel had predicted a 2 percent decline in December. Iowa reported a $1.91 billion budget surplus in September, and the state’s Republican lawmakers are considering another round of tax cuts.
No tax cuts yet in the United Kingdom. British finance minister Jeremy Hunt will present his budget on Wednesday. In an interview with GB News over the weekend, he said that while he wants lower tax rates for individuals and businesses, lower tax rates are only possible if the economy is on a sustainable path to growth.
For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at [email protected].