Revenue Woes And Budget Blues
Tune in today at noon for TPC’s Prescription with Brian Riedl of the Manhattan Institute. He’ll talk with TPC’s Howard Gleckman about President Biden’s budget plan for fiscal year 2024, congressional Republican budgeting priorities, and ongoing negotiations over the debt ceiling. Watch here at 12:00 Eastern Daylight Time.
CBO: Extending TCJA provisions and balancing the budget would require deep cuts, given other promises. The Congressional Budget Office, in an analysis requested by Senate Budget Committee Chair Sheldon Whitehouse (D-RI) and Senate Finance Committee Chair Ron Wyden (D-WA), considered the impact of extending the revenue provisions of the Tax Cuts and Jobs Act. To balance the budget in 10 years, without raising taxes—while continuing to make interest payments and keep spending on Medicare, Social Security, defense, and veterans’ programs at current levels—every other item in the federal budget would need to be cut to zero.
State budget setters should brace themselves. TPC’s Lucy Dadayan warns that while states’ tax revenue growth was strong in 2021 and 2022, forecasts look much weaker. State tax cuts and rebates have already reduced state tax revenues by $16 billion in fiscal year 2023, the largest estimated legislation-driven reduction on record, and additional cuts are under consideration. Given the bumpy fiscal road ahead, Lucy concludes that “states should take precautionary measures for their fiscal futures.”
ARPA helped states and localities recover, perhaps leaving them better able to brace themselves. TPC’s Richard Auxier considers the two-year history of the American Rescue Plan Act (ARPA) and its impact on state and local budgets compared to that of the American Recovery and Reinvestment Act. The $290 billion in aid to state and local governments during the Great Recession was followed by nearly a decade of fiscal austerity that slowed the nation’s recovery. While ARPA may have been flawed, Richard argues, it helped “states and localities recover faster and leave them in a better position to face the long-term economic and fiscal challenges.”
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