The Congressional Progressive Caucus (CPC) earlier this week released a proposed federal budget with important policy ideas that, shamefully, have no chance of passing in the current political climate.
The budget proposes revenue-raising tax reforms, both on the individual and corporate side, and would use the proceeds to reduce the deficit, invest in universal preschool, substantially boost infrastructure spending, make college more affordable and restore spending to domestic programs that have been hacked in recent years.
In contrast, the prevailing discourse in Washington has been driven in recent years by a relentless push for ever more spending cuts, ignoring entirely the value of the programs or investments being made. Even after facing the fallout of deep tax cuts in 2001 and 2003, discussing how to raise more revenue is anathema to the party that controls Congress. The perfect articulation of this is the recently released House GOP budget, which would raise no new revenue, yet it calls for making draconian cuts to low-income programs—cuts that would be in addition to reductions already made as part of the sequester and other budget deals. The Center on Budget and Policy Priorities (CBPP) notes that the GOP budget would cut roughly 40 percent of federal resources for low-income assistance, representing the “most severe budget cuts in modern history for Americans of limited means.”
It’s time to shift the national dialogue about the federal budget away from plans for deeper spending cuts or more tax cuts.
What’s in the CPC Budget Proposal?
The CPC 2016 budget proposal provides an exceptional blueprint for how Congress could make the tax system fairer, while at the same time raising sufficient revenue to pay for important public investments. According to an analysis by the Economic Policy Institute (EPI), the CPC budget would create millions of jobs, reduce the deficit to a fiscally sustainable level and make substantial investments in infrastructure, healthcare and education.
On the individual side of the tax code, the CPC would end the preferential tax rate on capital gains, restore the pre-Bush tax rates on individuals over $250,000 and enact new higher tax brackets on individuals making over a million dollars. Ending the preferential rate on capital gains is especially important because it would ensure that wealthy investors are no longer able to pay lower tax rates than many middle-income working families. Citizens for Tax Justice (CTJ) estimated for the CPC that these provisions together would raise $1.5 trillion over 10 years.
The CPC budget contains a few additional progressive revenue raisers on the individual side of the tax code. First, the budget would finally end the outrageous provision of the tax code, known as stepped up basis, that allows accrued capital gains to escape taxation at death, a move that would raise $825 billion over 10 years. In addition, the budget proposes to cap the value of itemized deductions at 28 percent, a progressive provision that would raise an estimated $646 billion in revenue over 10 years and significantly curtail the extent to which itemized deductions disproportionately benefit the wealthy. Finally, the budget would make the estate tax more robust by lowering the exemption level to $3.5 million, increasing the progressivity of its rate structure and closing loopholes, all of which would raise an estimated $231 billion over 10 years.
On the corporate side, the CPC budget takes aim at a number of the most egregious corporate tax breaks. To start, the budget would close the deferral loophole, which is a provision that allows companies to defer paying taxes on their “foreign income” and thus drives corporations to store large swaths of their income in tax havens. The CPC estimates that eliminating deferral (which includes ending the Active Financing Exception) would raise about $983 billion over 10 years. Adding to this, the CPC would also take aim at the inversion loophole ($41 billion) and the stock option loophole ($32 billion) as well as end tax breaks for fossil fuel companies ($139 billion).
Taken together, the CPC budget would raise $8.8 trillion in additional revenue over the next 10 years. To put this in context, revenue levels as a percentage of GDP would rise from its current average projected level of 18.1 percent under current law to 21.9 percent under the CPC budget. While they are unlikely to be passed anytime soon as a group, the tax proposals in the CPC budget reveal the sheer number of options that lawmakers could choose to provide much needed revenue to make new investments, stave off further austerity and curb annual deficits.