The flurry of activity and rhetoric around tax reform should not be interpreted as a signal that Congress is about to pass comprehensive tax reform anytime soon.  Most agree that a stand-alone tax reform bill in this Congress is unlikely and that the best possible chance to enact tax reform might be in the context of a deficit reduction deal later this year when the limit on the debt ceiling will need to be increased.

Many Democrats believe that any deficit reduction deal should replace the sequester cuts ($1.2 trillion – $85 billion in military and non-military spending cuts in 2013 and 8 more years of cuts through 2021).  The replacement they envision would generate net new revenues (be ‘revenue positive’) by closing individual and corporate tax expenditures or loopholes and by cutting programs in a more targeted way.  [Tax expenditures are special exemptions and exclusions, credits, deductions, deferrals, and preferential tax rates that result in foregone federal revenue.]  The revenue gained would be used to reduce the deficit and/or fund investments in education, building bridges and roads and other programs that would strengthen the economy and accelerate economic recovery.  Republicans whose goal is to reduce the size of the federal government are not concerned about the $1.2 trillion in cuts, especially the non-military ones, and would like to add significant reductions to entitlement programs.  Their perspective on tax reform is that it should not generate new revenue (be ‘revenue neutral’) with the savings achieved by closing loopholes used to lower both the individual and corporate tax rates.  Like most Democrats, the President seeks to replace the $1.2 trillion through a combination of selective program cuts and net increases in taxes on individuals.  Advocates are disappointed that he supports revenue neutral corporate tax changes.

Each party’s approach to tax reform is mirrored in the 10-year House and Senate budgets.  The Republican House-passed budget proposes to drop the individual income tax down to just two tax brackets, 10 and 25 percent, and it reduces the corporate income tax rate to 25 percent.  Reducing the top individual rate from its current 39.6 percent down to 25 percent provides a windfall to millionaires, who stand to gain an average of at least $200,000 each just in 2014, as shown by this analysis from Citizens for Tax Justice. The House budget proposal is also specific in saying that its tax changes will be revenue neutral. But other than a general statement about closing tax loopholes, it says nothing about how the trillions of dollars in tax cuts would be made up.  There are not enough loopholes for rich individuals to offset the cost of the huge income tax rate reductions they would receive.  That means the only way to pay for the rate reduction would be to raise taxes on low- or middle-income taxpayers.

The Democratic Senate-passed budget includes $975 billion in tax increases over ten years. It does not specify the precise nature of the tax increases, except to say that it is the intent of the Committee that the increases come from the wealthiest individuals and from large corporations. The budget discusses the opportunities for increasing revenues by reducing tax expenditures that provide the greatest benefit to upper-income taxpayers, without specifying which should be reduced or eliminated. It is specific in suggesting limits on the value of tax deductions or other preferences for the top two percent, and recommends reducing business tax loopholes.

Thus far only $600 billion in deficit reduction has come from revenue increases; those enacted in the January 1, 2013 American Taxpayer Relief Act (PL 112-240).  All of the revenue in the Act comes from the individual side of the tax code, none from the corporate side.  Individuals’ taxes increase slightly in 2013 for all income groups because of the expiration of the two percent payroll tax holiday, and somewhat more for upper-income households as their marginal tax rate increases from 35 percent to 39.6 percent.  Even with these changes the individual income tax system is still only modestly progressive. (A progressive system is one where the wealthiest pay a greater proportion of their income in taxes.)  Contrary to popular belief the wealthiest do not pay a vastly disproportionately share of taxes relative to their income.  When all taxes are considered (federal, state, and local) the lowest 20 percent of earners pay an effective tax rate of 18.8 percent of their income in taxes and the wealthiest one percent of earners pay an effective rate of 33 percent.  (For more details see Citizens for Tax Justice report.)  Advocates believe the individual tax code should be made more progressive through tax reform.

A common myth in the tax world is that corporate tax rates are too high (citing the 35 percent highest marginal rate), making corporations less competitive in the global market and therefore in need of lower taxes.  That might be true if corporations were actually paying the 35 percent rate but many are paying a significantly smaller amount, and in some cases they are paying no taxes.  The reality is that corporate profits are soaring. Profit margins are at an all-time high, while corporations are paying employees’ wages that are at an all-time low as a share of the GDP (total economic output), and the corporate share of taxes paid to the IRS continues to decline.  According to the Treasury Department, total federal corporate taxes collected in the U.S. in 2010 were 1.3 percent of GDP.   The most recent data from the Organizations for Economic Cooperation and Development (OECD) shows that corporations in the other 34 OECD countries that are the main U.S. trading partners paid 2.8 percent of their combined GDPs in taxes in 2010.

According to a recent Government Accountability Office report there are an estimated 80 tax expenditures that corporations use to avoid paying taxes.  In 2011, these resulted in $181 billion in revenue lost to the federal government, approximately the same as the total amount collected from corporations.  Companies among the profitable Fortune 500 from a range of sectors have legally used loopholes and expenditures in the tax code to avoid paying any taxes, and in fact, some have a negative tax liability and receive rebates from the federal government.  A Citizens for Tax Justice report is illustrative of companies that have paid no taxes and have received rebates over the past five years (2008-2012); among them are Apache, Facebook, General Electric, Principal Financial, Pepco Holdings, Ryder System and Tenet Healthcare.

Two of the biggest corporate tax breaks are one that allows companies to accelerate depreciation of machinery and equipment, and another that allows big multinational corporations to postpone paying U.S. taxes on foreign earnings until they bring those profits home which sometimes they never do. Estimates are that corporations have accumulated close to $2 trillion in offshore profits.  Many analysts believe that as Congress looks to revamp the tax code, a good starting point would be to examine the plethora of loopholes in the corporate code and make changes to ensure that profitable corporations pay their fair share.

Bi-partisan efforts are underway in the House Ways and Means Committee and in the Senate Finance Committee to lay the groundwork for tax reform.  In February, Ways and Means Committee Chairman Dave Camp (R-MI) and Ranking Member Sander Levin (D-MI) announced the formation of 11 working groups to review current law in designated areas, research relevant issues, and compile feedback from stakeholders.  The report with the results of their work was published on May 6.  In March the Senate Finance Committee members started a series of weekly meetings to discuss tax policy focusing each week on one topic.  Their work continues.

Enacting tax reform legislation will be an uphill climb for multiple reasons. Neither the Ways and Means nor the Finance Committees began their discussions with a set of operating principles, for example, stating whether tax reform overall will be revenue positive or revenue neutral. Multinational corporations and small businesses are not in agreement about which loopholes and expenditures should be kept or eliminated.  The most expensive tax deductions in the individual code – for mortgage interest, charitable giving, state and local taxes, employer-provided health care – all have powerful constituencies that will fight to keep them in place.  Finding a legislative vehicle to move tax reform will also be a challenge. Leading Democrats reject the notion that tax reform should be linked to the debt ceiling.  Stay tuned.

The post CHN: Tax Reform: A Long Shot appeared first on Coalition on Human Needs.

The federal government borrows money by issuing bonds.  About one-third of that debt is held within the government, by the Social Security Trust Fund.  Of the rest of the debt, nearly one-half is held by foreign governments; the remainder by corporate, pension fund, and other private financial interests.  The U.S. Treasury borrows enough to fill the gap between revenues collected and obligations to spend (that is, the deficit).  Despite the fact that Congress approves federal spending, it separately sets in statute limits on how much the federal government can borrow.

If the federal government hits up against the statutory ceiling on debt and Congress refuses to raise it, the federal government would not be able to spend more than the revenues it takes in each month.  H.R. 807 sets priorities for which bills to pay, placing bondholders at the front of the line.  Those who have bought U.S. bonds would be paid their principal and interest, and the Treasury would be authorized to exceed the limit on borrowing if necessary to prevent any default on bonds.  The bill was amended to add federal bonds held by the Social Security Trust Fund to its “must-pay” list.  By prioritizing repayment of funds borrowed by the federal government from the Social Security Trust Fund, it would make it make it possible to keep paying Social Security benefits without interruption.

H.R. 807 would not prevent the federal government from reneging on its other funding commitments, however, if the debt ceiling were not raised by Congress.  This legislation would in effect re-set the priorities established by Congress when it passes any legislation related to funding.  Bondholders and Social Security come first; everything else government does, from Medicaid to transportation to nutrition aid, is funded in part or not at all.

The Obama Administration issued a statement promising to veto this legislation if it made it to the President’s desk.  The Democratic leadership in the Senate has also voiced opposition.  However, Senator Pat Toomey (R-PA) previously introduced the Ensuring the Full Faith and Credit of the United States and Protecting America’s Soldiers and Seniors Act (S. 46) which he will seek to move as a stand-alone bill or attached to other legislation.  It has three items on its “must-pay” list – bondholders, Social Security bonds and beneficiaries, and military salaries.  As with H.R. 807, the Treasury would be allowed to borrow, even if it exceeds the existing debt ceiling, in order to pay these obligations.  The Senate Democratic caucus is not expected to support this legislation either.

There is reason to doubt that continuing to pay bondholders and a few powerful constituencies will end the risk to U.S. fiscal stability if Congress refuses to allow borrowing to pay its other bills.  When Standard and Poor’s downgraded the federal credit rating in 2011, it did so because it felt the stalemate that left us uncomfortably close to default made the federal government “less stable, less effective and less predictable” in its financial management.  New cliff-hanging negotiations threatening massive non-payment of bills and salaries will not be seen as a boon to stability and predictability.

The post CHN: Choosing Which Federal Debts to Honor; House Passes Bill to Protect Only Bondholders, Social Security If Federal Borrowing Authority Expires appeared first on Coalition on Human Needs.

Rep. Roby is quoted in The Huffington Post as saying, “This is about helping working moms and dads, providing the ability to commit time at home.” She and other Congressional Republicans have led a PR campaign touting the bill as worker- and family-friendly, but workers’ rights advocates and Democrats in Congress hold a different view.

Progressive advocates believe that H.R. 1406 is a “smoke-and-mirrors” measure that cuts workers’  pay  while giving them paid time off without the guarantee of when or how they can use it. The bill allows accrual of up to 160 hours of paid time off in a year. At year’s end, workers would be paid in cash for their unused comp time, but employers could defer payment of this sum for up to 13 weeks. Many advocates call this an interest-free loan for the company.

In another twist, there is alarm that the bill could help eliminate of the concept of paid leave time altogether. Political Director for the United Electrical, Radio & Machine Workers of America Union Chris Townsend told The Huffington Post that he worries that employers could ask their employees to “earn” their paid time off instead of automatically offering them a package of two weeks of vacation time plus sick days.

This letter from the National Partnership for Women and Families, signed by 163 organizations from across the nation, denounces H.R. 1406 for its false promises. William Samuel, Director of Government Affairs at AFL-CIO (one of the signing organizations), says “The AFL-CIO is vehemently opposed to the so-called Working Families Flexibility Act, which would amend the Fair Labor Standards Act to allow employer-controlled compensatory time off to be substituted for paid overtime,” as quoted in CQ. “We urge you to vote against this legislation.”

From service groups to union leaders, the progressive community opposes this bill, which would actually encourage employers to request overtime work from employees by providing a cheaper alternative to paid overtime. Neither is H.R. 1406 a good alternative for low-wage workers because it reduces their take-home pay, money which many low-income families rely on to make ends meet.

A Statement of Administration Policy released Monday announced that President Obama’s senior advisors would recommend he veto H.R. 1406 if it came to his desk. There is little chance that will ever come to pass, however. Passage of the bill in the Democratic-controlled Senate looks highly dubious, as Democrats are almost unanimously opposed to the measure and have defeated similar bills twice in the past. Still, Republicans may seek to bring the bill to a vote in the Senate.

The post CHN: New Legislation Gives Working Families a Pay Cut, Not Increased Flexibility appeared first on Coalition on Human Needs.

Certain ‘triggers’ related to border security must be met before immigrants can start to be admitted to RPI status or be allowed into LPR status after 10 years.  The Department of Homeland Security (DHS) must submit to Congress a Comprehensive Southern Border Security Strategy and a Southern Border Fencing Strategy within 180 days after the bill is enacted into law.  The goals of the plans include greater surveillance in areas where more immigrants have attempted to enter the country, a 90 percent apprehension rate of those who try to enter the country without permission at these ‘high risk sectors’, and implementation of an electronic employment eligibility verification system (E-Verify).  The bill appropriates $4.5 billion for additional surveillance equipment, fencing, and funding for border agents.  This expenditure would occur when staffing on the border is already at a record high number and migration from Mexico has dropped precipitously.  DHS Secretary Napolitano said during an April 23 hearing that additional fencing does not make sense.  The money would come from fees paid by various visa holders and employers.  Advocates are concerned about the growing militarization of the border that would occur as a result of the National Guard being deployed to construct fencing and checkpoints and engage in surveillance and other activities.  In a positive move, the bill establishes a 26-member Border Oversight Task Force that includes elected officials, civil rights advocates, and representatives from law enforcement, education, and the faith community to address human rights violations at the border.

Immigrants must have resided in the United States as of December 31, 2011 in order to seek RPI status.  Before new immigrants can begin the path to citizenship the current backlog in the family- and employment-based visas must be reduced.  Immigrants seeking admission to RPI status will be required to pay large fines, fees and taxes assessed by the Internal Revenue Service, and demonstrate a record of regular employment with no more than a 60-day gap.  Prior to receiving RPI status they must have remained in the United States, except for brief departures, since December 31, 2011.  A person with RPI status can apply for the status for their dependent children and spouse.  The fines required of adults include $500 at the time of filing for RPI status, $500 at the 6-year renewal point, and another $1000 when applying for LPR status.  In addition, application fees of yet-to-be-determined amounts would be assessed.  RPI status must be filed within one year from the time DHS publishes final regulations implementing the bill’s provisions unless DHS uses its waiver authority to extend the time.  A study of English and civics is also required.  These prerequisites could prove insurmountable for low-income immigrants.  According to the Migration Policy Institute, more than 25 percent of undocumented families have incomes of less than $20,000, making it extremely difficult to afford the fees and fines.  Local governments are cutting back on adult education programs so there is less access to English-language classes.  Documenting regular employment could also prove difficult.   Waivers in the bill allow for exceptions for some provisions based on age, physical and mental disabilities and other factors.

The initial PRI status is valid for 6 years, after which immigrants can apply to renew their status for a maximum of 6 more years.  At the time of renewal the applicant must show that they have been regularly employed (with gaps of no more than 60 days) and are not likely to become dependent on public cash assistance (such as TANF) or institutionalized for long-term care at government expense OR they must demonstrate an average income or resources (assistance from other entities that could include relatives) not less than 100 percent of the poverty level throughout the RPI period.  These criteria also apply at the time of application for LPR status with the income or resources threshold raised to 125 percent of the poverty level.  This demonstration of the lack of dependence on government resources aims to hold down the cost to government of having more documented immigrants.   Prior to admitting any immigrants to LRP status, DHS must have implemented the E-Verify system.

Farm workers and those who entered the United States before the age of 16, the so-called DREAMers who meet the school or military service requirement, would be eligible for an expedited 5-year path to citizenship.  After 5 years in RPI status, DREAMers would immediately be eligible for citizenship.  Unlike prior DREAM Act legislation, S. 744 does not put an upper limit on the current age of those who came to the United States when they were less than 16 years old.  Farm workers who can demonstrate that they have worked a minimum of 100 days in the two years prior to the enactment of the legislation would be eligible for an agriculture ‘blue card’.  Farm workers who work at least 100 days a year for 5 years or 150 days for 3 years can receive LPR status if they have paid any back taxes, have not been convicted of a serious crime, and pay a $400 fine.

Last June, DHS announced that immigrants who came to the United States as children and met certain guidelines could request consideration of deferred action for a period of two years, subject to renewal, and would be eligible to work.  These immigrants’ status is referred to as Deferred Action for Childhood Arrivals (DACA).  Eligibility in the program requires that they must have been under the age of 31 as of June 15, 2012, came to the United State before the age of 16, have been continuously present for 5 years, met the education or military service requirement, and passed the criminal background check.  S. 744 does not specifically say that DACA status would count toward the amount of time in RPI status nor that they would automatically be granted RPI status, but they could be given the status at the discretion of the DHS Secretary.

Certain categories of visas are eliminated as of 18 months after the bill’s enactment – including sibling visas and those for married children over 30 whose U.S. parents wish to sponsor them.   Advocates are concerned that eliminating these two categories will harm family unity, an important expression of deeply-held values in our immigration system.  The diversity visa lottery, the main source of immigration from African and Eastern Europe, would also be eliminated as of October 1, 2014.  One rationale for eliminating these visas is to make room for high caps in other visa categories, especially high skilled workers.

While some visas have been eliminated, S. 744 creates others.  Some, like ‘V’ visas, are nonimmigrant visas for workers temporarily in the country or visas for family members waiting for green cards so they can physically join their family members in the United States.  ’W’ nonimmigrant visas are for temporary low-wage workers who work for 3 years with registered employers in an occupation with labor shortages.  ‘W’ visa holders can renew for 3 more years, switch to another registered employer, and could eventually apply for a merit-based green card.  The bill would allocate immigration visas in a new two-track, merit-based point system.  Track One allows for 120,000 visas per year with the number increasing to as high as 250,000 per year depending on the unemployment rate.  Factors in the point system that would be considered include education, work experience, needs of U.S. employers, age and U.S. citizen relatives.  Track Two visas would be available for families and workers caught in the immigration backlog for many years.

There are multiple visa programs currently operating which provide avenues for individuals to be admitted legally into the United States.  The H-1B visa program is a temporary visa program for high-skilled workers.  The bill calls for increasing the number of visas in the program to not less than 110,000 and not more than 180,000 for any fiscal year.  During a hearing on April 21, Senator Dick Durbin (D-IL) argued that too many of those visas are going to companies headquartered outside of the United States.  The legislation also includes green cards for foreign students who graduate in STEM (science, technology, engineering and mathematics) fields.

Immigrants in the RPI status are not eligible for means-tested benefits.  Currently even adults who become lawful permanent residents are not eligible for SNAP (food stamps), Medicaid, TANF or SSI until after a 5-year waiting period. Non-citizen children of undocumented immigrants are also denied access to these programs. They are eligible for nutrition programs like school lunches and WIC, however.  The Senate bill does allow immigrants who may have used fraudulent Social Security numbers to get jobs to claim Social Security benefits for work they performed while undocumented, without fear of prosecution.  Immigrants will be eligible to claim the Earned Income Tax Credit once they are working under RPI status and paying taxes.

 S. 744 outlines the provisions that employers of immigrants with specific visas must follow, including requirements to first offer jobs to U.S. workers and to not displace U.S. workers.  Employers of temporary agriculture workers must abide by certain wage guidelines, provide insurance for injuries if the job is not covered by state worker’s compensation laws, and provide housing that meets standard for temporary labor.  The bill also set fines for employers who violate the guidelines.

(For further details see National Immigration Law Center comprehensive summary and analysis of S.744.)

Judiciary Committee Chairman Senator Patrick Leahy (D-VT) plans to begin marking up S 744 in Committee on May 9.  Dozens of amendments could be filed, so several subsequent markup dates have been scheduled in May.  Action is expected on the Senate floor as soon as June.

A bi-partisan group of Representatives in the House has also been working on comprehensive immigration legislation which has not yet been introduced.  However, Judiciary Committee Chairman Robert Goodlatte (R-VA), who has not supported a path to citizenship, recently indicated that he prefers to focus individually on components of the bill rather than one comprehensive bill.  Many see this strategy as a delay tactic.  If the Senate is successful this summer in passing a comprehensive bill with strong bi-partisan support, the pressure will be on conservative House Republicans to adopt a more comprehensive approach.

The post CHN: High Hurdles on Path to Citizenship appeared first on Coalition on Human Needs.

The furloughs of air traffic controllers were the result of sequestration, the across-the-board automatic cuts triggered when Congress was unable to agree on a more sensible plan for deficit reduction.  The sequester was meant to be a thoroughly unappealing means of cutting about $1.2 trillion through FY 2021, with cuts equally assigned to the Pentagon and to domestic programs.  Initially set to kick in on January 1, 2013, Congress replaced the first two months of these cuts in hopes of a last ditch effort to come up with an alternative.  Enough Republicans decided they could tolerate the military cuts, so no deal, and sequestration took effect at the beginning of March.  (For background on sequestration, see Senseless Cuts Begin in the March 4, 2013 Human Needs Report.)

The President and Congressional Democrats continued to call for a comprehensive replacement of the sequestration cuts. Senate Majority Leader Reid (D-NV) offered legislation in the week before recess to stop the FY 2013 cuts, paying for them with savings from ending the Iraq and Afghanistan wars.  But a bipartisan group of Senators abandoned the call for a comprehensive solution to carve out the airport fix.  The bill passed in the Senate was sponsored by Senator Susan Collins (R-ME), with 15 co-sponsors including six Democrats (Begich-AK, McCaskill-MO, Nelson-FL, Rockefeller-WV, Udall-CO, and Warner-VA).  Similar legislation had been previously co-sponsored Senators Klobuchar (D-MN) and Hoeven (R-ND).  The Administration caved too:  spokesman Jay Carney told reporters that the President would “be open to looking at” separate legislation to allow the FAA to move money around to end the furloughs.

In passing legislation that let the FAA spend less on infrastructure improvements and shift those funds to pay the air traffic controllers, Congress was coming closer to the approach of a number of Republican-sponsored bills.  S. 799, co-sponsored by Senators Inhofe (R-OK) and Toomey (R-PA) would give the Obama Administration until May 15 to come up with alternative cuts for all of sequestration, but would not reduce the total amount to be cut.  The White House and Senate Democrats have strongly opposed this approach, saying that it is impossible to cut $85 billion in this fiscal year without doing harm, and sparing some programs will only result in even more unacceptably deep cuts in others.  The FAA could choose to put off building projects, even though that hurts jobs now and will constrain economic growth in the future.  Most other programs do not have funds to invest in infrastructure, so this choice is not even an option.

In a minor footnote to Congress’ haste to adopt this legislation, a typo made it necessary for the bill to be taken up one more time for form’s sake in the Senate.  This occurred on April 30, and the bill is now on its way to the President’s desk.

While the President will sign this legislation, he has continued to point out the harm of allowing cuts to proceed for vulnerable children seeking Head Start and other programs that affect the health and life chances of hundreds of thousands of people.  But every time a powerful interest is able to carve out its own fix, the chance of getting agreement on ending sequestration is diminished.

The post CHN: Fear of Flying; Congress Fixes Waits in Airports but Lets the Poor Wait One More Year for Housing Vouchers appeared first on Coalition on Human Needs.

The Politics.  The President’s budget includes $166 billion in job creation initiatives, investing in infrastructure improvements, clean energy, and a comprehensive re-building approach in 20 poor communities.  It commits modest funding towards all levels of education in addition to the early childhood initiative.  But by using the budget as a platform to put forward a deficit reduction offer already made to Speaker Boehner (R-OH) and rejected by him, it makes cuts in Social Security strongly opposed by most Democrats and raises less revenue than the Senate budget plan.  As a gambit to demonstrate his willingness to compromise and to smoke out Republican unwillingness, the budget seems to have worked.  Pundits praised the elements of compromise and Republicans scrambled away from previous support for the Social Security change in order to stay firmly opposed to the President.  (Last December, Bloomberg News reported that Speaker Boehner was “pressing harder for the CPI revision than for other entitlement changes…”  Senate Minority Leader McConnell (R-KY) was looking for higher Medicare premiums for upper-income retirees, raising the age to become eligible for Medicare, and reducing Social Security benefits by shrinking the adjustment for inflation (the “chained CPI”) in order to consider new revenue last winter.)  But although the President included the reduced inflation adjustment and higher Medicare payments for upper-income retirees, his budget was rejected out of hand by the Republican leaders.

The President has said that he will only agree to cut Social Security as part of an overall deal that increases revenues and includes some economic investments.  But many strong advocates for Social Security and other vital safety net programs strongly oppose the Social Security cut under any circumstances.  Even those who could imagine it as part of a plan with healthy doses of revenue and job creation are worried now that the Social Security cut will find its way into a far less helpful budget plan.

The Math.  The President proposes $3.78 trillion in spending and $3.03 trillion in receipts for FY 2014, leaving a deficit of $744 billion, down from a deficit of $973 billion this year.  The deficit will decline from 6 percent of GDP now, to 4 percent in FY 2014, and down to 1.7 percent of GDP in 2023.

Revenues.  The budget includes $583 billion in revenue increases over 10 years from limiting high-income deductions to 28 percent and from increasing taxes on millionaires.  It adds another $100 billion in revenues from the chained CPI proposal’s effects on tax payments, and adds $78 billion in tobacco taxes to pay for the early childhood initiative.  In a move disappointing to many human needs advocates, the President’s budget lists a large number of corporate tax loophole-closings, but holds them in reserve to pay for an unspecified reduction in corporate tax rates.  Advocates are seeking a net increase in revenues from any corporate tax reform agreement, but the President would make reform revenue-neutral.

Spending Overview:  The President’s budget would replace the multi-year cuts that started this year with sequestration with the new revenue, plus about $400 billion in health care savings (largely Medicare), $130 billion from spending cuts due to the chained CPI reduced inflation adjustment, another $200 billion in savings in other mandatory programs (such as farm subsidies), and $200 billion in appropriations cuts, split evenly between the Pentagon and other programs.  By reducing the deficit, interest payments will decline by $210 billion over the same 10-year period.  Together, the revenues and spending cuts will reduce the deficit by $1.8 trillion.  The Administration estimates prior deficit reduction at $2.5 trillion; adding in his new budget proposal, deficit reduction would total $4.3 trillion over 10 years.

Budget Comparisons:  The President’s budget raises less revenue than the Senate’s $975 billion from progressive sources over 10 years.  The President’s plan cuts mandatory spending more ($600 billion in health care and other savings); the Senate’s mandatory savings total $350 billion.  The President cuts discretionary spending (appropriations) less than the Senate.  The Senate cuts $240 billion from the Pentagon, compared with $100 billion in the President’s budget.  The Senate cuts domestic and international appropriations by $142 billion, compared with the President’s $100 billion.

The Administration’s and Senate’s plans both differ starkly from the House budget, which includes no net revenue increases, and cuts spending by about $5 trillion, plus another $700 billion in interest savings.  The Pentagon is not cut.  About two-thirds of the cuts affect low-income programs, including deep cuts in Medicaid and SNAP/food stamps.  (For more details about the House and Senate budgets see the March 18 Human Needs Report.)

Details on Low-Income Programs in the President’s Budget:

Early Childhood:   The $75 billion 10-year Preschool for All proposal to ensure that every low- and moderate-income four year old gets pre-kindergarten education is joined by $1.4 billion next year for Early Head Start and child care partnerships to increase high quality early learning programs for infants and toddlers through age three.  Further supporting young families, the budget would expand voluntary home visiting services for families with newborns, with $15 billion over ten years, starting in FY 2015.

Aid to Poor Communities:  The President’s budget attempts a comprehensive approach, putting together resources from multiple government agencies to attack both the causes and toxic by-products of poverty.  It would create 20 Promise Zones, coordinating housing, education, anti-violence, and other economic development initiatives.  The Choice Neighborhoods Initiative would provide $400 million to improve distressed HUD-assisted housing in very poor communities (up from $120 million this year).  Homelessness Assistance Grants are increased by about $350 million, not counting the extra across-the-board cuts now being made.  Apart from the early childhood education expansions, there are initiatives to improve high schools and to invest in community colleges, both targeted to low-income community needs.  Related to the Administration’s push to reduce gun violence, the budget includes $160 million in new funds for Project AWARE, providing for more trained mental health providers able to work with children and youth in school, as well as more public safety support in poor communities.

The budget repeats the President’s $12.5 billion Pathways Back to Work proposal, which would fund summer and year-round jobs and training for low-income youth and provide subsidized jobs and training for the long-term unemployed.  This initiative was part of the President’s unsuccessful American Jobs Act proposal last year.  In part, it builds on the success of subsidized jobs funded through a now-expired Temporary Assistance for Needy Families emergency fund, in which hundreds of thousands of temporary jobs were created.

There are broader job creation initiatives, with funding to rebuild infrastructure, invest in clean energy, and create manufacturing hubs.  These are not specially targeted to help the poor, but overall efforts to create jobs will be a help, especially if the Administration connects job training for low-income workers to these new plans.

Reverses SNAP Cuts:  Millions of poor people are now facing a reduction in SNAP/food stamp benefits scheduled to start in November.  The President’s budget would cancel that loss in food assistance, estimated to cost a family of three $20-$25 a month.  In another critical area where the budget at least partially reverses cuts to low-income programs, rental housing vouchers for low-income families are increased by more than $1 billion.  The automatic cuts now in effect could reduce the number of vouchers going to low-income families by 140,000, out of 2.2 million households now benefiting from this form of housing assistance.  The President’s budget would end these cuts.

Makes Low-Income Tax Credits Permanent:  While the last deficit reduction deal made the Bush tax cuts permanent for all but the richest 1 percent, the low-income tax credits were only extended for five years.  The Obama budget makes the current levels permanent for the Child Tax Credit, Earned Income Tax Credit, and the American Opportunity Tax Credit (the latter for college students).  The Child Tax Credit and EITC lifted more than 9 million people out of poverty in 2011.  However, the chained CPI proposal will reduce the value of the Earned Income Tax Credit over time.

Protects Health Coverage:   The budget protects Medicaid and the Children’s Health Insurance Program.  It continues implementation of the Affordable Care Act, showing states that they can count on the promised federal support for expanding their Medicaid programs.

Cuts to Low-Income Programs:  Unaccountably, despite the Administration’s emphasis on interconnected programs to maximize effectiveness, the budget repeats its proposal to slash the Community Services Block Grant to $350 million (down from $682 million this year, not counting the across-the-board cuts).  These funds support community action agencies nationwide, which administer Head Start, home energy assistance, emergency food, and local economic development and other anti-poverty initiatives.  These agencies leverage private dollars and do the kind of coordination of services the Administration is counting on.  The budget also cuts the Low Income Home Energy Assistance Program (LIHEAP) by more than $500 million, counting this year’s across-the-board cuts.

Scope:  By choosing to stick to the deficit reduction offer made and rejected last year, the budget cannot support enough job creation and economic development to meet the needs of the current weak economy.  There is no doubt that there is strong opposition to making the needed investments.  But just as President Obama’s leadership has maximized public support for gun legislation and helped to shape public support for immigration reform, his leadership in pressing for jobs and shared prosperity will matter.

The post CHN: The President’s FY 2014 Budget: Important Initiatives Face Uphill Battle appeared first on Coalition on Human Needs.

There are currently 11.1 million undocumented immigrants in the country, down from the pre-recession peak of 12 million in 2007.  About 63 percent of them have been in the United States for 10 or more years.  Often these immigrants are part of families that include both documented and undocumented members, many of which have at least one U.S.-born child.

Contrary to common myth, immigrants do not take jobs from American workers and granting them legal status would actually create jobs.  Legalizing the approximately 11 million who currently lack documentation would strengthen the economy by creating jobs and increasing tax revenues.  The Center for American Progress estimates that immigration reform that includes legalizing the 11 million undocumented would add $1.5 trillion to the gross domestic product over 10 years.

The bi-partisan group of Senators has agreed to a framework that includes a path to citizenship for many of the undocumented (a 10-year path from a probationary period to a green card and at least 3 more years to citizenship), changes in the criteria for new immigrants, an effective employment verification system, and an improved process for admitting future immigrant workers.  It is understood that the path to citizenship will include passing a background check, learning English and paying fines and taxes, but important questions remain about the legislation.  Will payment of taxes require looking back at a work history that might include decades for which documentation is not possible, or as advocates support, will paying taxes start from the beginning of the probationary period?  Will the legislation call for mandatory participation by employers in a sometimes inaccurate E-Verify system to check an employee’s work authorization status?  Resolving the issues around who will receive new visas has proven to be among the most difficult for legislation drafters.

Visas

There are multiple visa programs which provide avenues for individuals to be admitted legally into the United States.  The largest is the family reunification program.  Two-thirds of the green cards are currently issued under that program.  Backlogs in the program mean that some families wait for more than two decades.   The new legislation is expected both to address the backlog and to apportion a smaller percentage of green cards in the family reunification program.  Advocates would be concerned about a reduction in those visas to make room for more high-skilled worker slots.  Other visa programs provide annual quotas for people from specific countries or with specialized work skills.

Labor and the U.S. Chamber of Commerce have agreed on a new “W” visa program for lower-skilled workers, setting parameters for the minimum (20,000) and maximum (200,000) number of new guest workers each year.  The agreement would require employers to pay their workers either the prevailing wage or the typical U.S. citizen’s wage – depending on which is higher. Senator Diane Feinstein (D-CA) led negotiations between the farm workers’ union and the agriculture industry over the number of agriculture workers and their wages.  The number of farmworkers is expected to increase, and the legislation is expected to provide them with an expedited path to citizenship.  Advocates are concerned that those workers are particularly vulnerable to being exploited and need protection.

Individual Senators are advocating including more visas for people from countries that are represented among their constituencies.  It is expected that the legislation will also include green cards for foreign students who graduate in STEM (science, technology, engineering and mathematics) fields.

Enforcement

The new legislation will likely include a set of goals to reduce illegal crossings on the U.S. southern border and call for a system to monitor entry and exit from airports and seaports.  Although the southern border is already more secured than the benchmarks called for in the failed 2007 immigration reform bill, the Department of Homeland Security will reportedly be charged with planning and implementing strategies to further strengthen enforcement.  Over 21,000 agents and 1,200 National Guard troops are now stationed along the border.  A fence has already been built along 651 miles of the 2,000 mile border between the United States and Mexico, and extensive surveillance and radar systems have been installed.  Border crossings are at a 40-year low and net illegal immigration is zero.  A report from the Migration Policy Institute reveals that the United States spent $18 billion on immigration enforcement in 2012 alone and a total of $187 billion since 1986.

The Senate bill will also require businesses to use the E-Verify system run by the Department of Homeland Security to affirm that a potential employee has the documentation to work in the United States.  This internet-based system has produced inaccuracies estimated to affect tens of thousands of workers in the most recent year.  It will be important to improve the E-Verify system and that there be a process for those non-confirmed through the system to correct inaccuracies.

Access to the Safety Net

In an attempt to keep the first 10-year cost of an immigration bill low, there will likely be no changes in immigrant eligibility for key federal means-tested programs.   Currently even adults who become lawful permanent residents (i.e. receive green cards) are not eligible for SNAP (food stamps), Medicaid, TANF or SSI until after a 5-year waiting period.  However, there are high costs in denying immigrants health coverage.  People without health coverage can end up costing the system more because they access care when there is an emergency.  Children of undocumented immigrants are also denied access to these programs.  They are eligible for nutrition programs like school lunches and WIC.  (See National Immigration Law Center guide to immigrant eligibility for Affordable Care Act subsidies and key federal means tested programs.)

Judiciary Committee Chairman Senator Patrick Leahy (D-VT) has scheduled immigration hearings for April 19 and 22, and plans to mark up the Senate bill in Committee in early May.  Action is expected on the Senate floor this summer.

There is also a bi-partisan group of House members negotiating on immigration reform (Republicans Sam Johnson (TX), John Carter (TX), Mario Diaz-Balart (FL), and Raul Labrador (ID) and Democrats Xavier Becerra (CA), Zoe Lofgren (CA), and John Yarmuth (KY)).  House negotiators have reportedly come to agreement on a 15-year path to citizenship for undocumented immigrants currently in the country – a 5-year probationary period followed by 5 years to learn English, pay fines and back taxes, after which they can receive a visa.  It would then take another 5 years to gain citizenship.  House Republican negotiators have rejected the deal made between labor and the U.S. Chamber of Commerce on low-skilled workers that is expected to be in the Senate bill, thinking that it is too favorable to workers.  They have indicated that they may move immigration legislation in pieces instead of in a comprehensive bill as the Senate has, an approach rejected by House Democratic leadership.

The polls show that by a margin of 3-1, the American public supports immigration reform, and by a margin of 2-1they support a path to citizenship.  The 11million undocumented immigrants anxiously await the legislation, hoping it will reflect values of fairness and justice and encourage them to emerge without fear from the shadows.

The post CHN: Immigration Bill Imminent in the Senate appeared first on Coalition on Human Needs.

The bill, the Safe Communities, Safe Schools Act of 2013 (S. 649), is sponsored by Majority Leader Harry Reid (D-NV), expands the national system of background checks for gun purchases, toughens penalties for buying guns on behalf of others who would not be eligible to buy them, and boosts authorized funding for school safety programs.

Many amendments will be offered, including some that would have the effect of loosening, not tightening, the rules around gun purchases.  But in addition to decisions about gun purchases, the Senate may take up legislation to improve mental health services, especially in schools, in the hope of preventing violence.

One bill to improve mental health services was approved by the Senate Health, Education, Labor and Pensions Committee on April 11.  The bill, introduced by committee Chair Tom Harkin (D-IA) and Ranking Member Lamar Alexander (R-TN), is called the Mental Health Awareness and Improvement Act (S. 689).  It would encourage the development of school-wide mental health programs and allow grant funding to promote partnerships between schools and clinical mental health services.  The bill also provides suicide prevention and mental health awareness training, for early intervention to help students with mental health or substance abuse problems.  In addition, there would be GAO reports commissioned to examine access to mental health and substance abuse treatment, to look at mental health specifically for children, and to assess whether federal regulations or laws are obstacles to states’ and local communities’  efforts to provide mental health services.

The Harkin-Alexander bill is prominently mentioned as one likely to be added to the package of gun-related provisions headed for votes in the Senate.  Other mental health pieces are being introduced:  Senator Stabenow (D-MI) has sponsored the Excellence in Mental Health Act (S. 264), which would provide for federal certification of community behavioral health centers and make them eligible for Medicaid funding.

Advocates for improved mental health services want to see greater access to services, without demonizing the mentally ill.  Many advocates see these bills as important expansions, and hope that additional funding will be appropriated so that the new services can actually be implemented.

The post CHN: Expanded Mental Health Services May be Included in Gun Legislation appeared first on Coalition on Human Needs.

The sequestration cuts were necessary because of another provision of the Budget Control Act.  Congress was supposed to come up with a plan to reduce the deficit by another $1.2 trillion over ten years.  If Congress was unable to agree on such a plan, automatic cuts would be triggered – half from defense and half from domestic or international programs.  Because Congress failed to act, sequestration for FY 2013 took effect on March 1.  Unless Congress intervenes to repeal or replace the sequester and 8 more years of spending cuts, for FY 2014 – FY 2021, $1.2 trillion more in cuts will result.  Advocates hoped that the expiring CR would be used as a vehicle to repeal or replace this second set of cuts but that has not happened.  (See March 4 Human Needs Report for more on the sequester.)                     

As a result of sequestration the federal government is being asked to absorb $85 billion in further cuts in FY 2013.  The kind of federal spending that requires annual appropriations – called “discretionary” – would take a cut of $59 billion.  The sequester also cut programs not funded under the appropriations bills including war spending by $6 billion, emergency funding (e.g. Sandy storm recovery) by $2 billion, disaster relief by $1 billion, and mandatory programs including Medicare by $17 billion.

Some of those cuts are beginning to be felt, from children taken out of Head Start programs to a nearly 11 percent cut in unemployment compensation starting April 1.  (See the first weekly Sequester Impact Report for March 5-13.)

When H.R. 933 came to the Senate, Appropriations Committee Chairwoman Barbara Mikulski (D-MD) and Ranking Member Richard Shelby (R-AL) chose to change it by adding three more full spending bills – Agriculture, Commerce-Justice-Science and Homeland Security – leaving 7 unfinished bills funded under the CR.  The Senate bill includes over 80 anomalies to address needed changes in agencies funded under the CR.   Some of those were also in the House bill, such as language needed to continue a pay freeze on federal employees.  The Senate bill adds more funding for the public housing operating fund, rental vouchers and homeless assistance in HUD not included in the House bill.  The Senate adds more funding to some agencies and decreases it for others while maintaining the $984 billion overall funding level.  Areas that receive more funding under the Senate bill include Agriculture, Financial Services, and Transportation-Housing and Urban Development.  Those that lose funding include Commerce-Justice-Science, and Interior-Environment.

Senator Tom Harkin (D-IA) offered an amendment to the Senate bill that would have included a full appropriations bill for FY 2013 to replace the CR provisions for Labor, Health and Human Services and Education.  His amendment called for an increase in funding for some education, health and labor programs.  The increases had been agreed to by the House and Senate during informal negotiations in December but the bill wasn’t included among the new spending bills Senators Mikulski and Shelby chose to include in the substitute.  The amendment was subject to a 60-vote threshold and failed 54-45 along party lines.  An amendment sponsored by Senator Ted Cruz (R-TX) to bar funding for implementing the Affordable Care Act also failed along party lines 45-52.

At press time the Senate was unable to finish the bill due to the inability to agree to a reduced set of amendments that would be allowed a vote.  When the Senate completes work, the bill will go back to the House, which has indicated that it will accept the Senate bill if it maintains the $984 billion spending level and includes no unacceptable changes.

Advocates continue to press members of Congress to repeal the $85 billion sequester which is already beginning to negatively impact human needs programs.  The opportunity may still come as members begin to feel pressure from constituents concerned about the impact of the cuts.

The post CHN: Funding for FY 2013 Pending in the House and Senate appeared first on Coalition on Human Needs.

House Budget Committee Chair Paul Ryan (R-WI) got party line (22-17) approval of his Budget Resolution in Committee on March 13; the next day Senate Budget Committee Chair Patty Murray (D-WA) secured a similar party line vote (12-10).  Both the House and Senate will take up their budget proposals during the week of March 18 in hopes of approving them before recessing at the end of the week.  Recent legislation required the House and Senate each to pass its budget by April 15 or each legislator would forfeit his or her pay.  But there is nothing to force the House and Senate to agree on a final joint resolution, and a policy chasm separates the two.

Revenues.  The House plan is notable both for what it says it will do and for what it leaves out.  Its $5.7 trillion tax cut is pretty specific:  it proposes to drop the individual income tax down to just two brackets, 10 and 25 percent.  It reduces the corporate income tax rate to 25 percent, repeals taxes enacted as part of the Affordable Care Act, and repeals the Alternative Minimum Tax.  Together, according to the Brookings-Urban Institute Tax Policy Center, those massive reductions add up to $5.7 trillion.  Reducing the top rate from its current 39.6 percent down to 25 percent provides mammoth tax cuts to millionaires, who stand to gain an average of at least $200,000 each just in 2014, in an analysis by Citizens for Tax Justice.  The House budget proposal is also specific in saying that its tax changes will be revenue neutral.  But other than a general statement about closing tax loopholes, it says nothing about how tax cuts as large as $5.7 trillion would be made up.  It is clear, though, that there are not enough loopholes for rich individuals to offset the cost of the huge income tax rate reduction, especially if Chairman Ryan keeps to his stated intention not to increase taxes on capital gains or dividends.  Citizens for Tax Justice estimates that even if millionaires lose every single one of their tax expenditures, they would still gain over $200,000 from the proposed tax rate reduction.  That means the only way to pay for the rate reduction would be to raise taxes on low- or middle-income taxpayers.

The Senate’s budget plan includes $975 billion in tax increases over ten years.  It does not specify the precise nature of the tax increases, except to say that it is the intent of the Committee that the increases come from the wealthiest individuals and from large corporations.  The budget includes a fast track procedure called “reconciliation” for consideration of increased revenues.  In this case, the Senate Finance Committee will be given instructions to come up with a set of revenue-raising proposals totaling $975 billion, and must report its proposal to the full Senate by October 1.  The budget discusses at length the opportunities for increasing revenues by reducing tax expenditures that provide the greatest benefit to upper-income taxpayers, without specifying which should be reduced or eliminated.  It is specific in suggesting placing limits on the value of tax deductions or other preferences for the top two percent, and recommends reducing business tax loopholes.

Spending Reductions.  The House budget makes extreme cuts both in mandatory programs including Medicaid and SNAP/food stamps and in discretionary programs such as education, housing, social services, environmental and consumer protection, and some nutrition assistance.  Its aim is to shrink the federal role, and does so by turning Medicaid and SNAP into block grants, drastically cutting the funding of each.  The proposal cuts Medicaid and the Children’s Health Insurance Program by $756 billion over ten years.  It cuts other mandatory programs by nearly $1 trillion more, without specifying where those cuts would occur beyond SNAP.  Those cuts would necessarily hit low-income people hard, since these other mandatory programs prominently include Supplemental Security Income (SSI) for poor elderly and disabled, child nutrition programs, unemployment insurance, child care, Temporary Assistance for Needy Families (TANF), and child welfare services.   In addition, the budget would repeal the health care reform law, ending the subsidies for health insurance and the Medicaid expansion called for in that legislation.  The budget turns Medicare into a voucher program which starts to take effect in 2024.  Analyses of last year’s Medicare “premium support” voucher plan showed that the savings projected for the federal government would be achieved by passing higher costs on to Medicare beneficiaries.

The House budget retains the cuts imposed by sequestration for domestic programs, and then cuts the domestic discretionary programs another $700 billion.  In contrast, it stops the sequestration cuts for the Pentagon, spending about $500 billion more on defense than would have been allowed under the Budget Control Act.

In all, the Center on Budget and Policy Priorities estimates that about two-thirds of the House spending cuts will target programs for low- or moderate-income people.

The Senate Budget Committee plan replaces the cuts that begin with sequestration in FY 2013 and continue through FY 2021 with $240 billion in Pentagon savings, $275 billion in health care savings, $76 billion in other mandatory program savings, $142 billion in domestic discretionary program reductions, and $242 billion in reduced interest payments, for a total of $975 billion.  Advocates had hoped the Senate plan would have spared domestic discretionary programs entirely, since they have already been cut substantially in the first deficit reduction round.  The budget narrative says that the health care savings (expected to be primarily in the Medicare program) will not be achieved by reducing benefits or eligibility, but by systemic savings such as negotiating for lower prescription drug prices.

Further Action in the Senate.  Under Senate rules, budget resolutions are adopted with a simple majority; debate is limited to 50 hours and the budget cannot be filibustered.  However, unlimited amendments are possible.  When all time for debate has expired, the Senate takes up amendment after amendment with no debate – known in Senate speak as “vote-a-rama.”  Advocates will be wary about amendments that could undermine the constructive approach of the Senate Budget Committee’s budget in the ensuing fast action.

Alternative Budgets.  The proposals developed by the House and Senate Budget Committees are not the only budgets prepared by members of Congress.  The House Congressional Progressive Caucus and Congressional Black Caucus have each developed an alternative approach.  Both make substantial investments in job creation and increase revenues far more than the Senate Budget Committee plan.  The Progressive Caucus budget would create 7 million jobs in the first year (in marked contrast to the House Budget Committee version, which is estimated to lose 2 million jobs over the same time period).  The Progressive Caucus budget also cuts the Pentagon while increasing funding for domestic priorities.  In addition, the House Budget Committee Democrats are expected to develop an alternative, also likely to increase revenues from fair sources and to protect human needs programs.  At press time, it was not yet known whether Senate Republicans would be releasing their own alternative.

The post CHN: Starkly Different House and Senate Budget Plans Offered for FY 2014 appeared first on Coalition on Human Needs.