October 17, 2008
It now seems likely that Congress will return to work in a “lame duck” session in mid-November. Leaders in both the House and Senate have indicated that another stimulus bill to address the deteriorating economy is in the works. Possible elements that could be included in the package include tax rebates, federal fiscal aid to states, a temporary boost in Food Stamp benefits, an extension of Unemployment Insurance benefits and an increase in funding for the Low-Income Home Energy Assistance Program (LIHEAP).
Declining tax revenues are also hitting the budgets of state governments hard. After closing a projected shortfall of $935 million during the last legislative session, Minnesota legislators will once again face a large projected budget shortfall when they convene in January 2009.
The Minnesota Budget Project sent a letter signed by 66 nonprofit organizations to the Minnesota Congressional delegation in September urging that federal fiscal aid to states be included as a key part of any second economic stimulus package. With Minnesota and other states facing new and deeper projected budget shortfalls next year, the need for federal fiscal aid to help the states is more urgent than ever. That is why we are reopening our sign-on letter to gather even more signatories. If your organization has not yet signed our letter, please join us today. Our new deadline is November 12.
In 2003, Congress provided $20 billion in fiscal aid to the states in the form of a temporary increase in the Medicaid match rate as well as general grants. This relief helped to avert deeper cuts in health care coverage and helped states address growing deficits. Unlike the federal government, virtually every state is required to balance its budget. Read more about federal fiscal aid to the states and why it should be part of an economic stimulus package.
We will keep you posted on further developments regarding a possible post-election session of Congress and a second economic stimulus package.
– Steve Francisco
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Action Opportunity, Economy, Federal Budget | Tagged: Economy, federal aid to states, stimulus | 
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Posted by Nan Madden
October 16, 2008
In response to the economic crisis, Congress passed a $700 billion financial rescue plan aimed at buying the troubled assets of banks, stimulating the credit market and restoring confidence in the nation’s economy.
Regrettably, Senate leaders also attached a controversial tax extenders package to the financial rescue bill. Tax extenders are provisions that are generally set to expire each year unless they are renewed by Congress. The debate on tax extenders was already underway. By adding these provisions to the financial rescue plan, the Senate avoided a confrontation with the House about whether the tax extenders should follow PAYGO rules and be offset with either another source of revenue or a spending cut. The House’s version of the tax extenders bill did follow PAYGO.
The tax extenders attached to the financial rescue plan are not offset, so they will further increase the federal budget deficit. Among the items included in the tax extenders package was the one-year “patch” for the Alternative Minimum Tax (AMT) and an energy tax plan.
The financial rescue package also became the home for a one-year improvement in the Child Tax Credit, a credit of up to $1,000 to help families with some of the costs of raising a child. Under this provision, an additional 34,848 Minnesota children will qualify for the Child Tax Credit, and another 120,715 Minnesota children are expected to qualify for a larger credit.
Under current law, the Child Tax Credit is not properly indexed for inflation, and Congressional action is needed to ensure that low-income families do not become ineligible for the credit as their earnings are eroded by inflation. This improvement in the Child Tax Credit was achieved by lowering the earnings threshold for low-income families to qualify for the credit from $12,050 to $8,500 for this year.
Hopefully, this temporary provision will be extended beyond 2008 when the new Congress convenes next year. To learn more about the importance of the Child Tax Credit, read the Center on Budget and Policy Priorities issue brief.
-Steve Francisco
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Federal Budget, Taxes | Tagged: AMT, child tax credit, paygo | 
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Posted by Nan Madden
August 15, 2008
Senators Max Baucus and Harry Reid have introduced a tax extenders bill that would lower the income level to qualify for the federal Child Tax Credit (CTC) from the current $12,050 to $8,500, the same amount as in a House-passed bill. The Child Tax Credit is a credit of up to $1,000 to help families with the costs of raising a child. Under current law, the CTC is not properly indexed for inflation. As a result, many low-income families will become ineligible to receive the CTC unless Congress adjusts the eligibility threshold. Under the Senate bill, 34,848 Minnesota children would become eligible for the CTC and 120,715 children would receive a larger credit.
Congress is expected to vote on a final bill in September. The Center on Budget and Policy Priorities has a good issue brief if you want to read more about the CTC.
-Steve Francisco
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Federal Budget, Taxes | Tagged: federal taxes | 
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Posted by Steve Francisco
August 14, 2008
** If you are looking for information on Minnesota’s current state budget deficit for 2009 -
check out our blog entry on the announcement of the $4.8 billion deficit. **
The federal deficit will hit a record $482 billion in 2009, according to Jim Nussle, director of the Office of Management and Budget. Factors behind the red ink cited by Nussle include the costs of the wars in Iraq and Afghanistan, tax rebates and a weak economy. The new deficit estimate is sharply higher than the administration’s $407 billion estimate made last February. The higher deficit will also mean increased interest payments on the growing national debt, which now exceeds $9 trillion.
This latest bad economic news comes as Congress prepares for important votes next year on whether to make temporary tax cuts from 2001 and 2003 permanent after 2010. It is becoming increasingly clear that making the tax cuts permanent is simply unaffordable. In fact, making the tax cuts permanent, along with adjusting the Alternative Minimum Tax, would cost $4.4 trillion over ten years…adding to our national debt that now exceeds $9 trillion.
- Steve Francisco
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Posted by Steve Francisco
August 7, 2008
On Aug. 5, my colleague Jeannie Fox, deputy public policy director for the Minnesota Council of Nonprofits, and I attended Farmfest 2008 in Redwood Falls. We listened to debates between Minnesota’s U.S. Senate candidates as well as Congressional candidates from across the state. We also had an opportunity to talk face-to-face with Reps. Tim Walz and Collin Peterson about the importance of including federal fiscal aid to the states in any future economic stimulus bill. We also talked with state House Minority Leader Marty Seifert and various legislative staffers, among others.
With Congress in recess until after Labor Day, Minnesota’s senators and House members are at home attending town hall meetings, debates, picnics and various events open to the general public. Congress also plans to adjourn in early October so that members can hit the campaign trail. These events are a great opportunity for nonprofit leaders and community members (like you!) to talk to your members of Congress about the issues that matter to you and your organization. Our members of Congress cannot represent us well if they don’t know what we think about the issues that matter most, whether it’s education, health care, social services, or the environment. To find out what public appearances your member of Congress will be attending, contact their office.
-Steve Francisco
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Posted by Steve Francisco
June 10, 2008
I’m the kind of person who reads about taxes in my spare time. I’m not saying everything I read is a page-turner, though the book Showdown in Gucci Gulch, chronicling the landmark 1986 federal tax reform and written by two Wall Street Journal reporters, is riveting.
Anyway, in the course of my reading I’ve come across some little-known facts about the estate tax (refresher: it’s an inheritance tax on extremely wealthy estates):
- A recent state-by-state analysis of the impact of the estate tax finds less than one percent of all estates in the United States were subject to the tax (and just 0.6% in Minnesota, or 230 estates) in 2006. In other words, this is not a middle-class tax.
- Andrew Carnegie, Teddy Roosevelt and even Herbert Hoover were strong supporters of the estate tax. To quote Carnegie: “The parent who leaves his son enormous wealth generally deadens the talents and energies of his son, and leads him to lead a less useful and less worthy life than he otherwise would.”
- The Gallo brothers - the California winemakers - took a much different tack than Carnegie. In 1986, they successfully lobbied for their own exception to the estate tax, so they could pass on more than $80 million to their grandchildren, tax-free.
And finally, take a look at our recently published issue brief on the same subject, with Minnesota-specific statistics.
-Katherine Blauvelt
No Comments » | Federal Budget, Taxes | Permalink
Posted by Katherine Blauvelt
February 13, 2008
Congress has passed, and President Bush has signed, a $152 billion economic stimulus package including tax rebates for individuals and incentives for businesses. But will this be enough to boost the nation’s ailing economy?
Several provisions, which the experts say would provide a more immediate jolt to the economy, were not included in the bill, including a temporary extension of unemployment insurance benefits, a boost in Food Stamp benefits and federal aid to states facing serious budget shortfalls (like Minnesota). We were disappointed by the failure to include these provisions.
According to Mark Zandi, chief economist of Moody’s economy.com, “a $1 increase in unemployment insurance benefits generates an estimated $1.64 in near-term gross domestic product.” The U.S. Department of Agriculture estimates that a $5 billion increase in Food Stamp expenditures would result in a $9.2 billion increase in economic activity and add 82,100 jobs. Because both unemployment insurance and Food Stamps are already operating, any increases could be delivered and spent quickly.
The failure to include federal aid to the states is also disappointing. In 2004, Congress approved $20 billion in federal aid to states. Minnesota received $356 million in aid - much of it used to continue health care coverage for low-income Minnesota families.
Congress may consider a second-round economic stimulus bill later this year, especially if the economy worsens. Let’s hope that Congress will include some of these items missing from the current bill.
-Steve Francisco
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Posted by Steve Francisco
