The Republican Study Committee (RSC) has released the latest version of its RSC Budget, and fortunately for taxpayers and advocates of fiscal responsibility, there are several thoughtful contributions on tax, spending, and regulatory matters in this comprehensive framework.
While the Budget is incredibly detailed and covers dozens of distinct topics, at NTU we’ll focus on a few areas that caught our attention.
Tax Policy
While RSC recognizes the dire situation caused by a massive federal debt and enormous annual deficits, Budget Task Force Chair Kevin Hern (R-OK) and his colleagues also understand that the federal budget should not be balanced on the backs of middle-class taxpayers and America’s businesses. The RSC Budget would make the individual provisions of the Tax Cuts and Jobs Act (TCJA) -- including lower individual income tax rates -- permanent. It would also repeal estate taxes that harm families and small businesses in the wake of a loved one’s passing, and ensure that individuals who worked remotely during the pandemic are shielded from double taxation at the state level.
On the business side of the tax code, the RSC Budget would help pave the way for a robust and long-lasting economic recovery by making full and immediate expensing for short-lived assets a permanent part of the code instead of allowing the provision to phase out beginning in 2023. More urgently, the Budget would ensure businesses can continue to fully and immediately expense their research and development expenditures, rather than switching to five-year amortization in 2022. These have been two of NTU’s top tax priorities in 2021, and we applaud RSC for including them in their Budget.
The RSC Budget would fully repeal the state and local tax (SALT) deduction, a highly regressive tax break that mostly benefits wealthy households in high-tax states. The RSC’s tax plans amount to a $1.9 trillion tax cut over 10 years. These tax cuts are paid for with spending reductions and the overall Budget remains fiscally responsible -- a major net reduction in federal spending over the course of 10 years.
Spending and Budget Process Reform
The RSC Budget cuts $14.3 trillion in spending over 10 years, mostly by tackling the unsustainable growth of mandatory spending programs (which make up 70 percent of federal spending today).
The RSC deserves praise for common-sense improvements to Medicare like:
- Raising the eligibility age (currently 65) so it matches the Social Security retirement age of 67;
- Establishing site-neutral payments in Medicare, which the Committee for a Responsible Federal Budget recently estimated could reduce budget deficits by more than $200 billion over 10 years;
- Eliminating Medicare’s responsibility for providers’ “bad debt,” which the Congressional Budget Office has estimated could reduce deficits by $69 billion over 10 years; and
- Allowing seniors on Medicare to contribute to a health savings account (HSA) given they are currently prohibited from doing so.
Beyond improvements to Medicare and Social Security, the RSC Budget also includes a number of budget process reform recommendations that could help ensure Congress and the executive branch do not get stuck in more debt and deficit ruts in the years ahead.
For example, the RSC Budget speaks favorably of the TRUST Act, which NTU has endorsed,which would require Congress to form rescue committees for America’s ailing trust funds (including Social Security, Medicare, and the Highway Trust Fund). It also speaks favorably of recent efforts passed into law that would require a federal program inventory (the Taxpayers Right-to-Know Act), No Budget No Recess (included in NTU’s Budget Control Act of 2021 framework), and changes to how Congress handles so-called “emergency” spending (which often doesn’t reflect true emergencies; more here).
Three other bills endorsed by the RSC Budget have been praised by NTU or NTU Foundation in the past, including Rep. Michael Cloud’s (R-TX) Cost Estimates Improvement Act (requiring CBO to include debt service payments in its legislative cost estimates), Rep. Jodey Arrington’s (R-TX) Taxpayer Receipt Act (requiring the federal government to send taxpayers a receipt showing where their money is spent), and Sen. Mike Lee’s (R-UT) CBO Show Your Work Act (which would improve CBO scorekeeping transparency).
None of these budget process reforms alone would fix America’s perilous debt and deficit situations, but together they could get Congress off the sidelines and back to working doggedly to improve America’s fiscal health.
Regulatory Reform
While the RSC Budget correctly recognizes the need for Congress to get off the sidelines when it comes to the budget and spending process, it also correctly recognizes that some aspects of federal rulemaking and the regulatory process are out of control and need to be reined in.
The RSC Budget supports several initiatives that NTU has endorsed before, such as:
- Requiring Congressional approval of regulations with an impact of $100 million or more (the REINS Act);
- Requiring federal agencies to publish their non-regulatory guidance documents in a single location online (the GOOD Act);
- Considering whether federal regulations that have been suspended or modified during the COVID-19 pandemic ever need to return (Rep. Chip Roy’s (R-TX) Coronavirus Regulatory Repeal Act); and
- Requiring federal agencies to include 100-word, plain-language summaries of any proposed regulations in their regulatory filings.
The RSC Budget also correctly identifies occupational licensing as an important and growing problem. Restrictive state licensing requirements can impose significant barriers to entry and lead to higher prices for consumers. This is a growing problem in the United States as thirty percent of jobs now require government-issued licensing requirements, a radical increase from just 5 percent in the 1950s. While some licensing requirements are necessary to protect consumers, they can also be used to benefit established businesses while creating anticompetitive and artificial barriers.
Rep. Jim Banks’ (R-IN) bill, the Portable Certification for Spouses Act, would allow the Department of Defense to enter interstate compacts and alleviate relicensing burdens for the spouses of military service members who move to new states. Rep. Diana Harshbarger’s (R-TN) Freedom to Work Act would force the federal government, the largest employer in the U.S., to reexamine its occupational licensing requirements and submit a report to Congress and the President. The Restoring Board Immunity Act is another well-intentioned bill that seeks to encourage occupational licensing reform at the state level. Cutting red tape would increase economic growth and the number of job prospects for consumers.
Health Reform
Amid a fierce and often partisan debate over the future of health care in the U.S., the RSC Budget includes several reform options that could attract bipartisan support in the 117th Congress. These include:
- Expanding Health Savings Accounts (HSAs), such as removing the requirement that an individual has to have a high-deductible health plan to start one and raising the annual contribution limits;
- Codifying association health plans (AHPs), an innovative health coverage option that allows small businesses to band together and provide health care to employees;
- Allowing the purchase of health insurance across state lines; and
- Reforming the 340B Drug Pricing Program that has been misused in recent years.
The RSC should also be commended for two bold positions on health reform that may not be politically popular these days but are nonetheless critical to maintaining a robust and affordable private sector-driven health system in the U.S.:
- Opposing efforts to impose price controls on prescription drugs, which will either push the cost bubble onto other parts of the health system or threaten access to new and existing drugs; as NTU has pointed out before, proper prescription drug utilization and an emphasis on generic and biosimilar drugs ultimately reduce health care costs by reducing the need for more expensive health care innovations; and
- Exploring the need for reforming the employer sponsored health insurance (ESI) tax exclusion, which has been proven to drive up health care costs and utilization while depriving workers of higher wages.
Identifying a precise solution to the latter concern requires a careful balance between retaining individuals’ and families’ access to private insurance while also bending the cost curve for health coverage in America. It’s a difficult tightrope to walk, but the RSC should be commended for offering a thoughtful approach here.
Going Further: Defense Spending
While the RSC Budget includes several strong reform options, we would also urge RSC to explore responsible reductions to the Department of Defense (DoD) budget -- currently, the RSC Budget recommends increasing the DoD budget from a planned $715 billion for fiscal year (FY) 2022 to $778 billion. NTU has identified a roadmap for Congress and the Biden administration to achieve $338 billion in reductions to the DoD budget over the next four years, and we believe policymakers can enact these cuts without negatively impacting America’s security from domestic and global threats. For example, the RSC Budget calls for continuing to support and fund the F-35 program and the December 2020 Naval shipbuilding plan despite ongoing concerns with both programs that threaten to further waste taxpayer dollars. We would also like to see the RSC Budget suggest cuts to the DoD discretionary budget; it is one of the few appropriations bills spared of suggested cuts in the RSC Budget’s section on discretionary spending.
Conclusion
Overall, the RSC Budget is full of solid recommendations for tackling record federal spending and debt, all while decreasing federal tax and regulatory burdens that stifle American workers and businesses. NTU appreciates their thoughtful contribution on behalf of taxpayers, and hopes both parties in Congress give serious consideration to proposals within the Budget.