Reaching agreement on an FY14 budget entails negotiations around replacing sequestration and budget caps on one hand and generating revenue through taxes on the other hand. The bipartisan Committee on the Budget Conference, comprised of members from both the House and Senate, must present to the full Congress by December 13, an FY14 funding agreement reconciling the difference between the House figure of $967 billion and the Senate number of $1.058.
Democrats on the Conference Committee state that revenue-generating measures must be included in an FY14 budget agreement. They are focusing on closing tax loopholes in order to provide sufficient revenue to cancel sequestration for one to two years. Senate Democrats have reportedly compiled a list of twelve tax loopholes, such as those relating to excessive executive stock options, treatment of foreign income, shipping jobs overseas, and use of corporate jets.
In a Washington Post op-ed on November 10, Conference Committee Co-Chair, Senator Patty Murray (D-WA) wrote, “the tax code clearly benefits the wealthy and well-connected. It would be unfair, and unacceptable, to ignore every last loophole and special interest carve-out yet ask seniors and families to bear the burden of deficit reduction alone.” Co-Chair Murray focused on two tax code reforms, limiting non-taxable compensation for corporate executives paid in stock options and requiring corporations to pay taxes on foreign subsidiaries. “If we eliminated these two loopholes — totaling less than 1% of all federal tax expenditures — and paired that with an equal amount of responsible spending cuts, we could replace more than two full years of sequestration’s cuts to education, research, infrastructure, jobs and the military.”
Republicans have not agreed to closing loopholes as a source of revenue to replace sequestration, although Senator John McCain (R-AZ) has expressed interest. Other Republicans are only willing to address tax revenue through certain user fees.
Senator Murray expressed optimism saying, “there have been encouraging signs. Democrats and Republicans agree that we should work toward, at the very least, a short-term deal to replace the irresponsible cuts from sequestration and agree on a spending level.”
Formal negotiations on the House and Senate FY14 budget proposals are on hold while the House of Representatives is on recess until November 12. Meanwhile, informal Member-level conversations reportedly continued during the week of November 4. The Budget Conference Committee will hold a public meeting on November 13 with Congressional Budget Office (CBO) Director, Douglass Elmendorf testifying.
The Budget Conference Committee has the opportunity to offer instructions regarding handling a portion of tax reform efforts to the Senate Committee on Finance and the House Committee on Ways and Means. Last week the Senate Finance Committee announced that it will meet on November 14 to begin addressing comprehensive tax reform. The House Ways and Means Committee is not expected to support individual tax reform efforts separately from a comprehensive tax proposal.
The Committees on Appropriations must wait for the outcome of the budget conference negotiations before they can proceed with their FY14 appropriations bills. On October 31, House Committee on Appropriations Chair Hal Rogers (R-KY) and Senate Appropriations Committee Chair Barbara Mikulski (D-MD) sent a letter to the Chairs and Ranking Members of the Budget Committees urging them to establish a FY14 budget figure by December 2. This would allow appropriators time to craft FY14 appropriations bills before the current continuing resolution (CR) funding the government expires. Appropriators must pass FY14 bills, an omnibus appropriations bill, or another CR by the January 15 deadline to prevent another government shutdown.
January 15 is also the date by which the Office of Management and Budget (OMB) must implement a second round of sequestration cuts, should the government be operating at a funding level above the spending caps agreed to for FY14 in to the Budget Control Act and the American Taxpayer Relief Act.
Read Senator Murray’s op-ed at: http://wapo.st/HOBCN8