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Explanations of Policies
"2019 End of Year Tax Cut Deal" is the average annual cost of a package added to legislation funding the federal government for the rest of fiscal year 2020 that includes repeal of the "Cadillac tax" on high-cost health insurance plans, the tax on health insurers, and the medical device tax, as well as renewal of several tax breaks known as "tax extenders."
"FY 2020 Spending Bill" is the amount appropriated for fiscal year 2020 discretionary spending by legislation enacted in December 2019.
“Border Wall Requested Funding for 2020” is based on President Trump’s request to Congress for funding construction of a wall on the southern border in his fiscal year 2020 budget.
“Payroll Tax Cut of 2 Percentage Points” is the average annual cost of cutting the employee-side Social Security payroll tax by 2 percentage points for two years.
“Index Capital Gains Tax to Inflation” is the average annual cost of indexing the capital gains tax to inflation. Based on an estimate from the Penn Wharton Budget Model.
“Bipartisan Budget Act of 2019” is the average annual cost of the Bipartisan Budget Act of 2019, which repealed the “sequestration” spending cuts.
“Free College Tuition” is based on the average annual cost of the proposal from Senator Bernie Sanders (I-VT) during the 2016 presidential campaign to make public college tuition free for all Americans.
"Green Apollo Project" is the annual average cost of a proposal from Senator Elizabeth Warren (D-MA) that would invest $400 billion over ten years in research and development of green energy technologies.
"Green New Deal" is the annual average of the high and low estimates from the American Action Forum's (AAF) interpretation of the Green New Deal resolution introduced in the House of Representatives by Representative Alexandria Ocasio-Cortez (D-NY). This figure includes the universal health care portion of the proposal.
“Increase Social Security Benefits by 5 Percent” is the average annual cost of increasing benefits for all Social Security recipients by 5 percent.
"Infrastructure Spending" is the average annual cost of the $2 trillion infrastructure proposal floated by President Trump and congressional Democratic leaders.
“LIFT the Middle Class Act” is the average annual cost of legislation (S.4) introduced in the U.S. Senate by Senator Kamala Harris (D-CA), which would provide a refundable tax credit up to $6,000 a year to families earning less than $100,000 annually.
“Medicare for All” is the average additional annual cost of government-run universal health care, based on estimates of the proposal from Senator Bernie Sanders (I-VT) during the 2016 presidential campaign. This estimate is the additional spending by the federal government, which most proposals have not discussed how to finance.
"Paid Family and Medical Leave" is the average annual cost of a proposal from Senator Kirsten Gillibrand (D-NY) to provide every worker with 12 weeks of annual paid family and medical leave at 66 percent of their monthly wages, capped at $4,000 per month.
“Pension Reform” is based on the average annual cost of the Butch Lewis Act of 2017, sponsored by Senator Sherrod Brown (D-OH), which would make loans to underfunded pension plans.
“Repeal ‘Cadillac’ Tax” is the average annual cost of eliminating the tax on high-cost health insurance plans that will take effect starting in 2020, known as the ‘Cadillac Tax.”
“Repeal Estate Tax” is the average annual cost of eliminating the tax on inherited estates.
“Tax Cuts and Jobs Act” is the average annual cost of the tax cuts passed in 2017.
“Tax Cuts 2.0” is the average annual cost of legislation introduced in late 2018 that would make permanent the individual tax reductions in the Tax Cuts and Jobs Act.
"Universal Basic Income" is the average annual cost of providing every American 18 years or older with a monthly check for $1,000. Those currently receiving means-tested benefits could choose instead to keep their current benefits.
"Universal Pre-Kindergarten" is the annual average cost of providing cost-free pre-kindergarten to all children 4 years of age from families with earnings at or less than 200% of poverty line.
“Defense and Military Benefits” is budget function 050, which includes the military activities of the Department of Defense, the nuclear weapons-related activities of the Department of Energy, and the national security activities of several other agencies, and budget function 700, which covers benefits and services for veterans.
“Foreign Aid and International Programs” is budget function 150, which includes providing military assistance to allies; aiding developing nations; and providing economic assistance to fledgling democracies through agencies such as the Department of State; the United States Agency for International Development; the Peace Corps; and the Millennium Challenge Corporation.
“Energy” is federal budget function 270. It includes civilian energy and environmental programs in the Department of Energy, the Rural Utilities Service of the Department of Agriculture, the Tennessee Valley Authority, and the Nuclear Regulatory Commission.
“Farm Subsidies” covers spending in the form of payments and other kinds of support extended by the U.S. federal government to certain farmers and agricultural businesses.
“Education” is what the federal government spends on elementary, secondary, vocational, and higher education, much of it through the Department of Education.
“Transportation” is federal budget function 400. It consists of programs that support and oversee various modes of transportation, including highways, mass transit, rail, air, and maritime transportation.
“Administration of Justice” is federal budget function 750. It involves programs that provide federal law enforcement, litigation and judicial services, federal correctional operations, and state and local criminal justice assistance. The Federal Bureau of Investigation, the Drug Enforcement Administration, and the Federal Bureau of Prisons are some of the agencies within this function.
Federal Tax Breaks
“Tax Expenditures” is the broad name given to the more than 200 credits, deductions, exclusions, and other tax breaks. They represent a break from a “clean” tax code and are often intended to benefit groups of taxpayers and incentivize specific activities.
The “Exclusion for Employer-Paid Health Insurance Programs” makes health insurance premiums paid by employers and the portion paid by employees exempt from federal income and payroll taxes.
“Reduced Tax Rates on Capital Gains and Dividends” reduces the taxes paid by investors on profits made from assets, like stocks, land, buildings, or art, that they have held for longer than a year. The tax rates on capital gains are 0%, 15%, and 20%—as opposed to taxes on most other income, which range from 10% to 37%.
“Preferential Tax Treatment of 401(k)s” reduces taxes on employees’ 401(k) accounts. The income is taxed once—either when placed in the account, as with Roth accounts, or when it is withdrawn, as in traditional 401(k)s.
The “Child Tax Credit” can be claimed for each child under the age of 17 and has a value of up to$2,000. If the credit is larger than taxes owed, the taxpayer can receive a refund of up to $1,400. This credit is gradually reduced as the income of a household increases over $200,000 for singles or $400,000 for couples.
“Preferential Tax Treatment of Defined Benefit Pensions” applies to qualified employer-sponsored retirement plans. Similar to 401(k)s, contributions to defined benefit plans are not taxed as income until the employee receives payouts, which can be decades later.
“Reduced Tax Rates on Foreign-Earned Multinational Business Income” decrease the rate at which income earned by US-based companies in foreign countries is taxed. Companies will typically pay taxes to the country where the income is earned, and not the United States, unless the other country imposes very low tax rates.
The “Earned Income Tax Credit” is paid out to working families with low to moderate incomes. A family with more children receives a larger credit.
“Accelerated Write-Offs for Business Equipment” allow businesses to deduct the price of capital assets (i.e. equipment, machinery, or business property) more quickly than those assets wear out.
The “Charitable Deduction” allows contributions to charitable organizations to be deducted from an individual’s tax liability, regardless of whether donations are as cash or goods. Such deductions can total up to 50 percent of their adjusted gross income and donated goods must be deducted at their ‘fair market value.”
The “State and Local Tax Deduction” allows taxpayers to deduct state and local tax payments on their federal tax returns. The 2017 tax law imposed a cap of $10,000 on such deductions.
The “Exclusion of Cafeteria Plan Benefits” allows workers to use pre-tax pay towards fringe benefits, thus reducing their tax liability. In order to qualify for a cafeteria plan, the employer must offer employees a choice between different compensation packages—which commonly include plans that pay for the employee’s share of health care premiums, supplemental coverage like dental and vision, and dependent care costs like child care or day care.
The “Exclusion of Social Security Benefits” exempts the Social Security benefits of individuals with income below $25,000 or couples below $32,000 from being taxed. Above these thresholds, benefits are partially taxed.
The “Exclusion of Capital Gains at Death” allows capital gains on assets held at their owner’s death to be tax-free. For example, assume that a stock is originally purchased at $10/share, its owner dies when the stock is valued at $50/share, and the heir sells it for $60/share. The heir will only owe taxes on the gain from $50 to $60. The gain from $10 to $50 will be untaxed.
The “Exclusion of Gains for Home Sales” allows the first $250,000 of profit from the sale of a taxpayer’s main home to be tax-free ($500,000 for couples).
The “Mortgage Interest Deduction” allows homeowners to deduct the interest paid on the mortgage of their first home. This deduction is capped at $750,000 of debt.
The “Pass-Through Deduction” enables taxpayers to deduct 20% of their self-employed or business income, excluding some occupations at higher-income limits.
The “Exclusion for Municipal Bonds” allows the interest earned from municipal bonds to be tax-free.
“Tax Benefits for IRAs” reduce taxes on individual retirement accounts (IRAs). Depending on the type of account, either initial contributions are tax-free or the income is tax-free when it is ultimately withdrawn.
The “Exclusion of Life Insurance Benefits” exempts life insurance payouts from being subject to federal income taxes.
“Health Cost Deductions” allow taxpayers to deduct large medical expenses, the self-employed to deduct their health-insurance premiums, and certain taxpayers to maintain tax-preferred health savings accounts.
“Expensing for Small Businesses” allows firms with average annual gross revenues of less than $25 million to deduct certain capital expenses in the year the asset is purchased, rather than taking the deduction over the life of the asset.
The “Higher Education Tax Credit” is a combination of two credits of up to $2,000 each given for undergraduate, graduate, or professional students.
The “Research and Experimentation Credit” is available to eligible businesses who conduct R&D. The credit is equal to a percentage of a business’ qualified research expenses above a base amount, encouraging research spending.
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