Legislation & Politics

AFSCME's Position – National Budget and Tax Priorities

Background

The national debate over federal budget and tax policies continues to dominate the political landscape in Washington, DC. Although President Bush and conservative members of Congress talk about fiscal discipline and balancing the Federal budget, they continue to advocate new expensive tax breaks for the wealthy that have exploded the size of the budget, and undermine funding for education, health care, public safety, and other vital public services. Leaders in Congress now want to enact new huge tax breaks to millionaires, billionaires, and corporations. Their top priorities are to permanently repeal the Estate Tax and the Alternative Minimum Tax; reduce income tax rates on capital gains and dividends; and increase tax breaks for large corporations. These tax breaks would cost a combined $2 trillion over 10 years and mostly benefit the richest Americans.

At the same time, the Republican-led Congress would significantly cut funding for education, health care, public safety, and job training.  AFSCME opposes new tax breaks that are not paid for, as well as irresponsible budget policies that defund critical government services in order to pay for unnecessary and unfair tax cuts.

In February 2006, President Bush proposed a federal budget which would cut total domestic spending, eliminate 42 education programs, and  significantly cut many specific programs, including job training and employment services, Community Development Block Grant (CDBG), homeland security,  and many other vital public services. In late February, Congressional Republican leaders followed Bush's budget plan and enacted cuts to entitlement programs of $40 billion over five years, including reductions to Medicaid, student loans, and food stamps.  Recently, Bush and Congressional Republicans have restarted their earlier efforts to establish an “Entitlements Commission” to further their efforts to gut these services.  They have also proposed an unelected “Sunset Commission”, which would have power to review and eliminate all federal programs.  AFSCME strongly opposes these efforts.

Each year Congress struggles to complete its annual funding process by approving spending bills that would make additional cuts in many federal programs that fund state and local public services. Work on Fiscal Year (FY) 2007 spending is no different as Congress has left difficult spending decisions on many domestic programs, including those in the areas of health, education, transportation, housing and social services to the last minute.  As a result, Congress is not likely to provide adequate funding for many urgent needs such as the "No Child Left Behind Act", veterans' health care, homeland security, and much more.

Summary of legislation

Estate Tax

Republican leaders in the House of Representatives and the Senate are also focused on their efforts to repeal the estate tax and have forced the House to vote on the issue several times during this Congressional session. In early 2005, the House approved the so-called "Death Tax Repeal Permanency Act of 2005" (H.R. 8), which would repeal the estate tax without any revenue offsets and grants million dollar tax breaks to a few very limited numbers of extremely wealthy families. During 2006, Republican House leaders forced another vote on a so-called reform bill, which would cost 80% of full repeal and again mostly benefit multi-millionaires and billionaires.  In contrast, all of these proposals would harm middle- and low-income class families by diverting nearly $1 trillion over 10 years from funding for vital public services. Fortunately, thus far, the Senate has rejected these proposals and Democrats have blocked the efforts of Senate Majority Leader Frist to enact these changes.

Other tax breaks

President Bush has also continued his efforts to reduce tax rates on capital gains and dividend income. Given that the wealthiest Americans own far more stocks and assets than others, this tax cut disproportionately benefits wealthy Americans. For the same reason, President Bush's new proposed tax breaks for large corporations also disproportionately benefit wealthy Americans.

Budget cuts

Again this year, the Congress will be making important decisions about the level of funding for health care coverage, job training, education, and other vital services for middle-class and low-income Americans as part of the budget process. Earlier this year, in a bi-partisan effort to avoid painful cuts, the Senate added back $6 billion to its Labor-Health and Human Services-Education spending bill. However, Republican House leaders have opposed these add backs and their plan – like President Bush’s proposed budget – would significantly cut these programs.

AFSCME position

  • AFSCME opposes tax proposals that benefit a few wealthy families at the expense of America's working men and women. AFSCME also opposes any proposal that reduces tax revenues without paying the costs with offsets because it weakens our nation's ability to invest in the needs of all Americans and it worsens the already record-sized federal deficit. AFSCME opposes repeal of the estate tax or other "reform" proposals, which would make the estate tax meaningless. The estate tax is a fair and progressive tax and focuses on those most able to pay - the richest one percent of all estates pays almost 50 percent of all estate taxes. In 2006, it only affects estates larger than $3 million per couple and in 2009 this will rise to $7 million. A recent congressional report ended the myth about family farms being affected by demonstrating that less than 300 American farms would pay estate taxes in 2005 and in 2006, only 15 farm estates would be required to pay taxes. AFSCME opposes full AMT repeal or any partial AMT repeal, which disproportionately benefits wealthier AMT taxpayers. Although some middle-class taxpayers need AMT relief, it's wrong to eliminate the AMT for all taxpayers. It is also wrong to grant AMT tax relief to the wealthiest Americans and wrong to give more AMT relief to taxpayers earning above $100,000 than to those earning less. AFSCME opposes any AMT repeal that does not include offsets because this harms working families by diverting funds from vital public services. AFSCME opposes lowering any tax rates that disproportionately benefit the wealthy, including rates on capital gains and dividend income or corporate rates, which mostly benefits wealthy stockholders. These tax breaks are too costly and don't stimulate the economy.
  • AFSCME is strongly opposed to the budget proposed by President Bush and approved by Congress that calls for drastic cuts in vital public services. AFSCME strongly supports fully funding those state and local programs that provide needed benefits to many hard working families and aid the victims of Hurricane Katrina. For too long, Congress has been passing on new responsibilities to the states without the resources to administer them. We need Congress to reject the harmful budget changes proposed and instead fund programs that provide health coverage, educational benefits, job training and employment services, housing and community development, and nutrition assistance.

What you can do

Contact your Senators and Representative and urge them to oppose any new tax breaks that are not paid for with offsetting revenues. Ask them to oppose full repeal or significant change to the Estate Tax, to oppose reducing the income tax rates on capital gains and dividends; and to oppose new tax breaks for large corporations.

Also tell your members of Congress to oppose cuts in vital public services, to fully fund employment services, "No Child Left Behind" school programs, health care programs, and other needed federal programs that are delivered by AFSCME members at the state and local level.

Department of Legislation
September 2006

Print Version
 

Raymond Summers
Council 31, Illinois

Raymond Summers

"I'm not a Democrat or a Republican, but I am a proud city employee. I support candidates who are on our side. And after they win, I make sure they vote for legislation that supports public services."