AAF: Calling Balls and Strikes on the House GOP Budget Reconciliation Menu

For more information, please contact AAF Policy Director John Shelton at jshelton@advancingamericanfreedom.com

AAF: Calling Balls and Strikes on the House GOP Budget Reconciliation Menu

TOPLINE: Advancing American Freedom applauds the House Budget Committee for compiling an ambitious menu of options to cut federal spending and deliver economic growth. With the upcoming reconciliation vehicle, conservatives in Congress have a rare opportunity to enact significant federal spending reforms. The following briefly outlines the case for—or against—some of the most significant proposals.

The Good: Pro-growth tax cuts, SALT subsidy reductions, Medicaid payment reform, curtailing the green energy agenda, eliminating illegal immigration incentives, student loan revisions

• Drop the Corporate Income Tax from 21% to 15%. Combined with state corporate income taxes, U.S. taxes are still higher than Communist China. • Make federal bureaucrats contribute more to their overly generous retirement plans. • Further limit the state and local tax (SALT) deduction. This deduction acts as subsidy for mismanaged states paid for by taxpayers in fiscally prudent states. As an example, California and New York spend >2x per capita than Texas.

o Eliminate corporate SALT. o Eliminate deductibility of all income and sales taxes from SALT. • Replace open-ended federal Medicaid matching funds with a per capita cap--- incentivizing state- level innovation.

o Restrict illegal immigrants from accessing federal health care programs.

• Repeal the Biden student loan plan and reform the Public Student Loan Forgiveness programs. • Reduce the Medicaid provider tax safe harbor.

o Federal government funding to states is partially contingent on the taxes a state collects from health providers. o Some states have rigged the system by increasing these taxes—and then providing a partial reimbursement to those providers from the gusher of federal funds induced by these higher taxes. • Require valid Social Security numbers for both children and parents filing for the Child Tax Credit (CTC). The current standards transform the CTC into an illegal alien baby bonus. • Eliminate the Death Tax. • Repeal Green New Deal components of IRA

The Bad —Increase SALT subsidy, expand tariffs, other forms of tax code favoritism

• Increase the SALT deduction. SALT forces taxpayers in fiscally prudent states to subsidize reckless spending elsewhere • Border Adjustment Tax (BAT). Revenue generated from BAT represents a very real increase in import costs. If the value of the dollar fails to adjust at the rate and speed predicted by proponents, both U.S. exports and imports could decline— harming both manufacturers and consumers. • Eliminate tax on overtime: Creates economic distortions by favoring hourly income rather than salary. Encourages overtime even when not efficient.

• Ending de minimus. Individuals may import small quantities of goods free of duties and tariffs. Ending this exception is a tax hike on consumers. • Eliminate the deduction for meals and lodging provided to employees for the employer’s benefit. This would increase the tax burden on businesses and result in lower wages for employees or fewer of these benefits (encumbering important activities like team meetings, conferences, and sales travel). • Eliminate tax on tips: Favors just 2.5% of the workforce. Incentivizes employers to reduce hourly pay in favor of tipping in more venues.

The Ugly — Historic tax hikes on American families—via tariffs

• Numerous proposals for tariff increases. Tariffs are real taxes on American families. For instance, a 10% across-the-board tariff would be the largest peacetime tax hike since 1940: $1.9 trillion over ten years. Since 1992—the implementation of NAFTA—median real family annual income increased more than $28,000 and manufacturing output increased more than 40%—largely due to expanding free trade.