Federal Budgets and Revenue Update

December 17, 2004
Volume 10, Number 5

An Information Service of the NCSL Budgets and Revenue Committee

Congress Passes Omnibus Appropriations Package

Congress passed the remaining nine FY2005 appropriations bills after rolling them into an omnibus package (H.R. 4818). The legislation caps discretionary spending at $822 billion. The legislation also includes an eight percent “across-the-board” cut to all non-defense/non-homeland security discretionary programs, leaving those program a total of $388 billion. The omnibus was signed by the president after an enrolling resolution (H. Con. Res. 528) was agreed upon striking a provision allowing Appropriations Committee chairmen – or their designees – access to individual’s tax returns.

Internet Tax Moratorium Extended

Congress passed legislation (S. 150) to extend the sunsetted moratorium on state and local government’s ability to tax Internet access. The bill imposes a 4-year general moratorium on taxation of Internet access through November 1, 2007, retroactive as of November 2003. It will continue to grandfather in the nine states already taxing dial-up service for the duration of the moratorium. Wisconsin, however, will receive a two-year exemption from the moratorium, rather than the four-year exemption received for the other eight states. 27 states and the District of Columbia currently tax digital subscriber lines (DSL) and can continue to do so through November 1, 2005. In addition, municipalities in Texas are permitted to continue to collect compensation for use of the public rights-of-way.

Federal Debt Limit Increased

On November 19, the president signed a bill raising the federal government’s legal borrowing authority from $7.384 trillion to $8.184 trillion, an $800 billion increase. The legislation (S. 2986) passed both houses on party-line votes, with the House narrowly approving the measure 208/204. Attempts by House Democrats to add PAYGO rules requiring offsets before new mandatory spending or tax changes take effect were rejected as possible floor amendments under a closed rule by the House Rules Committee. Estimates suggest the new increase in borrowing authority could last until the later part of 2005.

Congress Finishes Intellegence Overhaul Bill

On December 8, 2004, the U.S. Senate overwhelmingly followed the House in passing comprehensive legislation (S. 2845) revamping federal intelligence operations. The Intelligence Reform Act of 2004 calls for a negotiated federal rulemaking for developing federal content and feature standards for state-issued driver’s licenses and personal identification cards. It also sets federal standards for birth certificates. The U.S. Department of Transportation (DOT) will lead the rulemaking, which will include state legislators, governors and motor vehicle administrators. Senators Susan Collins (R-Maine), Joe Lieberman (D-Connecticut) and John Sununu (R-New Hampshire) each mentioned during floor discussion that NCSL must be a participant in the negotiated rulemaking. DOT has 18 months to develop “voluntary” standards documenting proof of identity, verifying identity documents, processing applications, developing security standards and determining information that must be included on driver’s licenses. The latter must include digital photos, a document number and machine-readable technology that allows cards to be “swiped.” Although the legislation does not fund any state activity needed to meet the legislation’s requirements, the transportation secretary must submit a cost analysis within nine months. The “hammer” in the legislation is that no newly issued state driver’s license or personal identification card, after two years, will be accepted for official federal identification purposes, such as boarding a plane, filling out a W-9 or receiving veterans or other federal benefits, unless it meets federal standards. NCSL was instrumental in preserving state authority to deal with licensure of undocumented individuals.

For more information contact NCSL staff: Molly Stauffer, Nick Steidel.