Federal Budgets and Revenue Update

February 9, 2005
Volume 11, Number 4

An Information Service of the NCSL Budgets and Revenue Committee

DEDUCTIBILITY EXTENSION INTRODUCED

Senator Kay Bailey Hutchison (R-Texas) and six bipartisan cosponsors have introduced S. 27, making permanent the optional deduction for annual state and local sales taxes which expires this year. Getting a permanent deduction will be very challenging in Washington, D.C.’s current fiscal environment. Texas Republicans Tom DeLay and Kevin Brady and Washington Democrat Brian Baird are expected to introduce companion legislation in the U.S. House of Representatives. NCSL supports S. 27 and asks state legislators to contact their U.S. senators and urge their cosponsorship of this bipartisan bill.

MANDATE GAP ADDRESSED

The unfunded mandate gap states and localities confront for costs of incarcerating unauthorized immigrants would be filled considerably with legislation introduced January 26 by Senator Diane Feinstein (D-California) and Jon Kyl (R-Arizona). S. 188 would reauthorize the State Criminal Alien Assistance Program (SCAAP) and set future funding levels at $750 million for FY 2006, rising up to $950 million over five years. The FY 2005 SCAAP appropriation was $297 million. According to 2004 figures, states were reimbursed for only 42 percent of their submitted costs, with the federal government limiting what states can seek through the reimbursement process. NCSL supports S. 188 and asks state legislators to contact their U.S. senators and urge their cosponsorship of this bipartisan bill.

UMRA SYMPOSIUM GENERATES RECOMMENDATIONS

On Jan. 26, 2005, the Government Accountability Office (GAO) convened a symposium of state and local government organization representatives, including NCSL, and other stakeholders to discuss means for strengthening the federal Unfunded Mandates Reform Act. The symposium is the last step before GAO will publish a report in late March 2005 for Senator George Voinovich (R-Ohio) on ways to broaden and strengthen congressional and administration fiscal analyses. UMRA will be the focus of a House Government Reform Committee hearing in early March likely followed by a Senate hearing in April.

DEMOCRATS UNVEIL EARLY SESSION TAX LEGISLATION

Senate Democratic leadership recently introduced a series of bills which include several tax provisions. S. 11 includes a provision exempting national guardsmen and reservists from the 10% tax on early distributions from qualified retirement plans if they are called to active duty for more than 6 months. S. 16 provides a tax credit on purchased health insurance for each dependent child of a taxpayer, as exceeds five percent of the adjusted gross income of that taxpayer. The bill also includes a tax credit for small employers who provide health insurance to their employees.

PRESIDENT’S ADVISORY PANEL ON TAX REFORM TO HOLD FIRST MEETING

The President's Advisory Panel on Federal Tax Reform will hold its first meeting February 16. According to the White House, the purpose of the Advisory Panel is to submit a report with revenue neutral policy options for reforming the Federal Internal Revenue Code. NCSL sent a letter on January 14 to former Senators Connie Mack and John Breaux, Chair and Vice-Chair, respectively, of the Advisory Panel, urging that the report’s recommendations preserve the fiscal viability and sovereignty of state governments. To access the letter, visit http://www.ncsl.org/standcomm/scbudg/tc1.htm

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