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Federal Budget Update
Another Continuing Resolution for FY 2024
President Biden last Thursday signed into law another continuing resolution that was agreed to by Congress. The third short-term funding bill for fiscal year 2024 funds the federal government in two tranches—four appropriations bills will expire March 1 and the remaining eight bills will expire March 8. The measure, which gives congressional appropriators time to allocate topline funds that Senate and House leaders agreed to in January, provides $773 billion in nondefense discretionary spending and $886 billion in defense spending.
The House GOP split slightly in favor of the latest funding stopgap, with 107 Republicans voting in favor and 106 opposing. House Speaker Mike Johnson is being pushed by members in his caucus to be harder with negotiations. The House Freedom Caucus, which is leading the push, wants Johnson to include border security measures and steeper budget cuts in the latest resolution, but the requests did not make it into the text prior to Thursday’s votes. In addition to the Freedom Caucus’ demands, Johnson also must navigate criticisms surrounding additional proposed funding for Israel, Taiwan and Ukraine.
Federal Tax Update
Bipartisan Tax Legislation Introduced
The Tax Relief for American Families and Workers Act seeks to increase and extend the Child Tax Credit and would change research and development deduction rules for business, among other measures.
The American Rescue Plan increased the Child Tax Credit from $2,000 to $3,000 per child for children age 6 and over and to $3,600 per child for children under 6; however, this increase expired at the end of 2021. The recently proposed measure would increase the current level of $1,600 per child to $1,800 for tax year 2023; $1,900 for tax year 2024; $2,000 for tax year 2025; and then tie additional increases to inflation for tax years beyond 2025. The Center on Budget and Policy Priorities estimates that in the first year, the proposal would lift as many as 400,000 children above the poverty line and make an additional 3 million children less poor as their incomes rise closer to the poverty line.
The measure also changes business deductions by allowing entities to deduct research and development costs annually, rather than in five-year increments, which current law requires. The measure also changes bonus depreciation and computation of adjusted taxable income, and increases limits on expensing of depreciable business assets.
The House Ways and Means Committee approved the measure, 40-3, on Friday. The next step is consideration by the full House—as a revenue bill, it must originate in and pass the House prior to Senate consideration. The Democratic chair of the Senate Finance Committee, Sen. Ron Wyden of Oregon, has stated that he hopes for passage of the bill by the end of January.
Read more:
Joint House and Senate Press Release, Technical Summary and reports by Joint Committee on Taxation: Description of H.R. 7024, the “Tax Relief For American Families and Workers Act of 2024” and Description of the Chairman’s Amendment.
Administration Updates
HHS Releases Report on Rescheduling Cannabis
The Food and Drug Administration concluded in August last year that cannabis is less harmful than other scheduled substances and that there is evidence it has medical benefits. The agency’s reasoning is outlined in a recently published, 252-page report. The Drug Enforcement Administration has the final authority to schedule or reschedule drugs under the Controlled Substance Act. Read more
WIC Program Facing $1B Shortfall
WIC serves over 6 million people per month, including an estimated 39% of all infants in the United States and has been shown to help reduce infant deaths and premature births. The program’s current budget crisis is due to many factors, including an increase in costs after Congress expanded cash vouchers for fruits and vegetables in 2021—a change based on a congressionally mandated report by the National Academies of Sciences, Engineering and Medicine in 2017. Modernization of the program, including the use of telehealth, has boosted participation in the program and an additional 400,000 people enrolled in WIC in 2023—far exceeding projections. Additionally, rising food inflation—30% over the past five years— has also contributed to the budget shortfall.
All continuing resolutions (CR) passed by Congress, including the CR just passed last week, have allowed the program to continue operating—but at 2023 funding levels and with permission to spend at a faster rate to maintain benefits and participation. The USDA has estimated that an increase of $1 billion is needed for the rest of FY 2024 to avoid running out of funds in August. Without increased funding, states may need to initiate waiting lists, scale back benefits or suspend benefits altogether. The program has traditionally received bipartisan support. Read more.
Proposed Rule Addresses Overdraft Fees
The Consumer Financial Protection Bureau issued a proposed rule that includes new parameters on the way large financial institutions, defined as banks with at least $10 million in assets, charge overdraft fees when a customer’s account does not have enough funds to cover a transaction. Under the proposal, banks could either charge consumers the amount that would allow the bank to break even on providing overdraft services or adhere to a benchmark fee of between $3 and $14 set by the bureau. Comments are due by April 1. Read more