House and Senate Budget Committees this week passed their respective budget resolutions providing a non-binding blueprint for FY 2010 federal spending and tax policy. The House and Senate will consider the resolutions next week, with final passage votes expected by the weekend. Although leaders in both chambers decided against using the budget resolution to “fast track” controversial legislation to address climate change, the House version proposes this tactic to expedite health care reform.
Both resolutions provide for level funding for surface transportation programs, but provide room for more spending if sufficient resources are made available in subsequent legislation (i.e., SAFETEA-LU reauthorization).
The resolutions also follow President Obama’s proposals to extend the 2001 and 2003 Bush tax cuts for couples with incomes under $250,000 and singles under $200,000. The resolutions also continue the estate tax parameters for 2009, with an exemption of $3.5 million ($7 million for a couple) indexed to inflation and a top rate of 45 percent. Without this change, the estate tax is scheduled to phase out completely in 2010, only to be reinstated at a top rate of 55 percent and $1 million exemption in 2011.
Transportation and Infrastructure Reserve Funds
The House budget resolution includes a “reserve fund” for surface transportation reauthorization that allows Congress to revise spending for surface transportation programs upward if Congress writes legislation that “establishes or maintains a solvent Highway Trust Fund over the period of fiscal years 2009 through 2015.” The provision leaves open the option of a transfer of general fund revenues to the Highway Trust Fund, “as long as the transfer of Federal funds is fully offset.”
The Senate budget resolution includes a reserve fund for a broader array of infrastructure projects, including energy, water, and public housing. It also allows for more spending on surface transportation if the “solvency of the Highway Trust Fund will be maintained for the length of the surface transportation authorization.”
Both resolutions reject the Administration’s proposal to change the budgetary treatment of “contract authority,” which would have treated surface transportation programs like any other federal program.
Senate Estate Tax Amendment
During Senate consideration of the budget resolution next week, Senators Blanche Lincoln (D-Ark.) and Jon Kyl (R-Ariz.) are planning to offer an amendment that would provide greater estate tax relief. The Senators’ amendment is expected to propose a top rate of 35 percent with an exemption of $5 million indexed to inflation. AGC supports efforts to provide a permanent reduction in the estate tax.
Tax Increases for High-Income Individuals
Both resolutions follow President Obama’s proposal to increase taxes for higher-income individuals. Since approximately two-thirds of construction firms are organized as subchapter S corporations and their taxes are paid on their shareholders’ individual tax returns, these tax hikes would be damaging to the construction industry.
AGC opposes President Obama’s proposed tax hikes in the budget and his use of the budget resolution to push through controversial legislation such as health care reform and climate change. To view more about AGC’s concerns and to voice your opinion to your Senators and Representatives, use AGC’s Legislative Action Center.
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