OT - Information on Kerry's Tax Infamous Tax "Plan"

[joni]

http://www.ntu.org/main/press_release_printable.php?PressID=628&org_name=NTUF

One Hand in Your Pocket: How Kerry's Campaign Pledges Stand to Cost Taxpayers Billions
NTUF Policy Paper 153

How much of your hard-earned money will you get to keep? That issue, fundamental to many Americans this campaign season, has become the focus of the Presidential race. The Bush campaign accuses John Kerry of hitting America's families where it hurts the most: squarely in the pocketbook. Drawing heavily from the publicly-released National Taxpayers Union Foundation (NTUF) study, "The Return of Fuzzy Math and Risky Schemes: How Presidential Hopefuls Would Deepen Deficits," the Bush campaign claimed John Kerry's new spending proposals would exceed $195 billion per year.[1]

Independent estimates included in this policy paper indicate that the Bush analysis of Kerry's agenda costs may actually be understated. Even after over $30 billion in proposed savings, John Kerry plans to introduce over $226 billion in new spending -- in his first year alone.

Unfortunately, Kerry's spending blueprint may not be the only thing the Bush campaign is understating. Lost among Bush's attack on Kerry's plans for costly programs is the President's own disturbing record on spending, which includes a 29 percent increase in the size of the federal budget during his first term.[2]

For his part, Kerry retaliated with an April 7th speech portraying himself as a fiscal conservative, announcing plans to cut the deficit in half in four years while "paying for" every program proposed without increasing the debt. This seemingly laudable goal is actually quite unexceptional -- slashing the deficit by half would allow the federal government to spend $260.37 billion more than it takes in by FY 2009 (and seemingly as much as it wants until then). Yet, Kerry's proposals increase spending by a cumulative $621.76 billion over a four-year Presidential term. That translates to an average increased tax burden of $6,066 for every person paying federal taxes in America over Kerry's first term.[3]

Voters faced with a constant stream of rhetoric, crosstalk, and campaign promises remain frustrated in their attempts to find answers to questions concerning how the Democratic nominee in this year's race for the White House plans to spend American tax dollars. This policy paper addresses those questions by systematically examining John Kerry's agenda, using neutral techniques to assign a running cost or savings tally to each cost-related proposal publicly offered by Sen. Kerry.

Highlights of this NTUF study include:

A projected $226.125 billion increase in spending -- in the first year of a Kerry Presidency alone.
A projected $734.62 billion increase in the national debt over five years.
Nearly $115 billion in social welfare, foreign aid, energy, and environmental handouts over a first Kerry term.[4]
Kerry the Fiscal Conservative?

In his April 7th speech at Georgetown University, John Kerry set forth the promise to "impose spending restraints so that no one can propose or pass a new program without a way to pay for it."[5] In addition to this "pay-as-you-go" approach, the Senator calls for a spending cap to ensure that federal spending does not exceed inflation. Unfortunately, Kerry exempts a series of major discretionary categories -- including military and homeland defense, education, and health care -- from his so-called "strong" spending cap, not to mention mandatory programs such as Social Security and Medicare.

Since beginning his Presidential bid, Kerry has announced a total of five cost-saving policy ideas. These are:

Ending subsidies to high-income corporate farmers.
Reducing federal government administrative costs by five percent.
Terminating 100,000 federal contracting jobs.
Trimming federal energy use by 20 percent.
Eliminating the sale of public mineral rights at $5 per acre.
Additionally, Kerry supports the creation of a Corporate Subsidy Reform Commission to recommend cuts to corporate welfare and submit them to Congress. The establishment of this Commission requires $4 million in initial operating outlays; however, the ultimate aim of the Commission would be to reduce corporate subsidies by billions of dollars.

Most of these cost-savings plans, while commendable in theory, are questionable in fact. For example, in the same speech that he professed "a strategy to create 10 million new jobs," John Kerry proposed firing 100,000 federal contractors. While doing so would trim nearly $6 billion from the federal budget, Kerry makes no promises that the contractors would not simply be replaced by federal workers (at a greater cost to taxpayers, given the comparatively lavish benefits federal employees enjoy).

The plan to "streamline government agencies and reduce out-of-control administrative costs by five percent" is a respectable goal, to be sure. Kerry remains vague, however, as to exactly what he includes in the definition of administrative costs. Theoretically, "administrative costs" could range from trucks to tape dispensers, and include the salaries of thousands upon thousands of employees. Further complicating the proposal is the lack of a reliable cost estimate for annual federal administrative expenses.

Sen. Kerry also remains ambiguous on his plans to reduce federal energy usage by 20 percent. Undoubtedly, reaching this goal would require significant initial expenditures in everything from hybrid vehicles to energy efficient long-life light bulbs, not to mention the costly prospect of re-insulating federal buildings and outfitting them with more efficient heating and cooling systems. Even with extensive concentration paid to the 20 percent reduction goal, it would likely take years to recoup the expenditures for the necessary energy saving devices and procedures.

In addition to these questionable "cuts," Kerry also supports delaying the 2005 round of the Base Realignment and Closure (BRAC) program. BRAC calls for an orderly and measured elimination of excess physical military capacity, "which diverts scarce resources from defense capability," by Congress and the military.[6] Recurring annual reductions created by earlier rounds of BRAC already save taxpayers $7 billion yearly.[7] Anticipated savings created by the 2005 BRAC would amount to an additional $6 billion annually.[8] Since this round of BRAC is set to occur in 2005, the loss of savings is not included among estimates calculated for this policy paper. However, BRAC represents a previously successful and potentially critical area of savings for the federal government that Kerry appears to shun.

During the same speech at Georgetown, Sen. Kerry claimed that "Americans can trust" his vow of fiscal responsibility because, he has "a voting record that, on the most critical budget votes of the last 20 years, helped balance our budget and pay down our debt." But NTUF's VoteTally and BillTally historical data present a different picture. For example, no other Senator proposed more new federal spending during the 106th Congress than John Kerry. And from 1997-2002, Sen. Kerry voted to increase federal spending by a cumulative total of $731 billion. During the current 108th Congress, Kerry's spending has reached new heights. In 2003, Kerry has already sponsored or co-sponsored $182 billion worth of new federal legislation.[9]

As Appendix A of this policy paper indicates, since announcing his candidacy John Kerry has offered 70 policy proposals affecting federal outlays, only five of which would decrease government spending. Overall, Sen. Kerry proposes spending $770.6 billion over five years to fund his projects, while suggesting just $35.99 billion in budget cuts. This leaves $734.62 billion unaccounted for and presumably passed on to American taxpayers in the form of increased taxes or a suffocating debt. The following table illustrates Kerry's questionable commitment to cutting spending using first-year numbers found in Appendix A.

Table 1. First Year Spending and Savings Policies Proposed by John Kerry

Impact on Federal Budgetary Outlays
 Number of Policies Proposed
 Cost of Policies Proposed
(in billions)
 
Spending      Savings       Total
 65                   5              70
 $256.28          $30.16      $226.12
 

If John Kerry were indeed to "pay for" every program he has proposed as a Presidential candidate, as he promised in the April 7th speech at Georgetown, taxpayers in the U.S. would face an average additional $2,206 apiece in taxes in the first year of a Kerry presidency alone.[10] That astounding number is sure to grow as nearly six months (and likely dozens of campaign promises) remain before Election Day.

The Kerry Platform

John Kerry's policy platform includes 70 proposals addressing issues from renewable energy to AIDS research, from Head Start to hate crimes. The Appendix of this study includes an item-by-item inventory of each budget-altering policy proposed by John Kerry.

The cost or savings of each item in the Appendix is estimated using a variety of sources, most notably the Kerry campaign's own budgetary projections and the National Taxpayers Union Foundation's BillTally analysis. BillTally is a computerized accounting system that annually tabulates the cost of every piece of legislation introduced in Congress with a net annual budgetary impact of $1 million or more.[11] In order to offer Sen. Kerry the most favorable interpretation possible, NTUF applied the lowest cost estimate for spending proposals and the highest estimate for savings proposals whenever several estimates existed.

Each of John Kerry's proposals fits in one of 15 categories. The categories range in numbers of proposals from one (Agriculture/Rural and International Aid) to 19 (Education) and range in budgetary effect from a $165 million savings to a cost of nearly $74 billion. The following chart has a complete breakdown of those 15 categories and the cost and savings proposed by Sen. Kerry for each category.

Table 2. Kerry Spending and Savings Estimates by Category, in millions

Category                  Spending             Savings          Total

 
Agriculture/Rural           $0                    -$165         -$165
 
Civil Rights                   $115                    $0            $115
 
Economy                   $25,050            -$22,660       $2,390
 
Education                  $74,883                   $0        $74,883
 
Employment               $17,912              -$5,980     $11,932
 
Energy                     $4,000                 -$1,250      $2,750
 
Environment                  $893                 -$104        $789
 
Health Care               $71,120                   $0        $71,120
 
Homeland Security      $7,004                    $0         $7,004
 
Housing                       $63                        $0          $63
 
Infrastructure             $31,177                  $0         $31,177
 
International Aid          $7,250                   $0         $7,250
 
Justice                         $7                         $0             $7
 
Military/Veterans        $16,810                   $0           $16,810
 
Science/Technology   Unknown                  $0         Unknown
 
Overall Total:            $256,284           -$30,159      $226,125[12]
 

In order to examine John Kerry's policy proposals in greater depth, the following section clusters the Appendix's 15 policy categories into five headings (health care, education, military/homeland security, social/economic/environmental programs, infrastructure) to expose some of the more interesting and most costly of Sen. Kerry's policy proposals. The following graph compares those five headings and the overall cost of Sen. Kerry's proposals for each category.



Education

John Kerry's most expensive policy area by nearly $4 billion, education tops out at over $74.88 billion in first-year costs and nearly $184 billion over five years. Thirty-three percent of the Senator's one-year proposed spending goes to satisfy Kerry's 19 separate education policy proposals. Higher education incentive programs such as refundable tuition credits and increases in the Pell Grant program cost upwards of $12 billion. The bill for John Kerry's child care proposals, including higher funding of the Head Start program and the Child Care and Development Block Grant, totals $22.32 billion. School renovation and modernization proposals (even excluding schools in the Bureau of Indian Affairs System) tack another $24.8 billion onto the education tab.

Health Care

The most often-questioned and hotly-debated aspect of the Kerry platform is also its most expensive single agenda item within a policy category: the Kerry health care plan. For the sake of consistency, this study utilizes the updated cost estimates proposed by former Clinton Administration economist Ken Thorpe, the source of the original estimate employed in the NTUF Democratic Presidential candidate cost analysis study from January 2004. Thorpe initially pegged the cost of Kerry's health care plan at $895 billion over 10 years. That estimate has since been lowered to reflect potential savings resulting in early prevention programs and disease management efforts. Thorpe's new estimate stands at $653 billion over a decade.

Several observers, including Rep. Bill Thomas (R-CA), Joseph Antos of the American Enterprise Institute, and John Goodman, President of the National Center for Policy Analysis, claim the new Thorpe numbers substantially overestimate the savings in the Kerry health care proposal. In fact, Thomas, the Chairman of the House Ways and Means Committee, alleges Kerry's plan would top $1 trillion over a 10-year span.[13] If the Kerry health care proposal actually proved to be as costly as Thomas projects, the $347 billion difference between Ken Thorpe's reduced estimate and Rep. Thomas's estimate will cost the average American taxpayer over $3,385.

In addition to his health care plan, Sen. Kerry offers $5.82 billion in other first-year health-related spending. Included in the price tag are $645 million in AIDS-related funding, $3.4 billion in health care services to the Native American community, and $1.27 billion to restore health care benefits to legal immigrants. Rounding out the costs are two drug treatment programs that tally a combined $505 million per year.

Infrastructure

Over 99.4 percent of the $31.18 billion cost of John Kerry's infrastructure plan results from a pledge to restore highway cuts made by the Bush Administration last year.

Besides the $31 billion in restored highway funding, Kerry also calls for the creation of high-speed rail services as well as for increased funding to enhance transportation services for the disabled and disadvantaged.

Military/Homeland Security

John Kerry plans to introduce $23.81 billion in new spending for anti-terrorism and other military efforts. Of that total, over half -- $12.01 billion -- goes toward veterans health care and other military benefits. Just over 20 percent of the category total goes to address homeland security issues. This includes a $5 billion port security plan to screen all containers that enter the United States. The remaining funds provide more policing and firefighting efforts and add 40,000 active-duty Army troops to the American forces. If the troop increase stands through the remainder of the decade, as Kerry suggests, it will be at a cost of $24 billion.

Social, Economic, and Environmental Programs[14]


In an apparent attempt to appeal to numerous constituencies, Kerry offers cost-incurring policy plans that benefit, among others, felons, gays and lesbians, Native Americans, women, small business owners, the unemployed, carmakers, coal producers, and endangered species. Kerry's plan for employment, for example, offers $12 million to close the gender gap in pay, $800 million to expand the Family and Medical Leave Act, and over $17 billion in new unemployment benefits.

Environmentalists have reason to be happy with $893 million in new spending on environmental conservation and protection. A plan to fully fund the Land and Water Conservation Fund, at a $586 million increase over the current baseline, is responsible for the majority of environment-related costs. Funding inner city parks, increasing the Conservation Reserve Program's annual budget, boosting funding for endangered species conservation, and cleaning up Superfund sites all consume the remainder.

Environmental overtones run throughout John Kerry's energy programs as well. These programs include a combined $20 billion sum over five years for clean coal technology, energy efficient vehicles, and renewable energy. On the civil rights front, Sen. Kerry aims to provide equal justice for victims of hate crimes -- at a $110 million cost to taxpayers -- and a $2 million plan to restore voting rights to felons. Other Kerry plans include $63 million earmarked for housing programs for Native Americans and AIDS patients, $7 million for Native American law enforcement and tribal courts, and a $7.25 billion yearly contribution to international AIDS treatment and prevention.

Conclusion

For overtaxed and deficit-weary Americans, the future prospects for federal spending are, at a minimum, uncertain. In his first term, George W. Bush repeatedly failed to adequately trim the pork from an ever-fattening federal budget. Bush's opponent John Kerry proposes to submerge America even deeper into a sea of spending. Despite his recent attempt to outflank Bush on the deficit issue and portray himself as the more "fiscally responsible" candidate, the data behind Kerry's rhetoric tell a different story. Enactment of Kerry's "revised" spending agenda in its entirety would still mean higher taxes, a larger national debt, or likely both. Kerry's proposed spending caps, meant to convince Americans that he would usher in a new era of austerity, are actually so porous as to be no more effective than the restraints George W. Bush has sought.

In the final analysis, the "winner" of the 2004 election is likely to be the federal deficit -- leaving taxpayers with a landslide loss of their economic freedom.

About the Author

Drew Johnson is a Policy Analyst with National Taxpayers Union Foundation. He is also the author of NTUF Policy Paper 148, The Return of Fuzzy Math and Risky Schemes: How Presidential Hopefuls Would Deepen Deficits, published in January 2004.


--------------------------------------------------------------------------------

[1] //www.ntu.org/main/press_papers.php? PressID=548&org_name=NTUF

[2] //www.whitehouse.gov/omb/budget/fy2005/pdf/ hist.pdf

[3] Based on 102.5 million federal tax filers whose income tax returns showed a positive tax liability as reported by the IRS Statistics Of Income (SOI) division, 2001.

[4] $114.719 billion (includes proposed new spending amounts in Civil Rights, Economy, Employment, Energy, Environment, Housing, International Aid, and Justice and Law Enforcement categories in Appendix A).

[5] //www.johnkerry.com/pressroom/speeches/ spc_2004_0407.html

[6] //www.defenselink.mil/brac/

[7] //www.defenselink.mil/brac/02faqs.htm#15

[8] //www.nationalreview.com/nrof_comment/ gessing200405270809.asp

[9] //www.ntu.org/main/page.php?PageID=30

[10] Based on 102.5 million federal tax filers whose income tax returns showed a positive tax liability.

[11] The most recent BillTally report, "The First Session of the 108th Congress: Operation Enduring Deficits -- Marshalling Taxpayer Dollars Into New Programs," is available at: //www.ntu.org/main/press_papers.php? PressID=581&org_name=NTUF

[12] Number varies between $226.12 billion and $226.125 billion due to rounding.

[13] //www.hillnews.com/news/051904/cbo.aspx

[14] Includes all proposals listed under the Agriculture/Rural, Civil Rights, Economy, Employment, Energy, Environment, Housing, International Aid, Justice and Law Enforcement, and Science and Technology headings in Appendix A.