MEDIA RELEASE: Congress should replace sequestration with balanced approach
Report proposes four revenue options for sequestration fix
RALEIGH (March 1, 2013) – This week the U.S. Senate failed to repeal the $85.3 billion in automatic, across-the-board spending cuts, also known as sequestration. As a result, these spending cuts will go into effect today, with likely devastating effects on North Carolina’s families, state and local budget, and its fragile economic recovery.
However, Congress still has an opportunity to address these cuts, a new report finds, and pursue a balanced approach to deficit reduction that replaces the sequestration cuts with equal amounts of new revenue and smart spending cuts. This approach would eliminate special tax breaks for corporations and the most well off in order to avoid more cuts to important public investments in education, job training, and food safety that benefit all North Carolinians, according to a memo from the Budget & Tax Center, a project of the North Carolina Justice Center.
Congress needs just $1.5 trillion in budget savings over the next decade in order to put the national debt on a sustainable path for our economy, thanks to recent economic growth and previous deficit reduction, according to the memo. But sequestration is the wrong approach to finding these savings, given that these cuts target domestic discretionary spending—a relatively small portion of the federal budget that doesn’t drive the nation’s long-term deficit.
Instead, the memo advises lawmakers to consider four revenue options that could raise almost $737 billion over the next decade – half of the savings required to hit the $1.5 trillion debt stabilization target.
The revenue options include:
- Limiting the total savings from deductions and loopholes available to high-end taxpayers to no more than 28 cents for every dollar of deductions and exclusions;
- Preventing offshore corporate tax avoidance by eliminating the deferral of foreign income from taxation until repatriation into the U.S. and reforming the foreign tax credit;
- Limiting deductions for oil companies by including oil form tar sands in the range of petroleum products subject to the taxes that fund the Oil Spill Liability Trust Fund; and
- Eliminating the corporate deduction for expenses associated with moving business operations offshore, raising about $1 billion over the next decade.
“Congress still has the opportunity to do the right thing on sequestration during upcoming negotiations over funding the federal government for 2013,” said Allan Freyer, public policy analyst with the BTC and author of the memo. “Replacing sequestration with a balanced approach to deficit reduction simply asks corporations and wealthy individuals to pay their fair share and protect vital public investments in education, job training, and food safety.”