Sick of resolving to clean up your financial life, only to find a few months down the road that you’ve failed? I say let’s pass the buck in 1995 and make resolutions for legislators rather than ourselves. State, federal, city and county officers are spending 40 percent of our money anyway.
Admittedly, with the federal debt pushing $5 trillion and budget crises in nearly every hamlet in the nation, even strong fiscal resolve may not result in lower tax rates. But it could eventually make America and Americans more prosperous.
So what should legislators resolve to do in 1995? Here’s a start.
– Resolve to stop messing with the tax code unless you’re personally able to fill out the forms you’ve changed. The U.S. income tax code-now under scrutiny for additional revision-has been revised an average of 2.5 times per year for the past eight years, making it highly complex and unstable, says Arthur P. Hall, senior economist at the Tax Foundation in Washington, D.C. Increasing numbers of Americans are forced to seek professional help-at costs ranging from $50 to more than $1,000-to file an annual tax return.
Why the complication? There are many hypotheses that all ring partly true. But a 1993 survey by Money magazine may have uncovered the real culprit: Only 24 of the 58 members of Congress’ two tax-writing committees actually fill out their own tax returns. And those few legislators who do their own returns are entitled to special help from the IRS, Money reported.
– Resolve to cut your own budget as drastically as you require others to cut theirs. Among the bitter ironies of the Orange County, California, financial debacle are the plans to solve the county’s budget crisis. County officials are grappling with a $160 million annual deficit caused by the dubious investment practices of the county’s former treasurer. They’ve said they’ll slash agency budgets by as much as 29 percent.
Yet, only a few county supervisors were willing to cut their own pay and staff. And then only by slim 5 to 10 percent margins.
– Trim the fat. Deficit reduction has been a rallying cry for years, and yet every year something called “The Pork-Buster Bill” is introduced-and subsequently shot down. What is the Pork-Buster Bill? It’s a proposal to nix hundreds of penny-ante, federally funded projects that have been tacked on to unrelated appropriations bills without debate, without individual approval-often against the wishes of the department being subsidized. Together these projects cost about $1 billion per year.
– Stop fudging the numbers. Consider one “revenue-enhancing” measure in the General Agreement on Tariffs and Trade. To partially pay for GATT, Congress will eliminate the so-called “guaranteed” rate on U.S. savings bonds. The guaranteed rate, currently 4 percent, was paid to anyone who cashed in their bonds within five years. People who held their bonds longer got the higher of the guaranteed rate or a variable market-based rate that’s equal to 85 percent of the yield on five-year Treasury notes, set every six months.
Starting sometime later this year, the guaranteed rate will be nixed and all buyers of savings bonds will get a variable rate. The variable-rate payout formula remains the same for bonds held five years or more. For bonds held less than five years, the Treasury will pay a rate equivalent to 85 percent of the yield on six-month Treasuries.
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Interest will accrue on the bonds just once each six months rather than every month. These two revisions to savings bond rules are supposed to save the government $122 million over five years.
What’s wrong with this picture? When this provision was “scored” for its revenue-raising abilities last April, number crunchers at the Congressional Budget Office assumed that the relevant T-bill rate would be 4.3 percent in 1995 and 4.6 percent in years beyond. But by the time the bill passed in November, it was clear that these interest projections were way off. Currently six-month T-bills pay 6.81 percent, which, if the change went into effect today, would obligate the Treasury to pay 5.79 percent rather than 4 percent on savings bonds cashed in early.
How many bonds are affected? About $4 billion worth each year, according to the CBO. Rough translation: This revenue raiser could cost $72 million each year, or about $360 million over five years, in additional interest payments.