Senate Democrats Propose Buffet Tax, Spending Cuts as Alternative to Sequestration

On Feb. 14, Senate Majority Leader Harry Reid (D-Nev.) unveiled his plan to replace the March 1 implementation of $85 billion in indiscriminate, across-the-board spending cuts—called sequestration—with an even balance of spending cuts and tax revenues. The plan includes a 30 percent minimum tax rate for personal income over $1 million, a change in the tax treatment of employment opportunities outside the US, and a new tax on oil from tar sands that will go into the oil spill liability trust fund (these provisions are expected to raise about $5 billion this year and $55 billion over the next ten years).  It also redirects and delays the planned sequester cuts by phasing in $27.5 billion in defense cuts over a six year period starting in 2015.  In addition the plan will reduce farm subsidies by imposing a means test over a 10 year period. Sen. Reid’s proposal faces opposition from House Republicans and even some Senate Democrats. Last Congress, House Republicans passed a bill that would have replaced the defense cuts in the sequester with all spending cuts, specifically to the president's health care law and food stamp program, among other things. House Republicans continue to consider the spending cut-only path as the only alternative.  Meanwhile, some Senate Democrats have called for an alternative measure that includes a ratio of 80 percent in tax revenues to 20 percent in spending cuts to replace the sequester. At this point, a number of members of Congress continue to say they expect sequester to happen and that no deal will happen before March 1. AGC recently updated its sequestration report, detailing the possible impacts of sequestration on the federal construction market. According to AGC's analysis, sequestration could cut approximately $4 billion federal construction investments in FY 2013 alone. As a result of the two month delay of sequestration enacted by the American Taxpayer Relief Act (the "Fiscal Cliff Deal"), $24 billion in overall federal budget cuts in FY 2013 were averted, leading to the change in initial AGC estimates of over $6 billion in potential cuts to federal construction spending. AGC also previously held a free webinar for members on the possible impacts of the sequestration cuts, including federal construction contracting agencies' possible changes in their contracting behavior. AGC continues to strongly urge Congress and President Obama to enact sensible debt reduction reforms and avert these indiscriminate sequestration cuts. For more information, please contact Jimmy Christianson at (703) 837-5325 or christiansonj@agc.org.