Liberal Revolt Torpedoes Dems’ Spending Plan

Plus, a win for TurboTax? By Yuval Rosenberg and Michael Rainey Liberal Revolt Torpedoes Democrats’ Spending Plan Democratic leaders in the House postponed an expected Wednesday vote on a 2020 spending bill after progressives within the party pushed for higher levels of domestic spending. House Majority Leader Steny H. Hoyer (D-MD) said that the vote would take place at some point after the upcoming two-week recess. Leaders of the 90-member strong Congressional Progressive Caucus said Tuesday that they would vote to kill the Budget Committee’s current budget plan, which provides more discretionary funding for defense ($664 billion) than it does for nondefense programs ($631 billion). Echoing a well-established liberal criticism of recent spending deals, the Progressive Caucus wants equal funding for both sides of the discretionary budget. “This is not a hard ask — this is a $33 billion increase [in nondefense spending],” Rep. Pramila Jayapal (D-WA), co-chair of the caucus, said Tuesday. “Here’s a real opportunity to tell people we are investing in their future and not in a Pentagon . . . that is increasingly wasteful and hasn’t conducted an audit. . . . We say we’re for the people; we have to be for the people.” A long-standing pattern: Most federal budgets in the last few decades have devoted a larger share of discretionary spending to defense. The 10-year spending caps imposed in 2010 stuck to that pattern, even as lawmakers agreed in recent years to increase spending well beyond the levels imposed by the caps, with the gap between defense and nondefense growing under President Trump’s military buildup. Progressives flex their muscles: The disagreement marks a new stage in what’s shaping up to be a power struggle between centrist and left-leaning factions within the Democratic Party. “The threat marks the first time in the new majority that progressives are deploying the full weight of their caucus to demand substantial policy changes and sets up a major showdown with House Speaker Nancy Pelosi and her deputies,” Politico’s Sarah Ferris, Heather Caygle and John Bresnahan [say](. House Budget Committee Chairman John Yarmuth (D-KY) said the budget bill would be a test of party unity as Democrats settle in to control of the House. “We have to figure out whether we’re going to be able to govern — this is a first testament,” Yarmuth said Tuesday, adding that it wouldn’t be “a positive sign” if the bill is shot down by the progressive caucus. But it’s all about the spending negotiations: Ultimately, House Democrats need to reach a deal with the Republican-controlled Senate and the president, with their budget plan serving as an opening bid in the negotiation process. Progressive Caucus member Rep. Mark Pocan (D-WI) argued that asking for more discretionary nondefense spending would give Democrats a stronger hand in the process. “We do think that if you’re going to be negotiating you should be negotiating in your strongest place, and the strongest place is to say we want more nondefense spending,” he said Tuesday. Separately on Tuesday, Senate Majority Leader Mitch McConnell (R-KY) announced that he and House Speaker Nancy Pelosi (D-CA) had agreed to begin negotiations on raising the budget caps for 2020 and 2021. McConnell said there was a "bipartisan desire" to avoid the automatic spending cuts imposed by the caps, and also to avoid the need for yet another short-term spending bill at the end of the fiscal year in September. "So I'm hoping this will be the beginning of a bipartisan agreement, which will be necessary in order to have an orderly appropriations process, not only this year, but next year as well," McConnell said. Senate Disaster Aid Talks Are, Well, a Disaster Senate negotiations over a disaster relief package have collapsed, which all but ensures “that Puerto Rico and states stricken by storms, wildfires and flooding will be left waiting for emergency aid until after Congress returns from a two-week recess,” [Politico reports](. The disaster aid legislation has been stalled due to a fight between President Trump and congressional Democrats over additional funding for Puerto Rico. Trump, who has faced harsh criticism for his administration’s response to the damage caused by Hurricane Maria in 2017, has recently attacked the island’s political leaders as “incompetent or corrupt.” A White House [“fact sheet”]( last week claimed, “Puerto Rico officials has a long history of financial mismanagement and corruption.” But fact-checkers [have taken issue]( with the president’s [claims]( about the island and its disaster relief [funding](. Sen. Richard Shelby (R-AL), the chairman of the Senate Appropriations Committee, said Republicans had made a "serious" and "substantial" offer over the weekend, according to [The Hill](. But Democrats reportedly rejected it, arguing that the latest offer did not guarantee new funding for Puerto Rico or ensure that money previously allocated to the island would be released by the administration. Tweet of the Day From the Kaiser Family Foundation’s [Larry Levitt]( with a chart and data from the [Peterson-Kaiser Health System Tracker]( House Approves Bill That Would Bar the IRS From Offering Free Online Tax Filing The House on Tuesday approved by voice vote bipartisan legislation to change the Internal Revenue Service that, among other things, would bar the tax agency from creating its own free electronic tax filing system. “Companies like Intuit, the maker of TurboTax, and H&R Block have lobbied for years to block the IRS from creating such a system,” ProPublica’s Justin Elliott [reported]( Tuesday morning. “If the tax agency created its own program, which would be similar to programs other developed countries have, it would threaten the industry’s profits.” Taxpayers who have adjusted gross income of $66,000 or less already have access to free tax-filing software, only it’s through private companies and not directly from the IRS. The [Free File Alliance]( a private industry group whose [members]( include H&R Block and Intuit, says that about 70 percent of taxpayers are eligible, or about 100 million Americans. But only a [small fraction]( of those taxpayers use the free program. “Critics of the program [say]( that companies use it as a cross-marketing tool to upsell paid products, that they have [deliberately underpromoted]( the free option and that it leaves consumer data open to privacy breaches,” Elliott writes. The ProPublica report sparked a response from liberals on Capitol Hill, who threatened “a last-minute rebellion,” according to [The Washington Post]( but then “gave up their fight, in part because of the value of other elements of the legislation.” The [Taxpayers First Act of 2019]( also includes protections from private debt collectors and up to $30 million in matching grants for a program to help low-income taxpayers. “They were persuaded to see that stopping passage based on one objection would kill highly palatable aspects of the bill,” said Brenda Jones, a spokesperson for Rep. John Lewis (D-GA), a sponsor of the bill, according to the Post. Jones also told the Post that supporters of the legislation will create a working group to study problems in the IRS’s agreement with private tax preparers. Charts of the Day: IRS Effectiveness The Bipartisan Policy Center released [an analysis]( Tuesday of how the government administers the U.S. tax system. The authors say that overall, the system is too costly to comply with and too easy to evade. Among their dozen recommendations for improvements, the authors call for better funding of the IRS, which, as they make clear in the charts below, is quite efficient when it comes to collecting revenues. According to IRS data, the agency spent just 34 cents to collect each $100 of tax revenue in 2017, and that cost has been falling for years. [This story]( will resonate with anyone who has kids. Send us your tech horror stories, tips and feedback by emailing yrosenberg@thefiscaltimes.com. Or connect with us on Twitter: [@yuvalrosenberg]( [@mdrainey]( and [@TheFiscalTimes](. And please encourage your friends to [sign up here]( for their own copy of this newsletter. 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