CBO Issues Cost Estimate for Retirement, Savings, Other Tax Relief Act, Taxpayer First Act

WASHINGTON, Dec. 20 -- The Congressional Budget Office issued the following cost estimate:

H.R. 88

Retirement, Savings, and Other Tax Relief Act of 2018 and Taxpayer First Act of 2018

House Rules Committee Print 115-87

SUMMARY

H.R. 88 would make a variety of changes to the tax code. Division A of the bill would provide tax relief for victims of disasters, modify the requirements for tax-favored savings accounts and employer-provided retirement plans, delay or repeal certain health-related taxes, extend certain expiring provisions, make technical corrections to Public Law 115-97, eliminate the increase in unrelated business taxable income related to certain transportation fringe benefits, and allow 501(c)(3) organizations to make statements relating to political campaigns. Division B of the bill would make numerous changes to rules governing the Internal Revenue Service (IRS).

The staff of the Joint Committee on Taxation (JCT) and CBO estimate that enacting the bill would reduce revenues by about $99.7 billion over the 2019-2028 period, and decrease outlays by $557 million over the same period, leading to an increase in the deficit of $99.2 billion over the 2019-2028 period. A portion of the changes in revenues would be from Social Security payroll taxes, which are classified as off-budget. Excluding the estimated $0.8 billion decrease in off-budget revenues over the next 10 years, JCT and CBO estimate that H.R. 88 would increase on-budget deficits by about $98.4 billion over the 2019-2028 period. Pay-as-you-go procedures apply because enacting the legislation would affect direct spending and revenues.

CBO and JCT estimate that enacting H.R. 88 would increase on-budget deficits by more than $5 billion in at least one of the four 10-year periods beginning in 2029. CBO and JCT estimate that enacting the legislation would not increase net direct spending by more than $5 billion in any of the four consecutive 10-year periods beginning in 2029.

The staff of the Joint Committee on Taxation has determined that the tax provisions of H.R. 88 contain no intergovernmental or private sector mandates as defined in Unfunded Mandates Reform Act (UMRA).

CBO has determined that the nontax provisions of H.R. 88 contain no intergovernmental mandates, but would impose a private-sector mandate as defined in UMRA. CBO estimates the cost of the mandate would fall below the annual private-sector threshold established in UMRA ($160 million in 2018, adjusted annually for inflation).

ESTIMATED COST TO THE FEDERAL GOVERNMENT

The estimated budgetary effect of H.R. 88 is shown in the following table. https://www.cbo.gov/system/files?file=2018-12/hr88_0.pdf

BASIS OF ESTIMATE

Revenues and Direct Spending

The Congressional Budget Act of 1974, as amended, stipulates that revenue estimates provided by the staff of the Joint Committee on Taxation will be the official estimates for all tax legislation considered by the Congress. As such, CBO incorporates those estimates into its cost estimates of the effects of legislation. Virtually all of the estimates for the provisions of H.R. 88 were provided by JCT.1

Division A - Retirement, Savings, and Other Tax Relief Act of 2018

Title I. Disaster Tax Relief. Title I of H.R. 88 would establish special rules for qualified disaster-related personal casualty losses and temporarily suspend the limitation on charitable contributions, among other provisions related to disaster relief. JCT estimates that the provisions in this title would, on net, reduce revenues by $3.8 billion over the 2019-2028 period. In addition, the provisions would increase outlays for refundable tax credits by an estimated $215 million over the same period.

Title II. Retirement and Savings. Title II of H.R. 88 would amend the tax code to modify requirements for tax-favored savings accounts and employer-provided retirement plans. The largest provisions include changes to the rules governing multiple and pooled employer retirement plans, and an exemption from required minimum distribution rules for individuals with account balances below certain amounts.

JCT and CBO estimate that the provisions in Title II would, on net, reduce revenues by $12.4 billion over the 2019-2028 period. The provisions would also increase outlays by $1.4 billion over the same period. Some of the provisions in this section would affect off-budget revenues, decreasing them by $346 million over the 2019-2028 period, JCT and CBO estimate.

Title III. Repeal or Delay of Certain Health-Related Taxes. Title III would amend the Internal Revenue Code to delay the excise tax on certain medical devices for five years, delay the excise tax on certain health insurance plans with high premiums for one year, delay the health insurer provider tax by two years and, repeal the excise tax on indoor tanning services. JCT and CBO estimate that the changes from Title III would decrease revenues by $54.3 billion over the 2019-2028 period.

Title IV. Extension of Expiring Provisions. Title IV would permanently extend the tax credit for railroad track maintenance. Also the income and excise tax incentives for biodiesel and renewable diesel fuel would be extended and phased out. JCT estimates that those provisions would reduce revenues by $18.8 billion over the 2019-2028 period.

Title V. Other Provisions. Title V would make some technical corrections to tax law relating to Public Law 115-97, in addition to clarifications regarding treatment of veterans for the low-income housing tax credit and the public use requirement for qualified residential rental project. This title would eliminate the increase in unrelated business taxable income related to certain transportation fringe benefits and allow 501(c)(3) organizations to make statements relating to political campaigns in the ordinary course of carrying out its tax exempt purpose. JCT estimates that those provisions would reduce revenues by $10.0 billion over the 2019-2028 period.

Division B - Taxpayer First Act of 2018

Title I. Putting Taxpayers First. Title I would make a number of changes to the management and oversight of the IRS with the aim to improve customer service and the taxpayer appeals assistance process, restrict certain IRS enforcement activities, and modify the agency's organization. JCT estimates that the provisions in this title would, on net, reduce revenues by $415 million over the 2019-2028 period. In addition, CBO estimates the provisions would reduce direct spending by an estimated $207 million over the same period. CBO has not completed an estimate of the bill's costs that are subject to annual appropriation.

Title II. 21st Century IRS. Title II aims to combat identity theft and tax refund fraud at the IRS, create an automated system to verify taxpayer information for authorized users, modernize information technology systems within the IRS, and expand the use of electronic information systems within the IRS. JCT estimates that the provisions of Title II would increase revenues by less than $500,000 over the 2019-2028 period.

Title III. Miscellaneous Provisions. Title III would make other changes to the laws governing the IRS and change the organization of the tax court. JCT estimates that the provisions in this title would have a negligible effect on revenues.

PAY-AS-YOU-GO CONSIDERATIONS

The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct spending or revenues. The net changes in outlays and revenues that are subject to those pay-as-you-go procedures are shown in the following table. Only on-budget changes to outlays or revenues are subject to pay-as-you-go procedures.

Click here to view table: https://www.cbo.gov/system/files?file=2018-12/hr88_0.pdf

INCREASE IN LONG-TERM DIRECT SPENDING AND DEFICITS

CBO and JCT estimate that enacting H.R. 88 would increase on-budget deficits by more than $5 billion in at least one of the four 10-year periods beginning in 2029. CBO and JCT estimate that enacting the legislation would not increase net direct spending by more than $5 billion in any of the four consecutive 10-year periods beginning in 2029.

MANDATES

The staff of the Joint Committee on Taxation has determined that the tax provisions of

H.R. 88 contain no intergovernmental or private sector mandates as defined in UMRA.

CBO has determined that the nontax provisions of H.R. 88 contain no intergovernmental mandates, but would impose a private-sector mandate as defined in UMRA. Section 224 would impose a mandate by requiring administrators of pension and benefit plans to disclose the plan's lifetime income stream, as defined by the bill, in statements provided to beneficiaries. Because the mandate imposes a minor administrative burden, CBO estimates the cost would be small and would fall below the annual private-sector threshold established in UMRA ($160 million in 2018, adjusted annually for inflation).

ESTIMATE PREPARED BY

Revenues: Staff of the Joint Committee on Taxation and Cecilia Pastrone

Federal Costs: Noah Meyerson

Mandates: Staff of the Joint Committee on Taxation and Andrew Laughlin

ESTIMATE REVIEWED BY

Joshua Shakin

Chief, Revenue Estimating Unit

John McClelland

Assistant Director for Tax Analysis

H. Samuel Papenfuss

Deputy Assistant Director for Budget Analysis