What Congressional budget reconciliation means for Vermont

If you’re following the national news, you’ve probably heard that Congress is in the midst of the budget reconciliation process. What is reconciliation, and how will it impact Vermonters?

Reconciliation is a budgetary process Congress can use to fast-track changes to federal spending and revenues. For lawmakers in the majority, it is popular and effective because it requires only a simple majority in the Senate—51 votes—rather than the 60 typically needed to advance legislation.

There are restrictions on what’s included in a reconciliation package. Under a rule adopted in the 1980s and named after the late Senator Robert Byrd (D-W. Va), each provision of the bill must:

• Include a budgetary effect. If the provision increases the deficit or reduces the surplus, like tax cuts, then the budgetary effect generally must end within 10 years unless Congress finds a way to pay for all costs after that time.
• Focus primarily on taxes, spending, or the debt limit. Any nonbudgetary policy changes in a section must be secondary to the budgetary impact. For instance, if Congress wants to spend $100 billion on electric vehicle charging infrastructure, the bill can detail how money will be spent and managed, but it typically cannot require workers who install the equipment to earn a certain wage or to be unionized.
• Fall outside of the jurisdiction of the committee that drafts it. So the housing committee can draft language to provide grants to construct affordable housing. But it cannot include housing tax credits because taxes are the ambit of the finance committee.

And no part may affect Social Security.

The Byrd rule makes it hard to sneak policy provisions unrelated to taxes and spending, such as a nationwide abortion ban, into a reconciliation package. Still, budgets represent values: what the majority thinks is important to fund and what it thinks Americans can do without.

Congressional Republicans have been clear that they intend to use reconciliation to cut social programs and extend President Trump’s 2017 Tax Cuts and Jobs Act, many provisions of which expire this year. These provisions include income tax cuts that disproportionately benefit people making over $400,000 and a doubling of the estate tax exemption, which currently allows inheritances of up to $22.4 million to go untaxed. Under this law, only .08 percent of U.S. estates are taxed.

These tax cuts passed through reconciliation are expected primarily to benefit the wealthiest and the spending cuts will hurt the lowest-income Vermonters. The state needs to counteract these harms.

Vermont should bolster state-level programs that help the most vulnerable Vermonters meet their basic needs. Targeted investments will be crucial to offset expected federal cuts to food security, healthcare access, and other necessities. For instance, over a third of the 140,000 Vermonters currently enrolled in Medicaid are at risk of losing some or all of their benefits. Strengthening the administration of these programs can ensure that every family that qualifies for benefits receives them.

Federal tax cuts also present an opportunity to shore up Vermont’s revenue streams and make its tax system more progressive. The top 1 percent of earners already pay a smaller portion of their income in state and local taxes than middle-income Vermonters and have disproportionately benefitted from federal tax cuts since 2017. If extended, those cuts are expected to save the most affluent taxpayers an average of over $27,000, more than 250 times the cut for the bottom fifth.

If everyone pays their fair share, the state will have resources to protect the Vermonters who will be hit hardest by policy changes in Washington.