RSC Budget Calls for Pro-Growth Tax Cuts and Restraints on Spending

Yesterday, the Republican Study Committee Budget and Spending Task Force, led by Rep. Kevin Hern (R-Okla.) and Chairman Ben Cline (R-Va.), released its FY2025 Budget, “Fiscal Sanity to Save America.”

The RSC Budget contains numerous proposals to rein in out-of-control spending, reduce taxes for the American people, and implement desperately needed government reforms. This document is an exceptional resource for conservative lawmakers looking to grow the economy, provide relief to the American people, and fight the Left’s disastrous agenda.

These policies include making the TCJA individual tax cuts permanent, implementing aggressive restraints on spending, repealing price controls on medicines, indexing capital gains to inflation, ending Biden’s student loan scheme, making full business expensing permanent, and promoting Universal Savings Accounts.

The Budget would make the individual tax cuts from the TCJA permanent.

The Tax Cuts and Jobs Act (TCJA) passed in 2017 by President Trump and Congressional Republicans contained numerous tax cuts for American families. The law reduced taxes for Americans at every income level and across the country.

Unfortunately, arcane procedural hurdles and unanimous opposition from Democrats in the House and Senate prevented lawmakers from making these provisions permanent. If Congress does nothing, most Americans will see a tax hike when the tax cuts sunset in 2026.

The RSC budget would make these tax cuts permanent.

The law reduced tax brackets, doubled the standard deduction from $6,000 to $12,000 (double for a family), and doubled the child tax credit from $1,000 to $2,000.

Thanks to these tax cuts, a family of four earning the median household income of $74,000 is seeing a tax cut of more than $2,000. Families with Adjusted Gross Income (AGI) of between $50,000 and $100,000 saw a 15 percent reduction in their average tax liability, according to IRS Statistics of Income Data.

The TCJA also repealed the Obamacare individual mandate tax by zeroing out the penalty. Prior to the passage of the bill, the mandate imposed a tax of up to $2,085 on households that failed to purchase government-approved healthcare. Five million people paid this in 2017, and 75 percent of these households earned less than $75,000.

Additionally, the TCJA enacted a high alternative minimum tax (AMT) exemption and raised the income level at which the exemption begins to phase out. 

Making these tax cuts permanent would ensure American families continue to see lower taxes, higher take-home pay, and a simpler tax code.

The Budget constrains federal spending through a Balanced Budget amendment, with the inclusion of taxpayer protections.  

The Budget calls for the adoption of a federal Balanced Budget Amendment (BBA) that would bar annual spending in excess of 20 percent of Gross Domestic Product (GDP). Importantly, the proposal includes provisions which prevent Congress from relying on tax hikes to balance the budget.

Capping spending at 20 percent requires government to live within its means. This strict spending cap is a significant step towards reining in the size of government and will help protect taxpayers from reckless and unnecessary government spending.

The Budget would repeal harmful price controls on medicine.

The RSC Budget opposes the price controls on medicine included in Democrats’ Inflation Reduction Act.

Democrats try to claim the provisions in the IRA, set to go in effect in 2026, would give the Health and Human Services Secretary the authority to “negotiate” the price of prescription drugs on behalf of Medicare. In reality, the Secretary is empowered to simply determine the price he or she deems acceptable and impose a steep tax of up to 95 percent on companies who charge more.

Price controls create shortages and discourage companies from entering the market. In healthcare, shortages and a lack of innovation costs lives. Further, this price control framework will increase healthcare costs, not cut costs as Democrats have claimed its purpose to be. 

The Budget would index capital gains taxes to inflation and expand the zero percent capital gains bracket.

The RSC budget ends the inflation tax by indexing capital gains taxes to inflation.

Currently, when a taxpayer sells a capital asset, they pay taxes on their gains-the difference between the basis and the sale price. Under current rules, Treasury determines the basis by looking at the purchase price of the asset at the time of purchase without consideration of the inflation-adjusted cost of the asset in today’s dollars. 

Over the years, other provisions in the tax code have been reformed to account for inflation such as income tax brackets, the standard deduction, and the Earned Income Tax Credit. Last tax year, there were 62 tax provisions adjusted for inflation.

Not treating capital gains this way unfairly exposes taxpayers to additional taxation. For example, an investor who makes a capital investment of $1,000 in 2000 and sells that investment for $2,000 in 2021 will be taxed for a $1,000 gain at a top capital gains tax rate of 23.8 percent. After adjusting for inflation, the “true gain” is much lower – just $352. (1,000 in 2000 – $1,648 in 2021).

The RSC budget also expands the zero percent tax bracket for capital gains which currently applies to individuals making $40,400 or less ($80,800 for married couples). The RSC budget would expand this to $75,000 for single filers and $150,000 for married filers, providing middle class families with an important tax cut when they invest in their lifesavings.

The Budget would end Biden’s student loan scheme.

The RSC Budget would end Biden’s student loan bailouts and his $230 billion Income Driven Repayment scheme.

Biden’s student loan policies are unconstitutional, unfair, distort market incentives, dramatically increase our debt, and primarily benefit wealthy elites. Working class families should not be responsible for subsidizing a $1 trillion student loan scheme to fund the spending habits of privileged 20-somethings.

The Budget would make permanent full business expensing and would implements accelerated depreciation for structures.

The RSC budget makes full business expensing, implemented in the TCJA, permanent for new investments. This policy helps encourage new investment, which helps promote greater economic productivity, job growth and higher wages.

It also simplifies the tax code by equalizing the tax treatment of new investments with other business expenses such as wages, rent, and healthcare costs. There is no reason a business should be able to deduct the costs of its utilities, rent, insurance, office supplies, etc. but be required to deduct the cost of their property over decades.

In addition to making expensing permanent, the RSC budget builds on the success of this policy by providing accelerated depreciation for structures. Currently, both nonresidential and residential property are subject to extremely long recovery periods, 39 years and 27.5 years respectively. This budget would reduce the depreciation schedule for all non-residential and residential property to 20 years. 

The Budget would promote saving and investment through the creation of Universal Savings Accounts.

The RSC budget proposes creating Universal Savings Accounts (USAs), allowing Americans to invest in their future, free of double and triple taxation. Currently, there are numerous tax-advantaged savings accounts that can be used for healthcare, education, and retirement. These accounts can drastically reduce the tax burden for individuals and families. Unfortunately, the complex requirements of how these accounts can be utilized causes many individuals to under-save.

USAs solve this problem by allowing individuals to save or invest a certain amount in tax-free accounts without limitations on how the money can be spent. By introducing a simple, streamlined saving account available for any expenditure, Americans will save more, be taxed less, and be able to better manage their finances. USAs would also allow families’ savings, already taxed twice through income taxes, to avoid a triple round of taxation through capital gains.