Federal Budget & Fiscal Policy

Tax & Fiscal Policy

The Issue

Consistent with our Statement of Beliefs Regarding Tax and Spending Policies adopted by our Board of Directors, Independent Sector believes in the power of the unique partnership of the charitable sector and the federal government and that our nation’s tax and spending priorities should be a reflection of that relationship that recognizes the inherent value of all individuals, families and communities, and the institutions that work with them to build their potential as agents of positive change and renewal in our nation.

Further, IS supports funding for the Internal Revenue Service sufficient for the agency to fully and effectively carry out its mandated oversight of the nonprofit sector. Each year, Independent Sector reviews and analyzes the President’s budget and Congressional budget legislation against these parameters and makes its analysis available to members.

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What’s in the Federal Budget?

The budget consists of three primary components:

  • Revenue – money coming in
  • Spending – money going out
  • Impact on the debt

Spending initiatives are then divided into three categories:

  • Mandatory or entitlement spending – for social safety net programs like Social Security, Medicaid, assistance and food programs for needy families, and the State Children’s Health Insurance Program.
  • Defense discretionary spending – includes the salaries of soldiers and sailors, research and development, and the acquisition of weapons, vehicles, and other technology.
  • Non-defense discretionary spending – guides the operations of nearly every federal government agency and program and largely determines how much federal assistance state and local governments will receive. Spending categories include: agriculture, education, housing, health and human services, the environment, arts, and transportation.

The Federal Budget Process in Practice

In practice, each year varies – Congress frequently modifies this schedule when it is unable to agree on a joint budget resolution or appropriations legislation. On the occasions when Congress and the President have not agreed on all 12 appropriations bills, Congress must pass a stop-gap measure, known as a continuing resolution, which provides temporary funding for all of the departments, agencies, and programs covered in the unfinished bills. Continuing resolutions can last for only a few weeks – in order to provide the House, Senate, and President time to work out differences – for the remainder of the session of Congress, or longer.

The Federal Budget – Legislative Process

Legislative activity on the federal budget generally takes place between the months of February and September, although spending and tax priorities contained within a budget document are often determined well before the president makes known his budget for the upcoming fiscal year. Here’s a basic timeline:

  • February
    On or by the first Monday in February, the President presents a budget proposal to Congress after the state of the union. The President’s budget request includes proposed funding levels for discretionary and mandatory programs and changes to the tax code, as well as the level of deficit or surplus on which the government should run.
  • February through April 
    Taking into consideration the President’s budget request and their own priorities, the House and Senate Budget Committees each develop a budget resolution outlining how much the government must spend according to 19 broad categories or budget “functions,” how much revenue the government must collect, and the level of deficit or surplus on which the government will run. In particular, the resolution determines the total level of discretionary funding that will be available for the upcoming fiscal year. The full Senate and House each approve their respective resolutions, before meeting in conference to agree on a single, joint resolution, which does not require the President’s approval.
  • April/May through Early Fall 
    The Appropriations Committees of each chamber consist of 12 subcommittees and set allocations for each one based on the budget resolution. Following hearings, each Subcommittee drafts a bill proposing spending levels for the programs and agencies under its jurisdiction, adhering to the overall discretionary spending level set by the budget resolution. After passage by the Subcommittee, the bill is sent to the full Appropriations Committee for passage.
  • Summer through Early Fall 
    Following passage by the Appropriations Committee, the individual appropriations bills are voted on separately in the House and Senate. After passage by their respective chambers, the bills are sent to a conference committee where the differences between the two chambers’ bills are resolved.
  • September 30 
    The budget is enacted after the President has signed each individual appropriations bill.

 

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