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President’s 2015 Budget

THE ISSUE
President's FY 2015 Budget
President Obama unveiled his nonbinding $3.9 trillion federal budget request to Congress for fiscal year 2015 on March 4, 2014. The overall budget plan conforms to the discretionary spending limit of $1.014 trillion agreed to by Congress under the terms of the Bipartisan Budget Act in December 2013, and includes a mixture of revenue increases and spending cuts. Also included are investments in Obama Administration priorities, such as expanding early childhood education and the Earned Income Tax Credit, encouraging energy efficiency and transportation projects, and reforming elements of the tax code. The plan also includes a separate discretionary spending account to pay for additional administration priorities.

The budget proposal:

  • Would use $1.2 trillion in new deficit reduction over the next decade to replace sequestration starting in fiscal year 2016:
    • $650 billion in new revenue from:
      • Capping at 28% all itemized deductions, including the charitable deduction, for high-income earners
      • Establishing the "Buffett Rule" - 30% minimum effective tax rate for joint-filing taxpayers on income in excess of $1 million. (The minimum tax rate is phased-in linearly beginning at $1 million and is fully phased in at $2 million; the charitable deduction would be the only tax deduction allowed under the Buffett Rule)
    • $402 billion in health savings from Medicare, Medicaid and other health programs such as the Affordable Care Act
    • $160 billion in savings from finalizing the Senate-passed immigration reform bill
  • Proposes to permanently set the estate tax at 2009 levels ($3.5 million individual exemption; 45% top rate)
  • Includes 136 cuts, consolidations, and savings proposals, which are projected to save nearly $17 billion in 2015.
  • Also includes $56 billion for a separate, fully paid for, Opportunity, Growth, and Security Initiative, which is split evenly between defense and non-defense funding.

Treatment of Charitable Deduction
President Obama's FY 2015 budget request again includes a provision to cap at 28 percent the value of itemized deductions, including the charitable deduction, for high-income taxpayers. This marks the sixth consecutive budget that the president has proposed capping the charitable deduction.

Analysis of the President’s Budget

  • Independent Sector summary (IS member password required)
  • Independent Sector statement on the budget
  • Independent Sector expert panel webinar reviewing budget proposals (IS member password required)
  • Joint Committee on Taxation Analysis of the Estimated Budget Effects of the Budget Proposal’s Revenue Provisions
  • Congressional Budget Office Analysis
  • Administration FY 2015 budget overview
  • Administration budget fact sheet for the nonprofit sector
Tax Issues (IS member password required)
President Obama's FY 2015 budget again proposes capping the rate at 28 percent for which high-income earners may take itemized deductions, including the charitable deduction; implements the Buffett Rule provision that would effectively replace the current alternative minimum tax (AMT); includes a provision calling for a single, 1.35% excise tax rate on investment income of private foundations; permanently sets the estate tax at 2009 levels; and expands the Earned Income Tax credit for childless workers. Spending Items (IS member password required)
President Obama's FY 2015 budget of $3.9 trillion sets total discretionary spending at $1.014 trillion. The budget proposes increased funding for several education- and infrastructure- related initiatives and includes targeted investments in programs that support low-income individuals, including preschool for all and food and nutrition benefits. It also contains a separate discretionary spending account of $56 million called the Opportunity, Growth, and Security Initiative.

E-filing of the Form 990
The Administration proposes to phase in a requirement that all tax-exempt organizations file their Form 990 information returns electronically and requires the IRS to release those data in a machine-readable format in a timely manner. If enacted by Congress, the accessibility of machine-readable data would enable donors and foundations to access tax-exempt organization data more easily and make it easier to perform robust analyses that could facilitate improved capital flows to the sector.

Background

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.

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.

Access Presidential budget proposals from previous years:

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