Senate Ways & Means Passed Revenue Proposal
The Senate Ways & Means Committee passed a revenue package today that would raise nearly $900 million to fund education and health care. While the overall level of the package is similar to the version proposed on February 23rd, there are differences in the components.
Major pieces of the previous proposal not included in the version passed by the committee today include:
- Repealing the sales tax exemption for trade-ins;
- Capping the B&O 1st mortgage deduction at $100 million; and
- Limiting the sales tax exemption for fertilizer to organic fertilizers.
These three provisions were relied upon in the previous version to raise about $168 million.
The package passed by the committee today contains new provisions. The most significant include:
- A temporary B&O surcharge on service businesses;
- Extending the sales tax to bottled water.
The B&O surcharge would temporarily raise the B&O on those service business currently taxed at 1.5 percent to 1.75 percent. The proposal would also double the small business tax credit for businesses subject to the surcharge. On net, it would raise about $171 million. (The House revenue package raises $22 million by raising the B&O on a much smaller subset of businesses.)
The proposal also follows the House’s lead by extending the sales tax to water, raising $30 million.
In total, under the Senate proposal, revenue increases would account for only 10 percent of the total solution to the FY2009-FY2011 $11.8 billion shortfall (see below).
