RE:
H.R. 2 Jobs and Growth Tax Relief Reconciliation Act of 2003
[h=1]ESTIMATED COST TO THE FEDERAL GOVERNMENT[/h] The estimated budgetary impact of H.R. 2 is shown in following table. Most of the budgetary effects of the legislation are reductions in revenues. However, the bill also would increase outlays by making various changes to the income tax brackets and rates of taxation. By reducing the amount of taxes owed, those changes would result in a larger portion of tax credits being refundable--and thus recorded as
outlays rather than reductions in revenues. The act also would increase the child credit, which is refundable under the tax code and counted as
outlays in the budget to the extent that it results in "refunds" of income taxes not actually paid. In addition, H.R. 2 would increase outlays by increasing the federal share of Medicaid spending in 2003 and 2004 and by providing funds directly to states.
[h=2]Direct Spending[/h]
Outlays from Refundable Tax Credits. JCT provided the outlay effects resulting from the refundable tax credits contained in titles I and III of the bill. JCT estimates that enacting those provisions would increase outlays by $3.6 billion in 2003 and by $9.5 billion over the 2003-2009 period (with no effects after 2009).
Fiscal Relief for States. Section 401 of the act would increase the federal share of Medicaid spending in 2003 and 2004 and provide a total of $10 billion in funds for states to use on government services. CBO estimates that these provisions would increase spending by a total of $7.7 billion in 2003 and $12.3 billion in 2004.
Increase in Medicaid match rate. The federal government pays a portion of the costs for each state's Medicaid program. The federal government's share, known as the federal medical assistance percentage (FMAP), varies for each state and is based on each state's per capita income. Under current law, FMAPs are updated annually to reflect new data on per capita income in each state. The act would change the FMAPs in three ways:
- The FMAP for the last two quarters of 2003 would equal the higher of the FMAPs (as determined under current law) for 2002 or 2003;
- The FMAP for the first three quarters of 2004 would equal the higher of the FMAPs (as determined under current law) for 2003 or 2004; and
- The FMAP for all states would increase by 2.95 percentage points for the last two quarters of 2003 and the first three quarters of 2004.
These provisions are not mutually exclusive; states could potentially qualify for all three increases. CBO estimates that these provisions would increase federal Medicaid spending by $2.7 billion in 2003 and $7.3 billion in 2004.
Aid to states. The act would provide $5 billion in each of fiscal years 2003 and 2004 for states to use on maintaining essential government services or to cover the cost of complying with unfunded federal intergovernmental mandates as defined in the Unfunded Mandates Reform Act. Under H.R. 2, payments would be made to the 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, the Commonwealth of the Northern Mariana Islands, and American Samoa. Such payments would be based on the population of each state, except that the provision would establish minimum payment levels. CBO estimates that this provision would result in outlays of $5 billion in 2003 and $5 billion in 2004.
H.R. 2, Jobs and Growth Tax Relief Reconciliation Act of 2003