Coburn Report Lists $962 Billion in Tax Expenditures Reform Savings

But any debt increase not accompanied with meaningful savings will only temporarily postpone the inevitable. Real choices must be made to reduce spending, increase revenues, or both. If Washington does not begin making these difficult choices today, those decisions will be made for us tomorrow and the results could be catastrophic. The only guaranteed entitlements for future generations will be debt and lower standards of living.

Our increasing government debt will "result in lower incomes than would otherwise occur, making future generations worse off," warns the non-partisan Congressional Budget Office. "Higher debt would make it harder for policymakers to respond to unexpected problems, such as financial crises, recessions, and wars. Higher debt would increase the likelihood of a fiscal crisis, in which investors would lose confidence in the government's ability to manage its budget and the government would thereby lose its ability to borrow at affordable interest rates."

Special interests and politicians would have us believe any proposed savings resulting from reducing spending will unfairly harm the disadvantaged. This is absolutely not true. The federal budget is bloated with hundreds of billions of dollars of waste, fraud and duplication.

Consolidating overlapping programs can actually improve efficiency while reducing costs. A recent Government Accountability Office (GAO) report exposed how duplication within the federal government is wasting hundreds of billions of dollars every year. "This fragmentation can create difficulties for people in accessing services as well as administrative burdens for providers who must navigate various application requirements," GAO noted. "The lack of coordination" caused by duplication poses a "barrier to the delivery of services" to those in need, according to GAO.

Improving the management of programs can also save billions of dollars. The federal government is overpaying pharmaceutical companies nearly $4 million a month for drugs provided by some federal health programs, for example. Likewise, Washington paid over $1 billion in benefits to the deceased over the past decade. Fixing these and other mismanagement will not only save tax dollars, but also ensure more, rather than less, resources to provide aid to eligible beneficiaries.

But in this era of trillion dollar annual deficits, even saving hundreds of billions of dollars is not enough. Tough choices will still be necessary. Everyone is going to feel a pinch. For some it may be a sting. Everyone will be asked to do more with less. This includes Members of Congress, government employees and contractors, millionaires, and even the White House and Pentagon. We are all in this together and, therefore, we all must be part of the solution.

When we are borrowing forty cents for every dollar we spend, we cannot afford excuses. We must review every department, every program, and every expenditure for potential savings. If you cannot find waste in any part of the federal budget, whether health care programs, defense spending, or even the tax code, it can only be for one reason -- you have not looked.

The federal government has become so large, it is impossible to grasp its true size and scope or to pay for its costs. Nearly every corner of the federal government is rife with duplication, mismanagement, and special interest carve outs. Each is protected by an entrenched bureaucracy, a well financed lobbying group, an active and organized constituency, and an entrenched politician, which time and again align to best any efforts to reform, cut, or eliminate government waste. Perhaps there is no better recent example of this phenomenon then when only 15 of 100 senators voted to defund the infamous Bridge to Nowhere in Alaska which had become the national symbol of government waste.

Eventually commonsense prevailed when taxpayer outrage accomplished what a vote in the Senate could not. Not only was the bridge stopped, the entire favor factory within Congress that allowed lawmakers to dole out tax dollars to special interests for parochial pet projects long defended by politicians in both parties was shut down. A decade earlier, similar widespread public demand forced Washington to overhaul welfare. These efforts, both of which were made possible with bipartisan support, are the models for returning fiscal sanity to our nation's budget.

The public is again demanding action but Washington is playing a game of partisan budget brinksmanship. The problems we face are too big to be caught up in political posturing and they will not be solved without the cooperation of members of both parties.

Most of our excesses are the result of decades of Congress overstepping the limited powers granted to the federal government by the U.S. Constitution. Government is so vast, complicated, and protected by special interests, it has become nearly impossible for even most lawmakers to navigate. As a result, overly simplistic solutions that will not solve the problem are being proposed, such as "capping" spending at unsustainable levels, reforms to the budget process that cannot guarantee spending reductions, raising taxes on millionaires, or increasing the government's borrowing authority.

A thorough review of the entire federal budget is long overdue. Such an evaluation should not be seen through political or ideological lenses, but as a practical evaluation: What works and what does not? What is a priority and what is not? What is in the national interest and is a special interest? What is necessary today and what has become obsolete? And what is efficient and what is wasteful?

This report does just that. It provides a plan to put the U.S. back in black by identifying $9 trillion in very specific savings that can be achieved over the next decade. These savings are derived from consolidating duplication, weeding out waste, eliminating special interest subsidies, reducing overhead costs, demanding results, and setting priorities.

This plan recognizes all spending is not created equal by asking those with more to take less to ensure those who gave more will not be left with nothing. It ensures health care for wounded combat veterans, while ending unemployment benefits for jobless millionaires.

It ensures initiatives benefitting all Americans continue to receive sufficient support while eliminating those benefitting a select few. Medical research to unlock cures for cancer and other afflictions conducted by the National Institutes of Health would continue to receive modest funding increases every year, while tax breaks for Hollywood movie producers would be ended.

Social Security is protected for future generations by giving more to those with less and less to those with more. The life of Medicare is extended without changing the fundamentals of the program. Our national defense is protected while eliminating over $1 trillion in Pentagon waste and excess. Foreign aid to nations who are making money by loaning the money back to us is cut off while maintaining our commitments to our allies and needy nations who rely upon our continued generosity to combat disease and poverty.

The debt is the real threat to our future and our national security. More than $1.5 trillion is projected to be added to our $14.4 trillion national debt every year for the foreseeable future. These colossal amounts are dwarfed by the $61.6 trillion in additional unfunded obligations promised by the federal government. These commitments include Social Security payments and federal retirement programs, which have been raided by Congress to pay for other programs.

We cannot guarantee retirement programs for the elderly, protect the safety net for the poor, or preserve the American Dream for future generations if we do not end Washington's unsustainable borrowing and spending. While the federal government is bailing out banks, corporations, and government programs and trust funds, we are bankrupting our nation in the process and there is no one who can bail us out when that happens.

To avoid such a catastrophe, this report provides perhaps the most detailed deficit reduction plan ever proposed. It is the result of a thorough review of every federal department, agency, program, and mission. It does not rely on gimmicks. It does not postpone spending cuts to future years. It does not defer decisions to commissions or future generations. It provides honest and thoughtful reasons for savings everywhere in the federal government, from entitlement programs to defense spending, and even the tax code, based upon facts rather than ideology or political posturing.

Taken together, this report provides a balanced plan that protects our priorities but asks every American to make some sacrifices today to ensure future opportunities for our children and grandchildren.

For the discretionary savings estimates, cost estimates were derived from multiple entities, including CBO, OMB, and CRS.

Every department and virtually every major government program was evaluated to determine if one or more of the following criteria was applicable:

• Not Needed -- Serves no vital or essential federal role or has outlived its intended purpose.

• Does Not Meet Any Need -- Little or no evidence to demonstrate results or effectiveness achieving stated goals.

• Wasteful -- Significant amounts of silly or unjustifiable expenditures.

• Duplicative -- Duplicates or overlaps existing government agencies or initiatives.

• Not a Priority at this Time -- Mission cannot be justified within today's budgetary constraints.

• Not Cost Efficient -- Benefits do not exceed the costs.

• Parochial -- Serves a local or special interest with no overriding federal role and exceeds the limited powers granted to Congress enumerated in Article 1, Section 8 of the U.S. Constitution.

• Mismanaged -- Significant amounts of erroneous, fraudulent and improper expenditures, excessive overhead and administrative costs, or otherwise poorly administered or implemented.

• Spending -- Provision is spending provided through the tax code.

• Questionable Policy -- Tax provision incentivizes behaviors with consequences that are not national priorities.

• High Rate of Waste or Fraud -- Significant amount of improper payments or fraud.

• Duplicative -- Provision duplicates other benefits provided by the federal government.

• Special Interest Earmark -- Provision benefits only a narrow group or industry.

For the Medicare and Medicaid programs, resources from the National Commission on Fiscal Responsibility and Reform, CBO, and the Department of Health and Human Services' Office of Inspector General were utilized.

For the Social Security and disability programs, numerous reports and recommendations were considered, including those of the Social Security Advisory Board, the SSA Office of Inspector General, and GAO as well as suggestions from CBO were reviewed. Staff also conducted a number of interviews with individuals within SSA, who provided insight on agency practice and interpretation of statutes and regulations.

The Social Security Office of the Actuary analyzed Senator Coburn's proposed reforms to the Social Security OASI and SSDI programs and determined the plan provides trust fund solvency for at least 75 years.

Most of our excesses are the result of decades of Congress overstepping the limited powers granted to the federal government by the U.S. Constitution.

FHWA is primarily funded by federal gas taxes collected at gasoline pumps and deposited in the Highway Trust Fund (HTF) and FAA is primarily funded by an assortment of fees levied on airplane passengers and airplane users deposited in the Airport and Aviation Trust Fund (AATF).

Unfortunately, Congress has over the last decade managed to bankrupt both the HTF and the AATF as a result of reckless spending decisions that have dramatically increased the amount and the types of projects eligible for funds from these accounts. While most Americans would assume that FHWA only funds interstate transportation projects such as the Interstate Highway and regulates transportation industries, Congress and various Administrations have greatly expanded the scope and purpose of DOT. The current mission of DOT is not only to provide Americans with a national transportation system, but to provide a "fast," "accessible and convenient transportation system . . ."¹⁷²¹

Because of increasingly fragmented, wasteful and duplicative spending the Government Accountability Office (GAO) recently concluded that "Large increases in federal expenditures for transportation in recent years have not commensurately improved system performance."¹⁷²² This mismanagement has resulted in a deteriorating state in infrastructure and increased our national debt and prompted GAO to include the HTF on its "High-Risk" list since 2007.

In 2010, DOT found that of the 604,413 bridges in the U.S., 156,276 (26 percent) were deficient. This includes 70,430 (12 percent) "structurally deficient" bridges and 85,846 (14 percent) "functionally obsolete" bridges.¹⁷²³ Structurally deficient bridges need to be monitored and repaired often because of deterioration or damage.¹⁷²⁴ Functionally obsolete bridges do not have the dimensions to adequately serve traffic demand, or may not be able to handle occasional roadway flooding.¹⁷²⁵ More than one fourth of all bridges monitored by DOT are either structurally deficient or functionally obsolete.

The 2008 "Status of the Nation's Highways, Bridges, and Transit: Conditions and Performance" report¹⁷²⁶ estimated that the cost to fix all existing bridge deficiencies is $98.9 billion in 2008 dollars. The repair cost reflected in this figure would include those aimed at addressing structural deficiencies as well as some functional deficiencies (it does not include the cost of replacing existing bridges with wider bridges with additional through lanes).¹⁷²⁷ In 2004, DOT estimated an existing bridge investment backlog of $65.3 billion to fix all current bridge deficiencies.¹⁷²⁸

According to the American Society of Civil Engineers, substandard road conditions are a significant factor in one third of car fatalities (or 13,700 deaths).¹⁷²⁹ Unacceptable road conditions affect personal and financial costs associated with travel, including vehicle operation and maintenance, traffic delays, and crashes.¹⁷³⁰ According to the most recent statistics, 33 percent of America's major roads are in poor or mediocre condition and 36 percent of the nation's major urban highways are congested.¹⁷³¹ Poor road conditions cost U.S. motorists $67 billion a year in repairs and operating costs (or $333 per motorist) and car fatalities cost each Americans an additional $819 in medical and other costs.¹⁷³² Americans also spend 4.2 billion hours a year stuck in traffic at a cost of $78.2 billion a year in wasted time and fuel costs ($710 per motorist).¹⁷³³

Unfortunately, our aviation infrastructure is also in need of significant upgrades. While air traffic is predicted to increase two to three times by 2025,¹⁷³⁴ the current Air Traffic Control (ATC) system is already overwhelmed with 50,000 flights every day¹⁷³⁵ and more than 700 million passengers every year.¹⁷³⁶ GAO estimates that one in every four flights is already delayed.¹⁷³⁷ In 2008, the Joint Economic Committee estimated that the costs of flight delays total $41 billion annually.¹⁷³⁸

The Inspector General for the Department of Transportation has concluded the current system "will not be sufficient to meet the anticipated demand for air travel or significantly reduce delays at already congested airports."¹⁷³⁹ The current, radar-based air traffic control (ATC) system -- which is less advanced than the global position satellite system (GPS) systems used by millions of Americans in their cars -- needs to be updated. The Air Transport Association describes the current system as "relying on World War II-era radar and technologies."¹⁷⁴⁰ This system forces airplanes to rely on ground-based, instead of satellite-based navigation systems and on human-centric ATC instead of automated assisted air traffic management. Total costs for the necessary technological improvements are around $40 billion in public and private costs.¹⁷⁴¹

Since the last transportation authorization bill (SAFETEA-LU), Congress has committed funding amounts that are significantly greater than the amounts being collected for the HTF. While the trust fund had an excess of almost $11 billion in FY05 ($20 billion in FY00), it ran out by the end of FY08. As a result, Congress has bailed out the HTF three times since FY08 for a total of $35 billion.¹⁷⁴² The Congressional Budget Office (CBO) estimates an annual shortfall in the HTF of $13 billion to $14 billion and that the HTF will have drained the last of the $35 billion in bailout funds by the summer of 2012.¹⁷⁴³

A similar story applies to Congress' management of the AATF where Congress drained a balance of $7.35 billion in FY01 to a low of $300 million in FY09. In FY10, the AATF balance was about $770 million thanks to a General Fund Transfer of $1 billion and an overall increase of annual General Fund spending of $3.17 billion over the past two years.¹⁷⁴⁴

Federal transportation spending should only go to critical national priorities that ensure the safety and operability of crucial interstate infrastructure. Purely intrastate and parochial initiatives should not be prioritized by the federal government, but by states and localities. Congress can also no longer afford to spend billions of federal transportation dollars on non-transportation priorities such as scenic beautification, air quality, bike path, ferryboat, transportation museum, and pedestrian walkway projects.¹⁷⁴⁵ DOT can also no longer afford to spend money on futuristic pie-in-the-sky projects such as high-speed rail when the state of our nation's bridges and roads is poor and our national debt is at record-high levels. Lastly, Congress must enable states to have greater freedom in spending the federal gasoline tax dollars collected in their states on state transportation priorities. Special interest provisions that drag out project costs and timelines must be either eliminated or dramatically reformed to further provide states with the ability to weather significant funding cuts in a down economy.

The goal of this plan is four-fold:

Department-Wide Reforms

In 2008 as part of the FY09 budget proposal, the Bush Administration proposed to rescind any highway and bridge earmark from the 1998 highway bill (TEA21) that had less than 10 percent of funds spent or obligated. This reform was estimated to save $626 million -- including $389 million in 152 earmarks that had 0 percent of funding obligated a decade after passage. DOT Secretary Ray LaHood also endorsed the proposal to rescind these unused old earmarks.

A January a USA Today article further examined unspent, old earmarks and found:

DOT also ends each fiscal year with billions of dollars in unobligated funds that are not earmarks. In 2009, the total amount of unobligated DOT funds was approximately $26 billion, but two years later, DOT has $58.663 billion in unobligated funds.¹⁷⁵⁰ These funds have yet to be assigned to any federal project. This budget recommends rescinding funds that have been unobligated for more than five years to reduce our deficit. This will ensure that any funds rescinded are low-priority, since if they were high priority, they would have been obligated within five years of being appropriated. According to DOT, there are least $830 million in unobligated funds ten years or older.¹⁷⁵¹ Under Washington budget scoring rules, a rescission of $2 unobligated balances will yield a savings of $1. Consequently, expected savings are considerably more than $430 million in FY12 and over ten years.¹⁷⁵²

Reduce Administrative Expenses for the Department

For fiscal year 2012, the Obama Administration has recommended reducing the administrative budget of DOT by $98 million. This would include reforms to travel and relocation, printing, supplies and materials, and service spending.¹⁷⁵³ Instituting these reforms is expected to save $98 million in FY12 and $1.074 billion over ten years.

Federal Aviation Administration (FAA)

FAA received almost $16 billion in FY10 appropriations ($15.992 billion). Within FAA, funding is broken into four different categories: Operations ($9.35 billion), Facilities & Equipment ($2.936 billion), Research, Engineering, & Development ($191 million), and Grants-in-Aid for Airports/Airport Improvement Program ($3.515 billion).¹⁷⁵⁴

The Airport and Airway Trust Fund (AATF) finances most of FAA's budget and is funded primarily by passenger and international travel taxes.¹⁷⁵⁵ Unlike the Highway Trust Fund (HTF), most of the AATF is subject to Congressional appropriations, meaning Congress has to appropriate AATF spending before funds can be spent. The AATF typically finances about 80 percent of the FAA's total budget, including:

• All of the federal funding for capital improvements to the aviation system, including:

• • The Airport Improvement Program (AIP);

  • The Facilities and Equipment account; and

  • The Research, Engineering, and Development account;

• Most of the funds for FAA's operations account (Air Traffic Control and Safety Inspection), varying between 43 percent and 85 percent.

• All but $50 million of the Essential Air Service (EAS) program -- even though it is administered by DOT, instead of FAA.

In recent years, collections have totaled between $10 and 12 billion annually. Fluctuations have occurred as a result of economic conditions that either encourage or discourage air travel. In the last few years, revenues have gone from $12 billion in FY08 to $10.7 billion FY09, to just over $11 billion in FY10. Because of the change in revenue forecasts, Congress has consistently appropriated more money than is actually available, leading to more General Fund revenue spending and an increased national debt.¹⁷⁶⁰

This plan recommends limiting appropriations of the AATF funds to 90 percent of expected revenues, ensuring somewhat of a buffer in case revenue projections are overly optimistic. This approach will reduce the need for General Fund Transfers and was endorsed earlier this year by the Senate Finance Committee and included in the Senate-passed FAA reauthorization bill (S. 223).

Increasing the Effectiveness of AIP Funding

While Congress and the FAA agree that significant technological and infrastructure improvements are necessary to upgrade our aviation system, Congress has failed to ensure funding is being prioritized for these "NextGen" developments. NextGen development has been identified as the necessary solution to capacity and safety concerns with the current Air Traffic Control (ATC) system for more than 10 years, but progress has been slow. In 2003, Congress created the Joint Planning and Development Office (JPDO) to implement a 20-year plan on how to adopt NextGen by 2025.¹⁷⁶¹

It is expected that completing this system will cost between $15 and $22 billion for the federal government and between $14 and $20 billion for the airplane industry¹⁷⁶² yet Congress only appropriated $188 million for NextGen in 2008, $638 million in 2009, and $868 million in 2010. At the same time, Congress appropriated billions of dollars in parochial and low-priority projects. These projects further dilute the impact of available funds and drives up the overall cost of FAA programs.

Many of these low-priority projects are funded through the Airport Improvement Projects (AIP) grant program, which received over $3.5 billion in FY10. AIP grant funding is usually spent on projects that support aircraft operations such as runways, taxiways, aprons, noise abatement, land purchase, and safety or emergency equipment. All funds come from the AATF. While large airports receive AIP funding as well, small airports are more dependent on AIP grants than large or medium-sized airports. Unfortunately, funding has often been misspent on low-priority projects at small airports at the cost of critical technological improvements at larger airports that are struggling with congestion and aviation safety.

One significant reason for this is that AIP has an incredible federal cost-share of 95 percent for non-primary airports (airports that have less than 10,000 enplanements annually). This rate was recently increased from 90 percent,¹⁷⁶³ to 95 percent.¹⁷⁶⁴ The current rate is 20 percent higher than the same cost-share for other airports qualifying for AIP funding.¹⁷⁶⁵ This high federal cost-share has contributed to dozens of low-priority AIP projects that crowd out more important aviation projects and prohibit effective leveraging of valuable AIP funds.

Because of the small local commitment, small airports are encouraged to find projects to fund with valuable AIP grants. Often, this results in non-priority projects being funded:

• The Pellston Regional Airport in northern Michigan, which averaged 66 departing passengers a day in 2009, receiving $7.5 million from federal taxpayers to build a 34,500-square-foot, lodge-style building with three stone fireplaces, ticket counters with stone facade and exposed log beams decorating the business center, observation deck and lounge with picture windows. State and local costs totaled $900,000. Since the terminal opened in 2004, the number of departures has dropped 22 percent and the number of departing passengers has decreased by 32 percent.¹⁷⁶⁶

• Kentucky's Williamsburg-Whitley County Airport receiving $11 million in federal money to build an airport with a 5,500-foot lighted runway, a Colonial-style terminal with white columns, and hundreds of acres for growth, even though it does not have any airline passengers and is used only by private airplanes. On a typical day, the airport has just two or three flights.¹⁷⁶⁷

• A general aviation airport with 46 planes on 45-acres in Delaware getting a new 4,200-foot runway built. This project was funded through a $909,806 American Recovery and Reinvestment Act (aka, federal "stimulus" program) grant -- an award that was promptly criticized by the DOT IG for its questionable economic merit. Since 2001, the state [has] collected about $13.7 million in AIP grants for the runway construction project. Another $6 million is expected to complete this project by 2015. The stimulus award was part of $1.1 billion in the bill designated for AIP projects. Barely two weeks after the grant was awarded, the IG singled out the Delaware Airpark grant as one of six that didn't meet the FAA's threshold for establishing the highest priority projects for stimulus grants. "We found no evidence in FAA's project justification documents that Agency officials considered the long-term economic merits . . ." the report, as recounted by The New Journal, states.¹⁷⁶⁸

• Halliburton Field Airport in Duncan, OK, getting $700,000 for a terminal with a pilot room and a reception room. The airport, open only to private planes, has 24 landings and takeoffs a day, mostly local pilots in piston-engine planes.¹⁷⁶⁹

• Idaho's Pocatello Regional Airport spending $7 million of its $18 million in federal funds on low-priority projects since 1998. That includes $1.6 million in 2006-07 to renovate the deteriorating parking lot that is free of charge."¹⁷⁷⁰

• Lake Cumberland Regional Airport in Kentucky getting $3.5 million to build a glass-fronted terminal in 2004 when the airport had no passenger flights. This has handled about 80 takeoffs and landings a day of private planes, FAA figures show, until June of 2009 when Locair began flights to three destinations, including Washington.¹⁷⁷¹

• $100 million being spent in earmarked AIP funds for 11 small airports where one of the two major cargo carriers (UPS or FedEx) has a large operation with daily flights. The funds have paid to expand or upgrade runways and taxiways to handle the large jets flown by FedEx and UPS. Over a nine-year period, Texans in Congress have steered $26 million to lengthen two runways at Fort Worth Alliance Airport to 11,000 feet from their current spans of 9,600 feet and 8,220 feet. FedEx is the only carrier that uses the runways on a regular basis.¹⁷⁷²

• Montana's Great Falls International Airport receiving $7.5 million in earmarked funds from 2001 to 2005 to install for FedEx a system that lets planes take off and land in low visibility.

• Louisville's International Airport receiving $11.2 million in earmarks since 2002 to expand a runway and build a taxiway to handle wide-body jets that UPS was planning to fly to Europe and Asia. Even though UPS canceled its plan in 2007 to buy wide-body jets, the airport is finishing the work to handle them.¹⁷⁷³

• Statesville Regional airport in North Carolina getting $6.5 million in earmarks from 2003 to 2008 to extend its runway to accommodate Lowe's five corporate jets based at the airport.¹⁷⁷⁴

This plan recommends increasing the local cost-share over three years -- from 95 percent to 85 percent in FY12, 80 percent in FY13, and 75 percent in FY14, giving airport managers and communities greater flexibility in meeting their construction needs while making the cost-share consistent for all airports.

Further leveraging these funds will not only increase the number of projects that can be funded, but increase the effectiveness of AIP nationally. It will also enable the AIP program to effectively weather a budget-recommended decrease in the AIP program of $1 billion annually. President Obama has also recommended reducing $1 billion in AIP funds in his budget for FY12.¹⁷⁷⁷ This $1 billion decrease will be applied to General Fund FAA appropriations and result in $10.958 billion in savings over the next decade.

Another reason for waste within AIP is that many of these projects were earmarks. According to a review by the Department's Inspector General, "many earmarked projects considered by the agencies as low priority are being funded over higher priority, non-earmarked projects."¹⁷⁷⁸

In fact, 99 percent of reviewed earmarks (which totaled over $400 million) were not subject to the FAA's authority review. For AIP earmarks, 42 percent of the earmarks sampled would never have been even considered for funding by the FAA. A candidate for an AIP grant would be part of the national Airport Capital Improvement Plan (ACIP), which is formulated by FAA in cooperation with states, planning agencies, and airport sponsors. In all cases, the planning process culminates in a list of priority projects to be funded within a given time frame." 53 of the 125 earmarked AIP projects would not have even been considered for funding.¹⁷⁷⁹ This plan recommends maintaining the earmark prohibition.

Lastly, Congress must also amend AIP award criteria to ensure the most important national aviation projects are funded with federal funds. According to USA Today, there are 2,834 airports nationwide with no scheduled passenger flights. In comparison, there are 139 well-known commercial airports that handle almost all passenger flights. AIP has been used by Congress to direct $15 billion to general-aviation airports.

• Half of the airports are within 20 miles of another private-aviation airport.

• The funding for such airports soared from $470 million in 1999 to $1 billion in 2007, even as private flying declined by 19 percent during that period and commercial air traffic congestion became a major problem and federal funding for the necessary technology is lacking. In 2009, small airports received $1.2 billion.

• General-aviation airports are vastly underused. A USA Today analysis of aviation plans in seven states indicates that more than half of their 312 general-aviation airports operate at less than 10 percent capacity. Nearly 90 percent operate at less than one-third of their capacity, well below the rates of larger airports that serve commercial passengers.

• Three-quarters of general-aviation airports lose money every year and stay solvent only with cash from local taxpayers.

• Nearly 2,400 airports have received $10 billion combined in federal dollars while handling fewer than 80 flights a day, according to FAA flight estimates. Most of the flights carry only a few people. Chicago's O'Hare International Airport handles that many flights in a half-hour.

• Only 2 percent to 3 percent of general-aviation airports charge planes to land.

• FAA records show that 66 percent of the nation's private airplanes are flown primarily for "personal/recreational" use. An additional 6 percent are used for flight instruction. Just 16 percent are flown primarily for business purposes.¹⁷⁸⁰

This plan recommends including criteria for AIP projects that require project applicants to set forth in their applications how their projects will address capacity, congestion, navigation, and safety problems or facilitate NextGen development at airports, and recommends requiring the FAA to use these criteria to prioritize AIP grants.

Congress should not be prioritizing over 2,000 airports with little to no commercial passengers each year over projects for critical national aviation improvements. These three reforms help turn a program that has been used to fund billions of dollars in questionable and low-priority funding into a program that advances a national and secure aviation network. Total savings resulting from these reforms are $10.958 billion over the next decade.

Essential Air Service

Following deregulation of the airline industry in 1978, the Essential Air Service (EAS) program was created to give commercial airports not immediately supported by the market up to ten years to transition to a free-market system. This "temporary" program, like so many other federal programs, has morphed into a permanent $200 million subsidy program that utilizes a dozen airline carriers in over 150 communities.

The effectiveness of this program as anything other than enabling commercial airports to remain afloat is questionable, since the goal of the program was to help airports transition away from federal subsidies for air carrier service. The Government Accountability Office found in 2009 that subsidies continue to increase even as low-cost carriers have increased air service "raise concerns about whether the program can continue to operate as it has."¹⁷⁸³ In the same report, GAO also found that these low-cost flights at non-subsidized airports are often more convenient and cheaper than EAS flights.

According to recent FAA data, taxpayers subsidize air service at 37 EAS airport communities within the continental U.S. airport that are less than 100 miles from other commercial airports at $53 million each year. One such example is in Macon (GA), 80 miles from one of the largest airports in the country -- Atlanta's Hartsfield-Jackson International Airport. The 35-minute flight to Macon costs passengers just $39 per seat, but taxpayers are left with a $464 bill. Even when there are no passengers, the flights continue. What's even more outrageous is that a similar flight is heavily subsidized just 70 miles from Atlanta's airport in Athens as well. Taxpayers there pay "only" $135 per passenger.¹⁷⁸⁴

Additionally, according to recent FAA data, taxpayers subsidize air service at 25 airports (not including airports in Alaska) that have less than 10 passengers a day at $34 million annually.¹⁷⁸⁵ The argument behind EAS is that small communities needed help subsidizing commercial air service because before deregulation, such service was commonly used. However, when airports are averaging fewer than 10 passengers a day, the question is whether or not there is any need for commercial service in the first place.

With the increase in low-cost flights at regular commercial airports and the growth of these airports, taxpayers should not be expected to subsidize air service indefinitely, especially in communities that are close to other airports and barely have any passengers. With the exception of EAS communities in Alaska, which face significant transportation constraints, this plan recommends phasing out the entire EAS program over five years, but, initially, only eliminates EAS airports within 100 miles of any non-EAS commercial airport or with less than 10 passengers a day immediately. This reform phase-in will allow states and communities receiving EAS subsidies to determine whether or not impacted air communities are worthy of state and local funding. The Congressional Budget Office has also recommended that Congress consider eliminating EAS in its budget options.¹⁷⁸⁶ Savings would be $78 million in FY12 and $1.677 billion over ten years.¹⁷⁸⁷ This includes $548 million in General Fund savings and $1.129 billion AATF savings.

Small Community Air Service Development Program (SCASDP)

The Small Community Air Service Development Program (SCASDP) program was created in 2000 to help underserviced small community airports enhance their commercial air service with temporary help.¹⁷⁸⁸ SCASDP grants go to communities that desire more air carrier service or lower air fares and are mainly used as marketing enhancement for existing airlines, revenue guarantees to attract new commercial routes that would otherwise be unsustainable or a combination of both. Since 2002, there have been 256 grants awarded for over $117 million. EAS communities are also eligible for these subsidies.¹⁷⁸⁹

The Department of Transportation's Inspector General found a 70 percent failure rate for SDASDP grants awarded from 2001-2003, stating "Most Projects Failed to Fully Achieve Their Objectives" and 62.5 percent of all grants did not accomplish any of their objectives.¹⁷⁹⁰ Wasteful examples of projects include:

• Tunica Municipal Airport, located 39 miles from Memphis International Airport, received funds to establish its first scheduled commercial service route to Atlanta.¹⁷⁹¹ Tunica, MS, a small gambling community, received the grant based on a cost sharing arrangement with local casinos, partnering tax payer dollars with gambling revenue to subsidize potential gamblers' travels that do not want to make the short drive from the major airport in Memphis. The SCASDP funded route ended with the expiration of the revenue guarantees.¹⁷⁹²

• Rockford-Chicago Airport, located 72 miles from Chicago O'Hare (the third busiest airport in the world) received a grant in 2009 to establish new service to a priority business destination, despite having received a SCASDP grant in 2005 to accomplish the same goal. The previous grant failed to make the Chicago-Rockford to Denver route sustainable without revenue guarantees. A spokeswoman at the airport referred to the federal grant money as a "risk-free trial."¹⁷⁹³

• Palmdale Regional Airport, located 73 miles from Los Angeles International airport (the 7^th busiest airport in the world) was a 2006 SCASDP recipient of a grant to establish its first commercial route from the airport to San Francisco through revenue guarantees.¹⁷⁹⁴ United Airlines discontinued the new route the day after the grant funds expired.¹⁷⁹⁵

• Two primary airports in Knoxville, TN and Huntsville, AL, with more than 1.35 million enplanements combined in 2009, used SCASDP grants for revenue guarantees to establish new commercial service routes. McGhee-Tyson Airport in Knoxville used the funds to attain air service to the vacation destination of Myrtle Beach, SC, and Huntsville International Airport used its grant to establish a new route to Baltimore/Washington International even though it already had unsubsidized service to the two other Washington, D.C. area airports.¹⁷⁹⁶

• Dothan Regional Airport, located within 120 miles of six airports with better service and more competitive rates, received a SCASDP grant for the second time in 2010. The previous attempt in 2002 failed to sustain commercial airline service despite being tagged with the special Air Zone Development designee. This tag constitutes direct help from the Secretary of Transportation along with additional assistance from the Department of Commerce to attract business and improve land development in the designated area.¹⁷⁹⁷

• An SCASDP grant was used by a Port Angeles, WA airport to hire a marketing advisor, whose strategy was to put the airport on the approved General Services Administration Airports so that government workers assigned to a local federal project could be reimbursed to fly there. This federal grant essentially paid $360,000 for an employee to find a way to use government money to reimburse government workers so they can fly to a more conveniently located airport to work on a government funded project.¹⁷⁹⁸

Conclusion

With a compelling need for substantial investment in and oversight of NextGen technology improvements that are estimated to cost in the range of $40 billion¹⁸⁰⁰ and with an all-time high debt of more than $14 trillion, Congress cannot afford to waste limited federal funds and Congressional attention on parochial and wasteful projects. The goal for Congress should be to ensure a strong and secure federal aviation network -- not to use aviation funds for economic development in communities.

This plan reduces FAA spending by $1.085 billion in FY12 and by $12.712 billion over ten years.

Federal Highway Administration

The Federal Highway Administration (FHWA) administers the Federal-Aid Highway Program -- the program that funds interstate highway construction. This agency administers the majority of DOT funding with an FY10 appropriation of $42.789 billion. Almost all of this funding comes from highway user fees also known as federal gasoline taxes ($41.846 billion). These user fees are deposited in the Highway Trust Fund (HTF) and appropriated by Congress.

The HTF is supposed to fund surface transportation and is split into the highway account and the mass transit account. The primary revenue sources (about 90 percent) for these accounts are the 18.4 cent per gallon tax on gasoline and a 24.4 cent per gallon tax on diesel fuel. The transit account receives 2.86 cents per gallon of fuel taxes, and there is also a 0.1 cent per gallon fuel tax reserved for the leaking underground storage tank (LUST) fund.

According to the Congressional Research Service, "The Highway Revenue Act of 1956 established the federal Highway Trust Fund for the direct purpose of funding the construction of an interstate highway system, and aiding in the finance of primary, secondary, and urban routes."¹⁸⁰¹ However, "the federal role in surface transportation has expanded to include broader goals and more programs."¹⁸⁰² In 1983, Congress divided the HTF into the Highway Account and the Mass Transit Account, and in subsequent highway reauthorization bills in 1991, 1998, and 2005 Congress added a variety of non-highway projects as well.

Unfortunately, increasing the type of projects that are eligible for HTF funding has helped bankrupt the HTF. Additionally, the last transportation reauthorization bill (SAFETEA-LU) purposefully sought to deplete almost the entire HTF surplus (expected outlays exceeded expected revenue by $10.4 billion over the five-year authorization -- leaving only an expected $0.4 billion out of the $10.8 billion surplus). As Government Accountability Office (GAO) puts it:

This is all the more remarkable because Congress has not only drained $11 billion in previous HTF reserves since FY2005 (and $20 billion since FY2000), but also $35 billion in Congressional bailout funds.¹⁸⁰⁵ This $35 billion was immediately added to our national debt and will never be paid back from HTF payments. Congress never bailed out the HTF in its history until 2008. Since then, it has bailed out the HTF twice more. This means that in less than three years, Congress has already transferred $35 billion to the HTF without changing spending transportation spending levels.

Despite this record funding, GAO found that "large increases in federal expenditures for transportation in recent years have not commensurately improved system performance."¹⁸⁰⁶ Additionally, GAO found substantial duplication and mismanagement resulting from "a fragmented approach" to funding national transportation needs.¹⁸⁰⁷ There are more than 100 programs being administered by DOT and FHWA -- many of which have duplicative functions. President Barack Obama has recognized the difficulty in effectively administering these "duplicative, often-earmarked" programs and has recommended consolidating 55 FHWA programs and merging them into five separate accounts.¹⁸⁰⁸

To address the huge funding gap in the HTF and to eliminate wasteful and low-priority spending, this plan similarly recommends consolidating all FHWA programs into five major accounts:

Taking only the FY10 funding for the first four accounts and the budgets of two DOT safety agencies totals less than $30 billion. This means that around $13 billion each year is spent on set-asides and other funding accounts, many of which are low-priority or non-core transportation funding accounts. By prioritizing only core national transportation concerns, Congress will enable states to weather a significant funding decrease, continue to address national infrastructure deficiencies, and help ensure better use of HTF revenues for taxpayers by giving states more discretion in how they want to spend these funds.

This plan recommends cutting $9.748 billion in FY12 and $108.806 billion over the next ten years in low-priority HTF funding within and outside of these core accounts and increasing the flexibility for states in using these funds for transportation projects. Within FHWA, this includes cuts of $8.661 billion in FY12 and $96.895 billion over ten years.

Eliminating Low Priority Spending

In addition to prioritizing these four main accounts, this plan recommends eliminating dozens of low-priority transportation programs to reduce the total amount appropriated from the HTF to match incoming revenues.

From the FHWA account, GAO found that from 2004 to 2008, $28 billion was wasted on projects that were not related to the maintenance and construction of highways and bridges.¹⁸¹⁰ By eliminating these programs and reducing overall appropriation levels, Congress will be ensuring that the HTF is healthy financially without increasing taxes on Americans and with minimal negative effects on critical national transportation infrastructure. Some examples of recent wasteful projects include:

• $878,000 for a pedestrian and bicycle bridge for a Minnesota town of 847;

• $2 million in stimulus funds will pay for a bike lane along a deteriorating road in Pennsylvania, where exasperated local officials say the road is so bad they may be forced to drive on the bike path instead;

• $1.6 million for a ferry boat program in Oklahoma that features Saturday morning cartoon cruises with Bugs Bunny and Wile E. Coyote on the ferry's flat screen T.V.;

• $84 million went for 398 pedestrian and bicyclist safety projects, including a brochure that encourages bicyclists to "Make eye contact, smile, or wave to communicate with motorists. Courtesy and predictability are a key to safe cycling;"

• $3.1 million in federal stimulus funds to make a historic canal boat a permanent floating museum in New York, in addition to the $28 million obligated for transportation museum funding from FY2004-2008;

• $18 million for motorcyclist safety grants; which helped fund a "cruisin' without bruisin'" brochure reminding bikers to "Obey traffic lights, signs, speed limits, and lane markings . . . and always check behind you and signal before you change lanes;" and

• $3.4 million in federal stimulus funds for a road-kill reduction project in Florida, which will help turtles and other wildlife pass under a highway.¹⁸¹¹

Enhancements

Members of Congress unfairly mandated that ten percent of all surface transportation program (STP) funds (which total around $6.577 billion annually) be spent on "enhancements"¹⁸¹³ -- including bike paths, sidewalks and flower beds along highways.¹⁸¹⁴ This mandate is outrageous, especially considering that it requires states with critical infrastructure needs to set aside its highway priorities for projects that are low priority and parochial. It is one thing for a state to demand bike projects in their state, but for Members of Congress from other states to dictate that their surface transportation funds must be spent on bike paths is inappropriate.

Including stimulus funds, more than $1 billion was spent on Transportation Enhancement Grants in FY09¹⁸¹⁵ and $571 million was spent in FY10.¹⁸¹⁶ According to a news article, recent DOT changes have resulted in giving biking and walking projects the same importance as automobiles in transportation planning and the selection of projects for federal money.¹⁸¹⁷ According to GAO, from 2004 to 2008, $3.7 billion was spent on transportation enhancement projects.¹⁸¹⁸ This included:

• $2 billion for 5,500 bike and pedestrian projects;

• $850 million for "scenic beautification" and landscaping projects;

• $224 million on Projects to rehabilitate and operate historic transportation buildings, structures, and facilities; and

• $28 million to establish 55 transportation museums.

These projects are routinely singled out as wasteful by transportation groups and state transportation departments and should not be funded with HTF revenues. Eliminating these projects would save about $600 million in FY12 in HTF funds and $6.575 billion over ten years.

Earmarks

Until this year, taxpayers have seen billions of their gas tax dollars wasted on parochial projects in other states, such as the "Bridges to Nowhere." A fairly recent phenomenon, Congress only included 10 earmarks in its 1982 highway bill, but quickly embraced this wasteful practice:

• The 1982 highway bill included 10 demonstration projects totaling $386 million;

• The 1987 highway bill included 152 demonstration projects totaling $1.4 billion;

• The 1991 highway bill included 538 location-specific projects totaling $6.1 billion;

• The 1998 highway bill included 1,850 earmarked projects totaling $9.3 billion; and

• The 2005 highway bill included over 5,634 earmarked projects totaling $21.6 billion.

The IG also found that earmarks negatively impact the mission and goals of federal transportation programs in five ways:

• Surface Transportation Priorities -- This program is exclusively earmarked. In FY10, $293 million is appropriated for this account with a 100 percent federal cost-share. President Obama has twice¹⁸²⁵ recommended eliminating this program because it consists exclusively of earmarked projects, is duplicative, and States or localities are not given the flexibility to target them to their highest transportation priorities.¹⁸²⁶

• High Priority Projects -- This account is entirely earmarked for 5,091 projects that receive guaranteed funding. FY10 costs were $2.996 billion.¹⁸²⁷

• Projects of National and Regional Significance -- An entirely earmarked account in the last authorization bill for high-cost transportation projects that are of national or regional importance in enhancing the surface transportation system. GAO found that both stakeholders and DOT said that not using the criteria-based competitive process for this program to select projects made it difficult to determine whether the projects funded were national or regional priorities and to determine where improvements should be made.¹⁸²⁸ FY10 costs were $356 million.¹⁸²⁹

• The National Corridor Infrastructure Improvement Program is an earmarked account that provides funding for highway construction projects in corridors of national significance to promote economic growth and international or interregional trade by enhancing freight mobility.¹⁸³⁰ GAO found that both stakeholders and DOT said that not using the criteria-based competitive process for this program to select projects made it difficult to determine whether the projects funded were national or regional priorities and to determine where improvements should be made.¹⁸³¹ This program received $390 million in FY10 appropriations.¹⁸³²

• The Transportation, Community, and System Preservation program (TCSP) is a heavily earmarked account that provides grants to States and local governments for planning, developing, and implementing strategies to integrate transportation and community and system preservation plans and practices. Projects include street-widening, sidewalk improvements, and "streetscape beautification."¹⁸³³ Of the $57 million appropriated for TCSP projects in FY10, 90 percent ($51.5 million) were earmarked.¹⁸³⁴

• The Ferry Boats and Ferry Terminal Facilities Program is heavily earmarked and provides up to 100 percent funding for the construction of ferry boats and ferry terminal facilities that have a strong public nexus. In addition to its annual appropriation of $67 million,¹⁸³⁵ this program also receives $20 million in General Fund revenue to fund these activities in three select states and the program received $60 million from stimulus funding.¹⁸³⁶ Lastly, there is also a program set-aside for ferry projects in Hawaii and Alaska that receives $15 million annually in mass transit funds.¹⁸³⁷ Eliminating these HTF programs and the related General Fund program would save $82 million in annual HTF funds and $20 million in annual DOT funds.

• The Bridge Set-aside for Designated projects is an entirely duplicative program of the overall Highway Bridge program that is heavily earmarked. Repealing this program results in $100 million in FY12 savings.¹⁸³⁸

• Interstate Maintenance Discretionary is an entirely duplicative program that is heavily earmarked for interstate maintenance projects within the states of earmark sponsors. For example, for Fiscal Year 2006, 16 of 65 earmarked projects, totaling more than $14 million, did not meet statutory program criteria and would not have received funding under the regular funding process.¹⁸³⁹ Repealing this program results in $100 million in FY12 savings.¹⁸⁴⁰

• The Public Lands Highways Discretionary program (PLHD) funds transportation projects that improve access to and within the Federal lands of the nation. This program represents another set-aside, discretionary program that is heavily earmarked. In FY10, Congress designated a total of $83,021,930 or 81 percent of PLHD funds for earmarks. The federal share for this earmark program is 100 percent. Eligible projects include land acquisition, parking lots, pedestrian and bicycle improvements and visitor centers. Repealing this program results in $102 million in FY12 savings.¹⁸⁴¹

Congestion Mitigation and Air Quality program

The Congestion Mitigation and Air Quality program (CMAQ) was authorized in the 1991 highway program to provide funds for projects to help states and localities meet the requirements of the Clean Air Act Amendments (CAAA) of 1990 by reducing congestion.¹⁸⁴² CMAQ funds are spent on transit projects, traffic flow improvement projects such as incident management, HOV lanes, and traffic signal improvements, bike baths, and pedestrian projects.¹⁸⁴³ Congress spent $1.77 billion in FY10 on this air quality improvement program.¹⁸⁴⁴ This program, if necessary, would more appropriately be funded by the Environmental Protection Agency (EPA), which administers the Clean Air Act, or by states and localities. This plan would eliminate this program and reduce annual HTF appropriations by $1.77 billion in FY12 and $19.4 billion over ten years.

The National Historic Covered Bridge Preservation Program

This program was established in the Transportation Equity Act for the 21st Century bill (TEA21) in 1998 and may only fund bridges listed in the Department of Interior's (DOI) National Register of Historic Places.¹⁸⁴⁵ The program provides grants to repair or rehabilitate a dozen or so covered bridges each year. In total $60.4 million has been appropriated for this program.¹⁸⁴⁶

According to the executive director of the Historic Bridge Foundation, "While some covered bridges are still in use, others have been bypassed in favor of steel bridges. The covered bridges' main function now is to look scenic and attract tourists."¹⁸⁴⁷ It is questionable why highway dollars are being spent on a historical preservation program in the first place. Some examples of projects funded with highway dollars include:

• The historic Chambers Railroad covered bridge in Cotton Grove, OR, that received a $1.3 million grant from the National Historic Covered Bridge Preservation Program in FY08¹⁸⁴⁸ is set to be destroyed and rebuilt as a tourist destination, with better access and historical panels. The city is chipping in less than $140,000 for the project.¹⁸⁴⁹

• Madison, IA, received $375,000 through the federal preservation program to install infrared cameras and fire detection equipment on its bridges after arson fires destroyed one bridge and another arson fire nearly destroyed a bridge.

• • According to a recent Associated Press story, "even the county official in charge of the bridges of Madison County says other needs come first." Todd Hagan, Madison County's engineer and head of the local covered bridge program, said Madison needs federal help keeping its roads paved more than it needs covered bridge aid. Paving expenses, he said, may force Madison to return some roads to gravel.¹⁸⁵⁰

Safe Routes to School

The Safe Routes to School (SRTS) program awards grants to states to fund initiatives that help children walk and bicycle to school instead of by car or even bus. On SRTS' Website, numerous health concerns are listed as reasons why it SRTS is necessary.¹⁸⁵² While that may be the case, it is difficult to understand why federal transportation funding should be dedicated to this program, let alone federal funding, for these completely intrastate and parochial initiatives. Set-asides like SRTS siphon away critical dollars from surface transportation priorities and represent low-priority spending at a time when billions of dollars in HTF spending have to be cut. This plan recommends eliminating SRTS for FY12 savings of 183 million and ten-year savings of $2.005 billion.¹⁸⁵³

National Scenic Byways Program

The National Scenic Byways Program subsidizes roads designated as National Scenic Byways, All-American Roads or America's Byways which are designated because of "outstanding scenic, historic, cultural, natural, recreational, and archaeological qualities."¹⁸⁵⁴ Funding is eligible for numerous activities including development and implementation of a marketing program, development and provision of tourist implementation, and construction of bicycle and pedestrian facilities, interpretive facilities, overlooks and other enhancements for byway travelers. This program duplicates numerous other Heritage Preservation programs within the federal government (such as the The Route 66 Corridor Preservation Program and preservation efforts funded by the Historic Preservation Fund) and is a questionable use of federal highway funds. This plan recommends eliminating this program for FY12 savings of $43.5 million and ten-year savings of $476.7 million.¹⁸⁵⁵

Recreational Trails Program

The Recreational Trails Program "provides funds to the States to develop and maintain recreational trails and trail-related facilities for both nonmotorized and motorized recreational trail uses."¹⁸⁵⁶ This program serves an entirely parochial purpose and should not be funded with federal highway funds. This plan recommends eliminating this program for FY12 savings of $85 million and ten-year savings of $931.5 million.¹⁸⁵⁷

Federal Lands Highways Program

The Federal Lands Highways program consists of several programs that fund transportation-related projects on or near federal lands. Some of these programs included the Park Roads and Parkways program, the Refuge Roads program, and the Public Lands Highways program.

The Park Roads and Parkways program (PRP) provides funding for most any type of transportation-related projects to or within a unit of the National Park Service (NPS). These funds can even be used to satisfy state/local matching share for other FHWA funded projects. The federal share for this program is 100 percent. Eligible projects include land acquisition, transportation planning for tourism and recreational travel, interpretive signage, pedestrian and bike projects, and visitor centers. This is not a high priority use of federal transportation funds. This plan recommends eliminating this funding account for a savings of $240 million in FY12 and $2.63 billion over ten years.¹⁸⁵⁸

The Public Lands Highways program (PLH) provides funding for transportation planning, research, and engineering and construction of transportation initiatives related to public land use. These funds can even be used to satisfy state/local matching share for other FHWA funded projects. The federal share for this program is 100 percent. The PLH Program is comprised of two main sub-programs: the Forest Highways (FH) Program and the Public Lands Highways -- Discretionary (PLHD) Program. PLHD receives $102 million in annual appropriations (or 34 percent) and the remainder, $198 million (or 66 percent) is allocated to FH. PLHD is a discretionary and heavily earmarked account discussed earlier in this plan. The FH program funds a wide array of transportation projects that provide access to or are within a National Forest or Grassland. Funds can also be used to purchase transit vehicles and for public transit facilities on public lands. The most recent reauthorization bill also added three new eligible activities for Forest Highway funds: Maintenance, Hunting and Fishing Access Signs, and Aquatic Organism Passage projects.¹⁸⁵⁹ Up to $10 million can be used by the Secretary of Agriculture to facilitate the passage of aquatic species beneath roads in the National Forest System.¹⁸⁶⁰ While this program is duplicative of Paul S. Sarbanes Transit in Parks Program, it is also not a high priority use of HTF funds. This plan recommends eliminating the entire account for a savings of $300 million in FY12 and $3.288 billion over ten years ($2.169.8 billion for the FH program).

The Refuge Roads program is administered jointly by DOT and the U.S. Fish and Wildlife Service (FWS). Funding is used for transportation projects to and within the National Wildlife Refuge System (NWRS). The most recent highway reauthorization bill expanded the scope of eligible projects to include interpretive signage and recreational trails. These funds can even be used to satisfy state/local matching share for other FHWA funded projects. The federal share for this program is 100 percent. This is not a high priority use of federal transportation funds. This plan recommends eliminating this funding account for a savings of $29 million in FY12 and $317.8 million over ten years.¹⁸⁶¹

While it is important for our public lands to be well-maintained, it is inappropriate for these maintenance activities to be financed in part by transportation user fees. Because of the necessary decrease in highway spending, these low-priority accounts should not be funded any more through highway funding accounts.

Regional Funding Accounts

While not unique to FHWA, billions of taxpayer dollars have been appropriated for regional commissions or initiatives. This fragmented approach to funding our highways takes the decision-making out of states and their transportation departments and results in state transportation priorities not getting funded. While some worthy projects are funded through these regional entities, this plan recommends eliminating them to allow for further consolidation and streamlining of FHWA funding for states.

The Appalachian Development Highway System

ADHS funds the construction of the Appalachian corridor highways in 13 states to promote economic development and to establish a state-federal framework to meet the needs of the region.¹⁸⁶² The 2005 surface transportation bill authorized $470 million annually from 2005 through 2009 for the ADHS (in total more around $9 billion has been appropriated for this system since 1964¹⁸⁶³). Additional funds have been earmarked for West Virginia portions of this highway system for FY10. This multi-state project has come under scrutiny because Virginia has refused to build its part of the ADHS, calling into question the benefit of funding the ADHS.¹⁸⁶⁴ The President recommended terminating funds earmarked for this program because such funding is duplicative and siphons funds from state transportation departments.¹⁸⁶⁵ This program duplicates several ongoing efforts within DOT including the Federal-Aid Highway Program (FAHP),¹⁸⁶⁶ the Surface Transportation Program,¹⁸⁶⁷ and the Highway Research and Development Program.¹⁸⁶⁸ Eliminating this program saves $470 million within the HTF in FY12 and $5.15 billion over ten years.

The Denali Access System Program

This program receives an annual set-aside for planning, design, engineering, and construction of roads and other surface transportation infrastructure identified for a region in Alaska, through the Denali Commission. The funds go directly to the commission to connect isolated rural communities to a road system, and to foster regional economic growth.¹⁸⁶⁹ The Denali Commission, an independent federal agency, also receives funding from other sources and has received nearly $1 billion in federal funding.¹⁸⁷⁰ Both the Bush and Obama administrations called for budget reductions citing the commission's inability to demonstrate results¹⁸⁷¹ and that dozens of other federal programs duplicate its efforts.¹⁸⁷² DAS funds may also be used as the non-Federal share of the costs of other federal transportation projects.¹⁸⁷³ President Obama recommended eliminating additional earmarked funds for the Denali Access System and the Denali Commission, because of duplication concerns and because "regional set asides such as this one are over and above formula allocations that allow States to set their own priorities and address local and regional needs."¹⁸⁷⁴ DAS is duplicative of numerous other transportation and economic development programs. Eliminating this program saves $15 million within the HTF in FY12 and $164.4 million over ten years.

Delta Regional Transportation Development Program

This program supports multistate transportation projects in the eight States comprising the Delta Region (Alabama, Arkansas, Illinois, Kentucky, Louisiana, Mississippi, Missouri, and Tennessee). Some of these primarily earmarked projects are done in conjunction with the Delta Regional Authority (DRA), an independent federal agency,¹⁸⁷⁵ to increase the economic vitality of the region.¹⁸⁷⁶ The Federal share is 80 percent, subject to the sliding scale adjustment. Delta funds may also be used as the non-Federal share of the costs of other federal transportation projects. This program is duplicative of numerous other transportation and economic development programs. Eliminating this program saves $10 million within the HTF in FY12 and $109.6 million over ten years.

Federal Motor Carrier Safety Administration, National Highway Traffic Safety Administration, and the FHWA Safety Program

HTF revenues fund three separate safety programs that focus on different aspects of highway safety.

The Federal Motor Carrier Safety Administration (FMCSA), which received $550 million in HTF funds in FY10, regulates large trucks and buses. It was established in 2000¹⁸⁷⁷ and has seen its appropriations increase from $105 million in FY2000 to $550 million in FY10.¹⁸⁷⁸

The National Highway Traffic Safety Administration (NHTSA), which received $873 million in FY10, conducts a number of highway safety programs. Specifically, NHTSA sets and enforces safety performance standards for motor vehicles and motor vehicle equipment, conducts research on driver behavior and traffic safety, administers "local" highway safety programs, investigates safety defects in motor vehicles, sets and enforces fuel economy standards, investigates odometer fraud, establishes and enforces vehicle anti-theft regulations and provides consumer information on motor vehicle safety topics.¹⁸⁷⁹ NHTSA has also seen its funding increase dramatically over the last decade from $368 million in FY00 to $873 million in FY10.¹⁸⁸⁰

The majority of NHTSA's FY10 budget ($620 million or 71 percent)¹⁸⁸¹ was for state grant programs that are intended to increase highway safety. These programs include:

• Safety Belt Performance grants ($124.5 million). These funds encourage the enactment and enforcement of state laws requiring the use of safety belts in passenger motor vehicles. In recent years, this program has become a slush fund for Members of Congress to use for other funding priorities because these grants are not used;¹⁸⁸²

• State traffic safety improvement grants ($34.5 million). These funds encourage States to adopt and implement effective programs to improve the timeliness, accuracy, completeness, uniformity, integration, and accessibility of State data that is needed to identify priorities for national, State, and local highway and traffic safety program;¹⁸⁸³

• High visibility enforcement program ($29 million). This program assists states in enforcing seat belt or alcohol/drug-impaired driving laws;¹⁸⁸⁴

• Motorcycle Safety grants ($7 million). This program encourages States to adopt and implement effective programs to reduce the number of single and multi-vehicle crashes involving motorcyclists.¹⁸⁸⁵ These grants helped fund a "cruisin' without bruisin'" brochure reminding bikers to "Obey traffic lights, signs, speed limits, and lane markings . . . and always check behind you and signal before you change lanes;"¹⁸⁸⁶

• Occupant Protection Incentive Grants ($25 million). This program is used by states to implement and enforce occupant protection programs;¹⁸⁸⁷

• Child Safety and Child Booster Seat Safety Incentive Grants ($7 million). These grants go to states that have passed a law requiring any child riding in a passenger vehicle who is too large to be secured in a child safety seat to be secured in a child specific type of restraint;¹⁸⁸⁸

• Alcohol-Impaired Driving Countermeasures Incentive Grant Program ($139 million). These funds are used to encourage States to adopt and implement effective programs to reduce traffic safety problems resulting from individuals driving while under the influence of alcohol;¹⁸⁸⁹

• State and Community Highway Safety Grants ($235 million). These funds support State highway safety programs, designed to reduce traffic crashes and resulting deaths, injuries, and property damage.¹⁸⁹⁰ These grants are completely duplicative of all the other state grant funding accounts; and

• Administrative expenses of managing these programs total $18.5 million annually.

The FHWA Office of Safety focuses on improving highway and road safety through highway engineering, planning, and safety audits. Safety improvements include increasing sign and pavement marking visibility, installing rumble strips, specifying skid-resistant pavements, and paving shoulders to eliminate edge drop-offs. FHWA also invests in numerous safety awareness programs, including duplicative seat-belt-use promotion campaigns (NHTSA administers its own seat-belt use grant program).¹⁸⁹¹ The budget for this office comes out of overall FHWA operating expenses totaling around $420 million annually. DOT was unable to provide a budget number for the annual cost to taxpayers for this office.¹⁸⁹²

Although these three entities do not completely overlap, there is no need for there to be three separate highway safety programs. FHWA Office of Safety already state that they coordinate with NTHSA and FMCSA to develop and implement multi-faceted, intermodal safety programs. ¹⁸⁹³ This plan recommends consolidating these three programs into a one-stop safety shop for highway users. Combining these three programs into NTHSA and implementing the recommended cuts to NHTSA results in a total safety budget of $628 million in FY12. HTF savings resulting from these reforms would total at least $541.5 million in FY12 and $7.7 billion over ten years.

Streamline or Eliminate Burdensome Political Mandates

Certain federal laws hinder adequate transportation infrastructure construction by delaying transportation projects and greatly increasing their costs. State DOT directors struggle to complete projects timely and under budget in large part due to onerous federal laws. These laws only apply to funds awarded through the Highway Trust Fund and Treasury. Many of these requirements are outdated and have not been indexed to inflation. GAO found in 2008, that 39 of 51 states (including D.C.) avoided using federal funds for certain projects because of these restrictions.¹⁸⁹⁴ While some states have similarly onerous compliance laws, many do not.

Environmental Review Mandate

For surface transportation projects, "environmental review" includes two related processes. First, it involves the process of preparing the appropriate documentation under the National Environmental Policy Act of 1969 (NEPA). Second, it involves the process for completing any other environmental permit, approval, review, or study required for a project under any local, state, tribal, or federal law other than NEPA.

While the intent of the NEPA process is noble, its administration has resulted in an unwieldy bureaucratic process that increases transportation project costs and timelines. According to a study done for the American Association of State Highway and Transportation Officials (AASHTO), the environmental costs were all over the map from 5 percent to 50 percent of costs with an average around 10-20 percent. These figures did not include things like staff time, hearings, or escalation costs resulting from project delays. While there have not been many studies done on the actual costs because states rarely track these costs,¹⁸⁹⁵ common estimates peg increased costs at between 8 and 10 percent.¹⁸⁹⁶

The delays are also considerable. The Federal Highway Administration (FHWA) reviewed and compiled time frame data for transportation projects needing an Environmental Impact Statement (EIS) as part of the NEPA process,¹⁸⁹⁷ and found that "13 percent took 10 or more years to complete NEPA; 19 percent were completed in 7 - 10 years; 16 percent were completed in 3 years or less. The majority of the projects (51 percent) took 4 - 6 years to complete. For the total of 37 projects [surveyed], the average amount of time elapsed . . . was found to be 67 months, or 5-1/2 years, while the median value was found to be 5 years.¹⁸⁹⁸

For projects that have a "Finding of No Significant Impact" (FONSI), or a "Categorical Exclusion" (CE), FHWA found that "70 percent of the respondents indicated that it generally takes less than 2 years to process a FONSI, while an additional 8 divisions, or 34 percent, indicated that it generally takes between 2 to 3 years. In the case of CEs, 22 divisions, or 85 percent of respondents, indicated that it takes less than one year to process a CE, with 18 of them, or 70 percent, indicating that it takes less than 6 months. Based on the responses received, FHWA has estimated that the typical time frame for completing a FONSI is about 18 months while the typical time frame for completing a CE is 6 months."¹⁸⁹⁹ In other words, it typically takes one and a half years to go through the NEPA process 18 months even if there is no negative environmental impact.

The NEPA process is unfairly mandated even for projects that are building on existing rights of way -- in other words in an area where NEAP was already conducted previously. NEPA was created to ensure transportation projects on "virgin alignments" were done with an analysis considering the environmental impact of such construction -- it should not apply to maintenance or rehabilitation projects.¹⁹⁰⁰

Advocates for NEPA reform also argue the process duplicates another environmental review process, Section 4(f) of the DOT Act of 1966, which additionally requires that any land from publicly owned parks, recreational areas, wildlife and waterfowl refuges, or public and private historical sites undergo a study that demonstrates using this land is necessary.

State DOT's must additionally get a permit from the Corps of Engineers for any projects where concrete is below the ordinary high water mark or in a jurisdictional wetland. For areas greater than half an acre, an extended process with comments is required to obtain a Section 404 permit.

Davis Bacon

The Davis-Bacon Act requires federal construction contractors to pay at least the wage rates prevailing on non-federal construction projects in the same locality. The act was intended to prevent the purchasing power of the federal government from driving down construction wages during the Great Depression. Federal contractors must then pay their employees at least the prevailing wage for each class of worker.

Nowadays, however, Davis-Bacon wages in most cities bear no resemblance to prevailing market wages. In some cities, Davis-Bacon rates are more than double market wages. In other cities, Davis-Bacon rates are below the minimum wage. Inspector General audits found errors in 100 percent of wage reports examined. Most prevailing wage surveys are years out of date. Some rates in effect have not been updated since the 1970s. Davis-Bacon rates average 22 percent above market wages.¹⁹⁰¹

According to the Congressional Research Service, the threshold of $2,000 has never been adjusted for inflation. The Davis-Bacon Act was enacted in 1931. Initially, the act applied to construction projects of more than $5,000. The threshold was lowered to $2,000 in 1935. If you were to index this amount, it would come to $31,320; if you were to index the 5,000 amount from 1935, it would be $78,300.¹⁹⁰²

The Congressional Budget Office (CBO) did a study in 1983 that estimated Davis-Bacon increased costs by 3.7 percent,¹⁹⁰³ and GAO found an increase of 3.4 percent in 1979 and recommended, "Congress should repeal the Davis-Bacon Act and rescind the weekly payroll reporting requirement of the Copeland Anti-Kickback Act because of: (1) significant increased costs to the federal government; (2) the impact of excessive wage determination rates on inflating construction costs and disturbing local wage scales; and (3) the fact that contractors tend to pay prevailing rates, which is the intent of the act, when determinations are too low."¹⁹⁰⁴

Unfortunately, Congress has refused to address this issue, even though dozens of states have their own prevailing wage laws.¹⁹⁰⁵ According to the Heritage Foundation, the Davis-Bacon Act increases the cost of federally funded construction projects by 9.9 percent. Repealing Davis-Bacon restrictions would allow the government to build more infrastructure and create 100,000 more construction-related jobs at the same cost to taxpayers (or save the federal government $9 billion on annual construction costs).¹⁹⁰⁶

Other Federal Mandates

There are numerous other federal mandates that unfairly delay and prevent significant construction projects. Mandates such as the transportation enhancement requirement or even unreasonable interpretations of important federal laws like the Americans with Disabilities Act (ADA) have led to transportation funds and resources being wasted silly projects like a "sidewalk to nowhere."¹⁹⁰⁷ Several non-transportation agencies are currently also promulgating rules that would further impede the ability of state DOT directors to efficiently and effectively utilize important federal transportation funds to address critical infrastructure needs. These regulations include expansions of previous interpretations of the Clean Air Act and the Clean Water Act.

These and other mandates unnecessarily drive up costs and delay construction while our nation's infrastructure is deteriorating and transportation funding is scarce. It is critical for Congress to repeal unnecessary mandates like the Transportation Enhancement and Davis-Bacon mandates, streamline the environmental review processes, and prevent unnecessary future regulatory changes at a time when it cannot increase funding for transportation infrastructure. This also includes mandating that federal DOT safety laws are promulgated only if absolutely necessary and only in a way that minimizes economic costs to transportation improvements and related industries. Congress should also encourage turning over the responsibility of administering NEPA-like processes to the states to reduce unnecessary bureaucracy and waste and build upon a current pilot project which allows some states to do this partially.¹⁹⁰⁸ Based on this information, these reforms would decrease transportation costs for states between 10 and 40 percent and enable transportation dollars to be stretched further.

Giving States the Flexibility to Manage their Own Highway Gas Taxes for Highways

Even though "the Highway Revenue Act of 1956 established the federal Highway Trust Fund for the direct purpose of funding the construction of an interstate highway system, and aiding in the finance of primary, secondary, and urban routes,"¹⁹⁰⁹ today the HTF is used for all types of projects. Congress' mismanagement has led to crumbling infrastructure, increased public debt, and a bankrupt HTF.

The justification and purpose behind the collection of a federal gasoline tax was to build an interstate system. Since this system has been constructed 60 years later, states should have the ability to manage the gas taxes collected within their state if they believe they can do a better job than the federal government.

This plan recommends giving states the ability to keep these funds if they agree to maintain the interstate highway system and spend these funds on transportation projects. A small portion of these funds would be set aside for federal safety accounts, but states would have the ability to manage the remainder of their Highway Tax Revenues dedicated for Federal Highway funding or Mass Transit accounts as if they were state revenues. Nothing would force states to opt-out and states would not only have one chance to opt-out, but could decide to before each fiscal year begins.

By giving states the option to manage HTF dollars themselves, Congress would also be placing an effective accountability check on itself and the Administration, because if they proved to continue to be poor managers of these dollars, states would opt-out. This proposal is identical to a current bill in the House of Representatives (H.R. 1585) and has the support of 24 Members of the House, 13 senators, three governors, and several national and state fiscal and transportation groups. This reform would curb wasteful Congressional spending and encourage innovation within states to address our infrastructure backlog without increasing spending.

Federal Railroad Administration

The Federal Railroad Administration (FRA) was created in 1966. Its primary purpose is to develop and enforce rail safety regulations. It has, however, over its history, also adopted significant rail funding programs, including, recently, very large annual appropriations for developing high-speed rail corridors.¹⁹¹⁰ In FY10, FRA received $4.36 billion in federal appropriations. More than 57 percent of this budget ($2.5 billion) went to high-speed rail assistance. An additional 36 percent went to Amtrak for capital and operating assistance, leaving only $295 million (7 percent) for administering and developing rail safety regulations and other responsibilities.

High Speed Rail

While proponents of high-speed rail existed before 2009, little federal funding was obligated towards actually planning and building high-speed rail corridors in America. But the federal stimulus bill (P.L. 111-5) appropriated $8 billion towards this endeavor and an additional $2.5 billion was added in the FY10 appropriations bill, for a total of $10.5 billion in less than two years.

According to the Congressional Research Service, "Critics have questioned the economic efficiency of building an expensive high speed rail network in the United States." Despite the large amount in funding available to states for these types of projects, three states -- Wisconsin, Ohio, and Florida -- have rejected high speed rail projects for which their states had received grants totaling $3.6 billion because of questions about the long-term feasibility of such projects¹⁹¹¹ and other states are considering returning their grant awards for similar reasons. According the Department of Transportation, from the $10.5 billion appropriated, $5.23 billion remains unobligated, including $2.15 billion of stimulus funding as well as $1.86 billion from regular appropriations.¹⁹¹²

While the idea of high-speed rail may have merit in the future, given the nation's record-high national debt and transportation infrastructure deficit, this plan recommends eliminating all high-speed rail grants and rescinding any unobligated high-speed rail grants. Savings resulting from these reforms would be $6.51 billion in FY12 and $31.41 billion over ten years.

Amtrak

Congress has appropriated more than $30 billion for Amtrak rail service since the program's inception, even though the Rail Passenger Service Act of 1970 required that Amtrak "operate rail passenger service on a for-profit basis . . . ," and Congress again demanded Amtrak become self-sufficient by 2003 in 1997. Unfortunately, Amtrak continues to receive over $1.5 billion in taxpayer funds each year. In FY10, Amtrak received $1.565 billion in appropriations, including $1.002 billion for capital improvements and $563 million for operating assistance.

In 2005, the Government Accountability Office (GAO) found that Amtrak lost $244 million in subsidies for Amtrak's food service for passengers between 2002 and 2004,¹⁹¹³ despite the fact that Congress had mandated previously "Amtrak may provide food and beverage services on its trains only if revenues from the services each year at least equal the cost of providing the services."¹⁹¹⁴ Despite attempts to prevent taxpayers from subsiding Amtrak food service at $85 million a year Congress refused to increase food prices even as Amtrak continually loses money and requires more than $1.5 billion in annual federal subsidies.¹⁹¹⁵

Amtrak also receives annual appropriations of $20 million from the Federal Emergency Management Agency (FEMA) for an Intercity Passenger Rail Program. ¹⁹¹⁶This program provides duplicative funding to protect critical surface transportation infrastructure and the traveling public from acts of terrorism, major disasters, and other emergencies within the Amtrak rail system. Only Amtrak is eligible to apply for this grant program.¹⁹¹⁷ This grant program duplicates the Transit Security Grant Program, which is intended "to create a sustainable, risk-based effort to protect critical surface transportation infrastructure and the traveling public from acts of terrorism, major disasters, and other emergencies."¹⁹¹⁸ This more general program was funded at $253 million this year.¹⁹¹⁹

To help strengthen the operations of Amtrak, this plan recommends requiring Amtrak to charge food prices that cover the cost of providing food onboard such as the way airlines charge for food service in FY12, eliminating all operating assistance for Amtrak in FY13, phasing out capital assistance over ten years, and eliminating FEMA's intercity passenger rail program. Savings resulting from these reforms would be $184.02 million in FY12 and $11.509 billion over ten years for DOT and $20 million in FY12 and $219.17 million over ten years for FEMA.

The Rail-line Relocation Grants Program

This grant program was authorized in SAFETEA-LU at $350 million per year from FY20062009 to provide financial assistance for local rail line relocation and improvement projects. This grant program is primarily earmarked, as in FY10 more than 70 percent of the $34.5 million appropriated was earmarked. President Obama has twice¹⁹²⁰ recommended terminating this program¹⁹²¹ because it duplicates several programs, including the Railway-Highway Crossings program which focuses on safety improvements of rail lines and accomplishes many of the same goals with its annual appropriations of $220 million distributed to states by formula, enabling states to set their own priorities.¹⁹²² This plan recommends eliminating this program resulting FY12 savings of $34.5 million and $378.6 million over ten years.

Federal Transit Administration

The Federal Transit Administration (FTA) administers numerous transit funding programs to support a "variety of locally planned, constructed, and operated public transportation systems throughout the United States. Transportation systems typically include buses, subways, light rail, commuter rail, streetcars, monorail, passenger ferry boats, inclined railways, or people movers."¹⁹²³ Most FTA appropriations come from the Mass Transit Account (MTA), which is financed by a tax of 2.86 cents on each gallon of fuel purchased at the pump.

In FY10, FTA received $10.733 billion in appropriations. About 80 percent ($8.343 billion) of these appropriations came from federal gas taxes Americans pay at the pump and the remaining 22 percent came from General Fund appropriations. Within the General Fund, while some funding went towards administration costs ($99 million or four percent) and research funding ($66 million or three percent), the vast majority went to the New Starts program ($2 billion or 84 percent). The remaining funding went to the Transit Investments for Greenhouse Gas and Energy Reduction grant program ($75 million or 3 percent) and the Washington, D.C. metro service ($150 million or 6 percent).¹⁹²⁴

Paul S. Sarbanes Transit in Parks Program

The Paul S. Sarbanes Transit in Parks Program provides funding for alternative transportation systems, such as shuttle buses, rail connections and bicycle trails. The program "seeks to conserve natural, historical, and cultural resources; reduce congestion and pollution; improve visitor mobility and accessibility; enhance visitor experience; and ensure access to all, including persons with disabilities." DOT administers this program with the Department of the Interior and the U.S. Forest Service. Funding is awarded to federal land management agencies and state, tribal, or local governmental authorities with nearby land. Funding for alternative transportation includes "sightseeing service."¹⁹²⁵ This program is not a national transportation priority and is duplicative of a number of programs, including the Federal Highway Lands program and broader transportation, conservation, and economic development federal programs. This plan recommends eliminating this program saving $26.844 million in FY12 and $294.17 million over ten years.¹⁹²⁶

New Starts

The New Starts program provides federal funds to public transit agencies for construction of new transit systems and expansion of old ones. It received $2 billion in federal funding for FY10. While the majority of the funding goes to rail transit, New Starts also funds the development of bus rapid transit (BRT) and ferries.¹⁹²⁷ The current federal cost share is up to 80 percent of project costs. While there are questions whether rail transit is more environmentally friendly than other types of transit, including automobile use, or more cost effective than BRT,¹⁹²⁸ no one questions that there is a massive transit maintenance backlog of $77.7 billion.¹⁹²⁹ The Congressional Budget Office (CBO) highlighted eliminating of the New Starts program as one of its budget options because of efficacy concerns and because many consider it to be inappropriate and inefficient to have the federal government dictate how communities spend federal aid for transit because local officials know more about local needs and priorities than federal agencies do.¹⁹³⁰ Even without New Starts, state and local governments could use federal aid distributed by formula grants (noncompetitive awards based on a formula) for new rail projects.

Given the incredible maintenance backlog and increasing national debt, this plan recommends reducing the maximum federal cost-share to 50 percent to increase the effectiveness of the program, reducing annual appropriations by $1 billion in FY12 and phasing out the remaining appropriations over five years, and requiring an open, merit-based process for all types of transit projects, including critical maintenance transit projects. Implementing this recommendation results in $1 billion in savings in FY12 and $18.474 billion over the next decade.

Transit Investments for Greenhouse Gas and Energy Reduction (TIGGER)

The Transit Investments for Greenhouse Gas and Energy Reduction (TIGGER) grant program was created in the 2009 federal stimulus law as a $100 million grant program to "to public transit agencies for capital investments that will assist in reducing the energy consumption or greenhouse gas emissions of public transportation systems."¹⁹³¹ In FY10 $75 million was appropriated for this program, which funds at a 100 percent federal cost-share the purchase of more energy-efficient transit vehicles and other initiatives to reduce transit energy consumption.¹⁹³² This program is duplicative of other federal programs that incentivize local and state initiatives for reducing carbon dioxide emissions and energy consumption and should not be prioritized over other transit projects. The Department of Energy has a loan guarantee program for alternative vehicle technologies and FTA has a $50 million Clean Fuels Grant Program that supports emerging clean fuel and advanced propulsion technologies for transit buses and markets for those technologies.¹⁹³³ This plan recommends eliminating this program and saving taxpayers $75 million in FY12 and $821.9 million over ten years.

Washington Metropolitan Area Transit Authority (WMATA or "Metro") Earmark

For the past couple of years, Congress has earmarked $150 million in funding for the Washington Metropolitan Area Transit Authority (WMATA or "Metro"). WMATA serves the Washington, D.C., metropolitan area through rail and bus transit services. Following a tragic rail accident in 2009 that claimed the lives of eight passengers and the driver of a railcar, publicized information revealed a culture of mismanagement and wastefulness.

Despite receiving a total of $422.9 million in federal funds in FY10, including $391.4 million for rail,¹⁹³⁴ WMATA is struggling to address many of its deficiencies as identified by FTA and the National Transportation Safety Board (NTSB). In particular, increasing operating (primarily personnel) costs have put WMATA's financial stability further at risk. Personnel costs make up approximately 70 percent of all operating costs, including pay and fringe benefits, or $1.13 billion in FY11. While the economy was in a recession, the average annual pay increased for FY2011 by $4,904 or 7.3 percent. At the same time, only $826 million in revenues comes from fares and other business revenues, meaning that user fee revenues don't even cover personnel costs, let alone any additional capital expenditures.¹⁹³⁵

While this plan recommends eliminating this direct subsidy to WMATA, it also recommends reforming numerous federal mandates that make it even more difficult for transit agencies such as WMATA to be financially viable without significant federal assistance. Specifically:

• Remove a one percent transportation enhancement requirement for all capital Improvement program grants (enhancements include historic preservation, landscaping, public art, pedestrian access, bicycle access, and enhanced access for persons with disabilities).¹⁹³⁶ There is no federal need to mandate these types of projects. Enacting this reform results in $45 million in FY12 savings and $493.1 million over ten years.¹⁹³⁷

• Reform federal laws to ensure that labor disputes are settled at the local level between transit agencies and union employees;

• Clarify that the Civil Rights Act of 1964 does not prohibit non-discriminatory fare rate increases by transit agencies which, may disproportionately affect one group of Americans;¹⁹³⁸ and

• Giving transit agencies more flexibility in providing services to disabled Americans under the Americans for Disabilities Access (ADA).¹⁹³⁹

Earmarks

Until this year, taxpayers have seen billions of their gas tax dollars wasted on parochial projects such as the "Bridge to Nowhere." In a 2007 study, the DOT Inspector General (IG) found that 28 percent all FTA funds were earmarked ($2.406 billion).¹⁹⁴⁰

In total, 99.54 percent of all DOT earmarks either were not subject to the agencies' review and selection processes or bypassed the states' normal planning and programming processes (7,724 of 7,660 projects reviewed). The Federal Transit Administration (FTA) had the 2nd most number of earmarks: 15.54 percent (1,252 out of 8,056). These costs do not include the cost of administering these earmarks -- another burden on the HTF.¹⁹⁴¹

The IG also found that earmarks negatively impact the mission and goals of federal transportation programs in five ways:

Mass Transit for Federal Workers

Federal employees enjoy a subsidy for mass transit of up to $230 per month and are directly subsidized to the tune of about $431.6 million according to the most recent numbers through the Transit Benefit Program.¹⁹⁴³ Recently costs have increased significantly because of this limit increase for transit benefits.¹⁹⁴⁴

Congress enacted legislation in fiscal year 1993 that authorized selected Federal Government agencies to elect to pay all or a portion of employees' public transportation costs.¹⁹⁴⁵ The subsidy program was expanded by an Executive Order¹⁹⁴⁶ in FY00 that required all Federal Government agencies to implement a transportation subsidy program. To be eligible to receive the transportation subsidy, employees must use public transportation to commute to and from their offices. DOT manages this program and takes a cut of almost five percent out of the total amount disbursed in subsidies.

With generous benefits such as these, recipients are left to conclude, "Where can you go for that price, drive all month and have all your maintenance, safety sticker, registration, insurance and not have to pay for it?"¹⁹⁴⁷ This plan proposes eliminating this subsidy and saving $431.6 million in FY12 and $4.73 billion over ten years.

Giving States the Flexibility to Manage their Own Highway Gas Taxes for Mass Transit

This plan recommends giving states the ability to keep federal gas taxes levied in their state for mass transit if they agree to spend these funds on mass transit projects. A small portion of these funds would be set aside for federal safety accounts, but states would have the ability to manage the remained of their Highway Tax Revenues dedicated for Federal Highway funding or Mass Transit accounts as if they were state revenues. Nothing would force states to opt-out and states would not only have one chance to opt-out, but could decide to before each fiscal year begins.

By giving states the option to manage HTF dollars themselves, Congress would also be placing an effective accountability check on itself and the Administration, because if they proved to continue to be poor managers of these dollars, states would opt-out. This proposal is identical to a current bill in the House of Representatives (H.R. 1585) and has the support of 23 Members of the House, 13 Senators, 3 governors, and several national and state fiscal and transportation groups. This reform would curb wasteful Congressional spending and encourage innovation within states to address our infrastructure backlog without increasing spending.

Conclusion

The legacy of the Interstate Highway System is a proud one. There is no doubt the existence of the Interstate Highway System has led to the increased welfare of our great country. Unfortunately, the same cannot be said for much of the current spending administered or directed by DOT. Much of DOT serves little purpose but to administer block grants to states for various modes of transportation or set-aside projects often earmarked that do not reflect national or state transportation priorities.

Congressional oversight has identified billions in low-priority spending and a fragmented approach to addressing critical national transportation infrastructure needs. In light of record spending, GAO found that infusing more money into the HTF in itself "would not ensure the long-term sustainability of the HTF nor address the need for improved performance of our nation's surface transportation programs."¹⁹⁴⁸

By eliminating duplicative and low-priority spending, repealing and reforming unnecessary or burdensome federal mandates, and increasing state flexibility in managing gas taxes collected in their state, Congress will enable smarter and more innovative transportation spending and help offset the negative impact of necessary budget cuts. Implementing these recommendations will focus taxpayer funds on true transportation priorities and eliminate the current deficit within both the Highway and Aviations trust funds and our overall national debt.

The mission of the Department of the Treasury is to "maintain a strong economy and create economic and job opportunities by promoting the conditions that enable economic growth and stability at home and abroad, strengthen national security by combating threats and protecting the integrity of the financial system, and manage the U.S. Government's finances and resources effectively."¹⁹⁴⁹ In addition to acting as the president's lead adviser on "economic and financial issues," the Secretary of the Treasury manages a vast array of federal bureaus that oversee federal finances, tax collection, currency and coinage, the public debt, bank supervision and enforcing tax law.¹⁹⁵⁰

In Fiscal Year 2011, the Treasury Department's total budget is $13.1 billion, a slight decrease from the year before.¹⁹⁵¹ Of this, the Internal Revenue Service (IRS) accounts for $12.1 billion, or nearly 93 percent, of the Department's total budget.¹⁹⁵² Nearly two-thirds of IRS funding, or approximately $8 billion, falls under the broad category of "enforcement," while the remaining amounts fall largely to "taxpayer services."¹⁹⁵³

Unfortunately, the Treasury Department and the IRS, in particular, have not adequately managed taxpayer dollars, resulting in significant waste. Few examples were as embarrassing as the results of a recent investigation of the Treasury Inspector General for Tax Administration (TIGTA), which oversees the work of the IRS. A February 2011 report revealed 11 contractors hired by the IRS -- our nation's tax collector -- were severely delinquent in paying down their own tax debts, owing a combined $4.3 million.¹⁹⁵⁴ The contractors were ultimately paid $356 million by the IRS, in addition to $3.7 billion more from other federal agencies.¹⁹⁵⁵

Treasury also oversees administration of the Earned Income Tax Credit (EITC), a tax benefit available to low-income workers, which suffers from significant mismanagement and loses tens of billions a year to fraud and abuse. Administration officials dubbed EITC a "high-error program" after it was discovered for 2009 its improper payment rate was as high as 29 percent, resulting in $16.9 billion in fraudulent payments.¹⁹⁵⁶ GAO auditors found much of the problem was preventable, attributing such high losses to, "high turnover of eligible claimants, confusion among eligible claimants, complexity of the law, structure of the program, unscrupulous return preparers, and fraud."¹⁹⁵⁷

A second tax program was also recently criticized for wasting considerable sums of money, by the IRS inspector general. The TIGTA investigation found that weaknesses with IRS internal controls "allowed potentially erroneous refunds of more than $513 million to be received by taxpayers who most likely did not qualify for the Homebuyer Credit."¹⁹⁵⁸ Auditors felt that the problem was not isolated to this program and that there was a strong need "also for strengthening controls over all refundable credits."¹⁹⁵⁹

Considerable savings can be achieved from addressing these and other areas of mismanagement and waste within Treasury and eliminating unnecessary programs.

Eliminate Unnecessary, Duplicative, Inefficient, and Wasteful Programs

While many of Treasury's functions are legitimate and vital for our nation's financial security, there are programs at Treasury that are either non-essential or duplicative of other efforts elsewhere in the federal government and should be eliminated.

End Funding for the Community Development Financial Institutions Fund

Funded at $246.7 million in Fiscal Year 2010,¹⁹⁶⁰ the Community Development Financial Institutions (CDFI) Fund was established to provide economic revitalization efforts in low-income communities. According to the Treasury, the purpose of the CDFI program is "to use federal resources to invest in CDFIs and to build their capacity to serve low-income people and communities that lack access to affordable financial products and services."¹⁹⁶¹ A CDFI is an institution that provides financing and assistance to "underserved" communities for a range of purposes.

These efforts are intended "to promote economic development, to develop businesses, to create jobs, and to develop commercial real estate; to develop affordable housing and to promote homeownership; and to provide community development financial services, such as basic banking services, financial literacy programs, and alternatives to predatory lending."¹⁹⁶² However, in reality, this program's success is unclear.

The most prominent CDFI institution, ShoreBank in Chicago, Illinois, has also been one of the program's most controversial spokesmen by highlighting how taxpayer money is often put at needless risk. Formerly known as South Shore Bank, it was the first community development bank, and was in continuous operation for 30 years until it failed in August 2010.¹⁹⁶³ ShoreBank received millions in federal assistance from the CDFI fund, dating back as far as the fund's creation. Upon its failure, however, an investigation by the FDIC Inspector General found that it was the result of poor management decisions.¹⁹⁶⁴ "ShoreBank management was not responsive to repeated examiner concerns pertaining to these areas, particularly from 2007 until the bank failed."¹⁹⁶⁵

Treasury's Inspector General found the CDFI's controls over investing and accounting had significant deficiencies,¹⁹⁶⁶ which open the door for waste and abuse. Another CDFI-certified Chicago bank, Park National, showed even more clearly the program's investments are not always well-considered. On the same day the Secretary of the Treasury announced CDFI awarded Park National $50 million in federal tax credits, the FDIC closed the bank down permanently and sold it to another financial institution.¹⁹⁶⁷ Why the Treasury Department was not able to determine the bank's unstable condition is not clear, but FDIC auditors blamed the failure on poor "day-to-day decision making" and a bad business plan.¹⁹⁶⁸

One of the most popular programs within the CDFI fund has been the New Markets Tax Credit (NMTC), which is intended to spur development in low-income neighborhoods. Only that is not always the case. The biggest beneficiaries of the program have been some of the nation's biggest financiers, including J.P. Morgan Chase, Goldman Sachs and U.S. Bancorp, which among others have collected at least $10 billion since 2003.¹⁹⁶⁹ Some of the questionable projects benefiting from the program have included a Georgia aquarium and a Washington State car museum. ¹⁹⁷⁰ Drawing perhaps the most controversy was a $116 million renovation for the Blackstone Hotel in Chicago, one of the city's most upscale locations.¹⁹⁷¹ A 2010 GAO study found it is not entirely clear whether projects being funded with NMTC awards required federal funding.^1972,1973

This program also duplicates the $4 billion a year Community Development Block Grant (CDBG) program, housed at the Department of Housing Urban Development (HUD), which also funds community development initiatives that aim towards improving economic development and affordable housing, and several other programs within our government. In fact, in a report this past March, GAO identified more than 80 similar programs targeting "economic development," which received a combined $6.5 billion in federal funding.¹⁹⁷⁴ Each one of these programs appears to overlap with at least one other program in funding certain economic development activities. These programs are administered in a fragmented and duplicative manner that discourages the maximum efficiency and fails to ensure constituents can easily find and apply for assistance. In a previous 2005 study, at least 180 economic development programs were identified within more than a dozen different agencies costing taxpayers about $17.9 billion annually on community development, regional development, and other economic development programs.¹⁹⁷⁵

Federal dollars for the CDFI fund is also questionable given large amounts provided for CDFIs by private institutions. In 2010, Bank of America alone pledged $10 million to CDFIs, with large institutions such as Wells Fargo and others promising to follow suit.¹⁹⁷⁶

Estimated Ten-Year Savings: $2.77 Billion

Replace the $1 Bill With $1 Coin

The Treasury Department should phase out use of the $1 bill and replace it with the $1 coin. Paper-based currencies wear out faster than coins, and so cost taxpayers more in the long run. According to GAO, starting in the 1980's, "Over the last 47 years, Australia, Canada, France, Japan, the Netherlands, New Zealand, Norway, Russia, Spain, and the UK, among others, have replaced lower-denomination notes with coins."¹⁹⁷⁷ GAO also estimates that over a 30-year period, the average annual savings would be approximately $184 million.¹⁹⁷⁸

Estimated Ten-Year Savings: $2.04 Billion

Eliminate the Office of Technical Assistance

Funded at $25 million in Fiscal Year 2010,¹⁹⁷⁹ the Office of Technical Assistance (OTA) Department of Treasury program designed to assist and advise foreign countries in how to manage their finances. Its core mission is "to develop strong financial sectors and sound public financial management in countries where assistance is needed and there is a strong commitment to reform."¹⁹⁸⁰ Treasury's program consists of five main areas including, Budget Policy and Accountability, Banking and Financial Services, Government Debt Issuance and Management, Financial Crimes, and Revenue Policy and Administration.

This office duplicates ongoing efforts at the United States Agency for International Development (USAID), which has programs that also focus on building financial infrastructure and knowledge for poor and developing countries, often in conjunction with the World Bank.¹⁹⁸¹ USAID, whose mission is to educate, build, and support developing countries, is a more appropriate agency to advise foreign nations in this area.

The Office of Technical Assistance has also been involved in training overseas police forces in counterterrorism and counternarcotics strategies, but it is one of many federal agencies doing this. An April 2011 review by GAO (see chart below) found that, "during fiscal year 2009, seven federal agencies and 24 components within them funded or implemented police-assistance activities to support their counternarcotics, counterterrorism, and anticrime missions," and spent more than $3.5 billion.¹⁹⁸²

      Table 1: U.S. Departments, Agencies, and other Organizational Units

Eliminate Debt Restructuring Programs

Debt restructuring programs at the Department of Treasury were established to alleviate the debt burdens of poor and/or underdeveloped countries. The $60 million annual budget for these programs enables funding for three initiatives: the Heavily Indebted Poor Countries Initiative (HIPC) debt reduction, the HIPC Trust Fund, and the Tropical Forest Conservation Act (TFCA).¹⁹⁸³ The HIPC initiatives provide debt relief to impoverished countries in return for domestic economic reforms to bolster growth and to reduce poverty, while the TFCA writes off debt owed to the U.S. in return for conservation of tropical forests.

A recent example of questionable use of TFCA funds abroad involved the country of Brazil, whose economy has exploded in the past couple of years. According to USAID, "the Governments of the U.S. and Brazil signed a Debt-for-Nature Agreement in August 2010 to reduce Brazil's debt payments to the United States by close to $21 million through 2015. In return, the Government of Brazil has committed these funds to support grants to protect the country's tropical forests."¹⁹⁸⁴

The primary and appropriate entity responsible for aiding indebted and impoverished nations is the World Bank. In 2010, the World Bank made over $72 billion in loans to developing countries.¹⁹⁸⁵ The Department of Treasury should remove itself from debt forgiveness for other countries and instead focus on eliminating our debt to other nations.

Estimated Ten-Year Savings: $666.05 million

Improve Energy Efficiency at IRS Data Centers

The IRS should update its policies regarding energy use at its data centers, which could achieve significant savings. Data centers are rooms or warehouses containing large amounts of computer equipment, such as servers, that also consume huge quantities of energy, often 40 times as much as a conventional office.¹⁹⁸⁶ A TIGTA audit revealed that IRS data centers, however, were following outdated practices and needlessly wasting significant amounts of energy. At just two of these 42 sites, auditors found that making simple changes could save as much as $3.2 million over four years, and further savings were possible if extended to all data centers.¹⁹⁸⁷ Among the suggestions were ideas for simple upkeep, like replacing missing tiles in floors, making sure furniture does not block airways and alternating hot and cold servers.¹⁹⁸⁸

Estimated Ten-Year Savings: $10 million

Reduce Administrative Expenses for the Department

For Fiscal Year 2012, the Obama administration recommended reducing the administrative budget of the Treasury Department by $199 million. This would include "eliminating printing and mailing of certain forms, publications and inserts," which would save $4 million per year.¹⁹⁸⁹

Estimated Ten-Year Savings: $2.18 billion

Increase the Number of Paperless Transactions

The Treasury Department, as keeper of the nation's money, interacts with millions of employees, citizens, taxpayers, contractors and others every day. By increasing the number of electronic, paperless transactions it has, the administrative cost of these interactions would decrease significantly. The Obama administration has endorsed a plan that would pay benefits electronically, require businesses to pay taxes electronically, issue more electronic savings bonds, sell more Treasury securities online, and automate many paper-based processes, such as Freedom of Information Act requests.¹⁹⁹⁰ The White House estimates the five-year savings from this would result in savings of $524 million.¹⁹⁹¹

Estimated Ten-Year Savings: $1.05 billion

Consolidate Various Information Technology Programs

For 2012, the Obama administration recommended consolidating five different information technology systems used by the Bureau of Public Debt and the Financial Management Service. The move would better integrate systems that both bureaus depend on, and possibly eliminate certain contractor costs. OMB estimates the five-year savings would be $96 million.¹⁹⁹²

Estimated Ten-Year Savings: $192 million

Increase Levy Payments for Federal Contractors with Delinquent Tax Debts

A recent investigation by GAO uncovered that 3,700 federal stimulus contractors with $757 million in tax debt were awarded over $24 billion in federal funds.¹⁹⁹³ The government should do more to end problems like this by increasing the amount the government can collect from federal contractors from 15 percent to 100 percent until the debt is repaid. OMB estimates this would generate nearly $1.5 billion in savings over ten years.¹⁹⁹⁴

Estimated Ten-Year Savings: $1.47 billion

Eliminate Ten-Year Statute of Limitations on Debt Collection

Under current law, federal debts not collected within a ten year window of time are not collected at all. AS proposed by the Bush administration, the government should eliminate the restriction and allow, with proper safeguard, full collection of all unpaid debts.¹⁹⁹⁵

Estimated Ten-Year Savings: $88.81 million

PROGRAMS ELIMINATED:

• The Community Development Financial Institutions Fund

• The Office of Technical Assistance

• Tropical Forest Conservation Act

• The Heavily Indebted Poor Countries Initiative

• The Heavily Indebted Poor Countries Trust Fund

Because Social Security provides economic security for so many, lawmakers in Congress owe it to all Americans to ensure Social Security is solvent over the long-term. Those in Congress who truly care about the retired and disabled Americans who benefit from Social Security should enact sensible reforms now to preserve the program for the millions who depend on it.

Putting the program on a solvent path first requires a clear understanding of what challenges the program faces. And an examination of the program reveals serious reforms are needed.

For the first time since 1983, Social Security posted a deficit in 2010 -- $37 billion -- and is now permanently running cash flow deficits. Over fiscal years 2010 to 2021, the program's cash flow deficits are projected to total $630 billion.

                           Combined OASDI Trust Funds

Experts also agree delaying reform is a bad deal for Americans who rely on Social Security. According to the Social Security Trustees, "The long-run financial challenges facing Social Security and Medicare should be addressed soon. . . . Earlier action will also afford elected officials with a greater opportunity to minimize adverse impacts on vulnerable populations, including lower-income workers and those who are already substantially dependent on program benefits" (emphasis added).²⁶¹⁶

Some downplay the coming crisis by alleging "well funded" trust funds are a reason to delay reform. However, because Congress has effectively stolen and spent all excess revenue due to Social Security over the years, the trust funds are empty except for $2.6 trillion in promises from a bankrupt government.

The $2.6 trillion is really an "I.O.U" the federal government owes itself, so the government can only raise this "I.O.U." money by issuing more public debt, raising taxes or cutting spending elsewhere. The current Director of the Office of Management and Budget (OMB), Jacob Lew, basically acknowledged the phony nature of the trust funds when he was leading the OMB for President William Clinton. Under Lew's leadership, when commenting on the FY 2000 budget, OMB explained that the trust funds' balances are nothing more than a "bookkeeping" device and "do not consist of real economic assets that can be drawn down in the future to fund benefits."²⁶¹⁷

It is because the trust funds are merely an accounting mechanism and do not contain real economic assets that President Barack Obama recently warned that he "cannot guarantee" Social Security checks would be mailed to beneficiaries if the government failed to raise the debt ceiling by August 2^nd -- the date the U.S. is estimated to breach its statutorily-established borrowing limit.²⁶¹⁸ The reality is the government can only raise Social Security "I.O.U." money by issuing more public debt, raising taxes or cutting spending elsewhere.

But it is not just Social Security's trust funds that are in financial trouble. Unfortunately, Social Security's disability programs are in worst shape and face insolvency in the immediate future.

The Social Security Administration ("SSA") currently administers two programs that provide benefits to disabled individuals: Social Security Disability Insurance ("SSDI") and Supplement Security Income ("SSI"). Both programs provide benefits to individuals that are so disabled they are unable to perform any job in the national economy. But without immediate reforms, both programs face a financial collapse that would jeopardize their ability to provide benefits to disabled Americans in need. As the recent Social Security Trustees' Report made clear, the SSDI Trust Fund will be exhausted by 2018 (or 2016 under the high cost assumptions).²⁶¹⁹ As a result, the Trustees clearly warn Congress that "legislative action is needed as soon as possible."²⁶²⁰

One reason the disability program is running out of money is that the disability rolls have been increasing at an exponential rate. Another reason is that as fewer disabled Americans are getting back on their feet, more are staying on the program longer. As the report explains, "the proportion of disabled beneficiaries whose benefits cease because of their recovery from disability is very low in comparison to levels experienced throughout the 1970s and early 1980s."²⁶²¹

Given the warnings from nonpartisan experts and financial realities of Social Security's programs, it is clear the enemy of beneficiaries is not reform but inaction. In the face of such evidence, those who deny Social Security is on an unsustainable path -- or who claim reform can be delayed without consequences -- do a tremendous disservice to seniors and future beneficiaries.

If the Social Security program is to continue providing income security for 157 million Americans, and the 54 million Americans currently receiving benefits, the system must be modernized and strengthened immediately. Delaying sensible reforms gambles with the future of millions of retired and disabled Americans and could jeopardize the stability of those Americans who rely on the program.

Putting Social Security On A Solvent Path

According to the Social Security Administration's Office of the Chief Actuary,²⁶²² this proposal's Social Security plan ensures the program is solvent for the next 75-years, eliminating the program's current deficit.²⁶²³ The plan helps fulfill the mission of the Social Security program by modernizing the program, strengthening work incentives, enriching benefits for lower income earners dependent on the system, and slowing benefit growth of workers at the higher end of the income scale. The plan makes these strong reforms without increasing taxes.

For too long, important steps to ensure the integrity of Social Security's disability programs have taken a back seat to other priorities. While current SSA Commissioner Michael Astrue's focus on reducing the disability application and hearing backlog is important and has been encouraged by Congress, such a narrow emphasis is shortsighted. To restore balance, the proposal modernizes Social Security's disability programs that help so many Americans in need, while strengthening safeguards to deter waste, fraud and abuse. The reforms are designed to ensure individuals that are truly disabled are provided the benefits they need, while able Americans are encouraged to work and be self-sufficient. These reforms also seek to shift the agency's current culture -- from one of solely paying benefits, to a culture that ensures qualified beneficiaries receive the benefits to which they are entitled, while also taking steps to implement program integrity to strengthen and improve the program.

Reform 1 -- Restrain Benefits for Higher Income Earners

In order to control program costs, the plan alters the progressive benefit formula of current law, slowing benefit growth, especially for higher earners. Importantly, the plan avoids increases in Social Security taxes so workers retain more of their earnings.

Under the plan, the benefit formula under current law is altered so that workers below the 40^th percentile of new retired work entitlements will not have their benefit reduced by the Social Security benefit formula. In fact, the formula is enriched so that workers below the 40^th percentile experience a slight benefit increase under the formula.

To understand how the plan changes benefit calculations, it is helpful to examine how benefits are currently calculated. Under current law, individual Social Security benefits are determined through a multiple-step process.

First, a worker's average indexed monthly earnings (AIME) are calculated. To calculate AIME, a worker's entire work earnings history is wage-indexed to historical wage growth in order to place wage amounts on the same terms as current wage levels. The recipient's highest 35 years of earnings are identified, averaged and divided by 12 to produce his/her AIME.²⁶²⁴

Second, after the AIME is calculated, a primary insurance amount (PIA) is calculated. The PIA is the monthly benefit at the full retirement age. The PIA is calculated based on a progressive formula by which workers have less of their benefit replaced as they move up the earnings scale. For example, in 2011 terms:

• 90 percent of first $749 is replaced;

• 32 percent of the amount between $749 and $4,517 is replaced; and

• 15 percent of the amount over $4,517 and up to the cap on earnings is replaced.²⁶²⁵

In fact, the benefit formula is actually enriched so that workers below the 40^th percentile experience a slight benefit increase under the formula. Above the 40^th percentile, benefit growth is restrained by lowering the amount the current system replaces.

Under the plan, the formula would be altered according to the following parameters:

• 95 percent of first $749 is replaced. Under the plan, the initial replacement factor is increased from 90 to 95 percent, meaning all earners receive a larger portion of the first $749 replaced than is replaced under current law.

• A new bend point is created at 40th percentile of earners. Between the first bend point ($749) under current law and new bend point created under the plan (approximately $2,433 in 2011 terms), the current law replacement rate of 32 percent remains the same. This means that 32 percent of the amount between $749 and $2,433 is replaced.

• Above the 40th percentile of earners, benefit growth is restrained. Above the new bend point of $2,433 and below the second bend point under current law ($4,517), 10 percent is replaced (instead of current law replacement of 32 percent). Any amounts earned above $4,517 and below the cap have a 5 percent replacement factor (instead of current law 15 percent).

When Franklin Delano Roosevelt signed Social Security into law in 1935, average life expectancy was 64 and the earliest retirement age in Social Security was 65.²⁶²⁷ Today, Americans on average live 14 years longer, retire three years earlier, and spend 20 years in retirement.²⁶²⁸

To better reflect life expectancy, this proposal would make three changes related to longevity gains.

First, the proposal would index the Normal Retirement Age (NRA) to life expectancy after the NRA increases to 67 as scheduled under current law.²⁶²⁹ Under this plan, the NRA would gradually increase by just one month every two years. This means individuals who turn age 62 in 2046 will have a NRA of 68, and those who turn age 62 in 2070 will have an NRA of 69.

Second, under this proposal, the Earliest Eligibility Age (EEA) would increase in tandem with the NRA, reaching ages 63 and 64. This change is consistent with the principle of adjusting for increases in longevity.

Third, the proposal also strengthens work incentives by applying the actuarial reduction to children of early retirees so that all beneficiaries are treated the same for purposes of early retirement. Here are some illustrative examples of couples and how they would be impacted by these changes:

Under this proposal, starting in 2012, Social Security cost-of-living-adjustments (COLAs) would be determined based on a more accurate measure of inflation. This proposal uses "chain-weighted" Consumer Price Index for Urban Wage and Clerical Workers ("chained CPI").

Chained CPI differs from the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers), the current measure for Social Security COLAs. Unlike CPI-W, the chained CPI accounts for substitution goods (i.e., if cereal prices increase, consumers may instead purchase off-brand cereal).

Chained CPI is widely regarded by economists and analysts as a more accurate accounting of inflation than the traditional Consumer Price Index. According to the Bureau of Labor Statistics chained CPI "is designed to be a closer approximation to a 'cost-of-living' index than the existing BLS measures."²⁶³¹

Determining Social Security COLAs more accurately is a reform proposal that has garnered widespread support. This reform was recommended by the National Commission on Fiscal Responsibility and Reform ("Fiscal Commission")²⁶³² and the Bipartisan Policy Center's Debt Reduction Task Force ("Domenici-Rivlin").²⁶³³ The recommendation has also been incorporated into a large number of other plans, including plans from the Heritage Foundation²⁶³⁴ on the right and the Center for American Progress on the left.²⁶³⁵

Reform 4 -- Adjust the Spousal Benefit Calculation

Under this proposal, spousal benefits would be recalculated to better reflect the costs of a two-person household. This proposal would also strengthen the connection between taxes paid and benefits received.²⁶³⁶

The current spousal benefit is based on 50 percent of the primary insurance amount (PIA) of the other spouse. However, this level of benefit may be overly generous compared with real costs. According to the Congressional Budget Office (CBO), "the Census Bureau's poverty measures imply the cost of living for a two-person elderly household is only 26 percent higher than that for a one-person elderly household."²⁶³⁷ As the CBO points out, if the Census Bureau measures are correct, "a 33 percent spousal benefit would more accurately account for the cost of supporting a two-person household."²⁶³⁸ This proposal adjusts current law by reducing the spousal benefit by 1 percentage point annually (beginning with newly eligible spouses in 2012), until the percent reaches 33 percent.

Congress originally intended the disability programs to be a safety net of last resort for disabled Americans who could not work. However, an accumulating wealth of data suggests the program has grown far beyond the mere "safety net" role Congress intended. Since the Trustees' reports show program rolls and costs increasing exponentially (and the in case for SSDI, exceeding trust fund income), it is time for Congress to carefully reform these programs to ensure resources are targeted toward those truly in need.

Reforming and strengthening the disability programs is long overdue. The programs were not designed to function in the current labor market, nor do they account for modern medical or technological advances that improve disabled American's ability to participate in the workforce with dignity and independence.

Not only are the disability systems in need of modernization, but they are in need of updated guidelines and oversight to ensure scarce dollars are appropriately targeted. Indeed, when Congress created the SSDI program in 1956, members of the Senate Finance Committee noted the difficulty of making determinations that an individual may be disabled and unable to work and highlighted the uncertainty of future costs of a cash disability insurance benefit program.²⁶³⁹

Such concerns remain well-placed today. One recent report even concluded that "the chance a disability claim is granted or denied is often determined more by the particular judge assigned to handle it than by the facts and circumstances presented in the case."²⁶⁴⁰ The same report even found disparities within the same SSA hearing offices on which claims should be paid and which should be denied.

Reasons to reform the disability programs are not limited to modernization or implementation alone. Reform is also a fiscal necessity, as the SSDI Trust Fund cannot sustain current program growth.

As the recent Social Security Trustees' Report made clear, the SSDI Trust Fund will be exhausted by 2018 (or 2016 under the high cost assumptions).²⁶⁴¹ The report also highlighted the fact the disability rolls were not only increasing at an exponential rate, but "the proportion of disabled beneficiaries whose benefits cease because of their recovery from disability is very low in comparison to levels experienced throughout the 1970s and early 1980s." Unfortunately, the report suggested that SSA is actually making the problem worse and contributing to the increase in the rolls by failing to remove individuals that could work, since SSA is no longer adequately evaluating current beneficiaries to make sure they meet program requirements.²⁶⁴²

The disability program is in such dire financial shape that for the SSDI Trust Fund to last until even 2018, the Trustees assumed an increase in funding to review current beneficiaries to determine if they still qualify for the program. To underscore the drastic need for reform, the Trustees bluntly noted that "legislative action [was] needed as soon as possible."²⁶⁴³

This proposal would implement a number of carefully targeted solutions that update SSA's disability programs and adhere to its core principles. The purpose of these reforms is to ensure individuals that are truly disabled are provided the benefits they need, while able Americans are encouraged to work and be self-sufficient. By adopting some practical steps, this proposal would modernize the application process and the administration of program benefits. When taken in total, these measures restore a balance between the agency's equally important responsibilities of paying entitlement benefits and ensuring the program's integrity.

SSA Disability Programs Designed for Individuals Who Cannot Perform Any Job

Below is an explanation of how Social Security's two disability programs work under current law. While this primer on SSA policies may be technical for some, it is necessary to understand the requirements, income thresholds, and eligibility standards under current law to be able to evaluate the impact of proposed reforms.

Social Security Disability Insurance ("SSDI")

Enacted in 1956, the SSDI program provides benefits to insured disabled workers (who are under the full retirement age) by paying monthly cash benefits.²⁶⁴⁴ To be insured, a worker must have worked a minimum amount of time in employment covered by Social Security.

SSDI payments are made from the SSDI Trust Fund, which is financed by payroll taxes.²⁶⁴⁵ SSDI payments are based on the worker's past average monthly earnings, indexed to reflect changes in national wage levels.

At the end of December 2010, 10.2 million people were receiving SSDI payments with the average monthly payment being $1,068.²⁶⁴⁶ SSA estimates that in FY2011 the program will pay $129.7 billion to SSDI beneficiaries. However, in sharp contrast, the SSDI trust fund will only take in $110.9 billion.²⁶⁴⁷

         Annual Number of SSDI Beneficiaries in Current Payment Status

Benefit payments continue as long as the beneficiary remains disabled, or until she reaches the full retirement age. Very few individuals leave the disability rolls due to returning to work or medical improvement, with the majority of individuals converting to retirement benefits.

               Reasons for SSDI Worker Benefit Terminations, 2009

SSI (established in 1972) is a means-tested benefit paid to the disabled poor, elderly, and blind. SSI payments are funded through the government's general revenues which are financed by tax payments from the American public. In most states, SSI recipients also receive Medicaid and food assistance. In FY2010, SSI paid 6.8 million blind or disabled beneficiaries an average of $517 a month.²⁶⁴⁸

SSI benefits and related administrative expenses are considered mandatory spending -- meaning that payments are authorized by law and are made without annual Congressional appropriations. In FY2011, the SSI program will disperse an estimated $52.6 billion in federal benefits and another $3.8 billion in beneficiary services, administration, and research.²⁶⁴⁹ Adding to the cost, in most states, SSI recipients also receive Medicaid and food assistance -- two programs which are also funded by taxpayers.

          Annual Number of SSI Beneficiaries in Current Payment Status

• the house the individual lives in and the land it is on;

• household goods and personal effects (e.g., wedding and engagement rings);

• burial spaces and funds for the individual and the individual's spouse (not to exceed $1,500 in a bank account or other financial instrument);

• life insurance policies with a combined face value of $1,500 or less;

• one vehicle, regardless of value, if it is used for transportation for an individual or a member of his/her household;

• retroactive SSI or Social Security benefits for up to nine months after an individual receives them;

• grants, scholarships, fellowships or gifts set aside pay educational expenses for nine months after receipt;

• property essential to self-support (e.g., property the individual owns and uses in a trade or business, such as a gas station, farm, beauty parlor or personal property the claimant uses for work, such as tools, uniforms, or safety equipment); and

• money saved in an Individual Development Account or "IDA" (defined as a special bank account that helps an individual save for education, the purchase of a first home, or to start a business).²⁶⁵⁰

• the first $20 of any income received in a month (either benefits or earned wages);

• the first $65 of earnings and one-half of earnings over $65 received in a month;

• the value of food stamps;

• income tax refunds;

• home energy assistance;

• need-based assistance funded by a state;

• small amounts of income received irregularly;

• loans that must be repaid; and

• money someone else spends to pay the claimant's expenses.²⁶⁵¹

One of the most serious concerns related to the current operation of the SSI program is program's vulnerability to improper payments. Improper payments in federal government programs are payments the government makes that are incorrect -- perhaps too much money is paid to an individual or entity, or money is paid the wrong individual or entity. Unfortunately, at a recent hearing before the House Ways and Means Committee, the SSA Inspector General testified that in 2009 alone, SSA made $4 billion in overpayments to SSI recipients, who did not properly report assets.²⁶⁵² This means SSI recipients who did not accurate report their financial income and related means cost taxpayers an unnecessary $4 billion in just a single year.

Definition of "Disability" According to SSA

To qualify for either SSDI or SSI, an individual claiming these benefits (a "claimant") must meet SSA's definition of disability. SSA defines disability as the inability to engage in substantial gainful activity ("SGA") due to a medically determinable physical or mental impairment expected to result in death or last at least 12 months. If a claimant is earning over $1,000 month, it is understood that individual usually meets the SGA threshold. Generally, the worker must be unable to perform any kind of work that exists in the national economy, taking into account age, education, and work experience.

 

Chart B-1: SSA's Five-Step Sequential Evaluation

 

for Determining Disability for Adults

 

 

 

Once a claimant files an application for disability benefits with SSA, it is forwarded to the state disability determination service ("DDS") for a medical determination, based on the medical evidence in the claimant's file. If the claimant does not provide medical evidence, SSA will contact the claimant's doctor to request the medical evidence on behalf of the claimant. The DDS then conducts a five-step sequential evaluation to determine if an applicant is disabled. An applicant can be denied at any step, even if they meet a later criterion.

If an individual is denied benefits at the DDS evaluation or Initial Application, a claimant has four opportunities to appeal the denial:

1. SSA Should Implement Continuing Disability Reviews and Redeterminations

Due to pressure from Congress to reduce the wait time for disability application determinations, SSA has chosen to allocate significant resources to processing applications for disability benefits. Unfortunately however, this focus has come at the expense of many of SSA's program integrity responsibilities. As a result of this disproportionate focus, enrollment in the disability programs continues to grow, despite the fact that numerous individuals currently benefitting from the program could actually perform work and be self-sustaining. Unfortunately, when individuals who are not truly in need are enrolled in the program, this takes scare dollars away from the benefits of those truly need -- and further strains the Trust Fund which is scheduled for exhaustion in just a few short years.

Below the proposal outlines some carefully targeted steps to implement reforms and save taxpayer dollars. Adopting these policies will ensure the program is strengthened for disabled Americans in the most need.

Eliminate the Backlog of Continuing Disability Reviews

Under current law, after SSA determines a person is disabled and that individual begins to receive benefits, SSA is required to conduct periodic continuing disability reviews ("CDRs") to determine if the beneficiary continues to qualify for benefits.²⁶⁵⁵ In reviewing the beneficiary's medical condition, SSA determines whether or not the disabled individual's condition has improved since entering the program.²⁶⁵⁶

In the Contract with America Advancement Act of 1996, Congress provided additional funding specifically for CDRs from 1996 to 2002. However, since that funding expired, SSA performance of medical CDRs has decreased by over 50 percent -- from over 669,000 in 2003 to approximately 322,000 in FY 2010.

Furthermore, in 2011, 2.8 million beneficiaries are scheduled to receive a CDR, but SSA will only complete about half this amount, leaving a projected backlog of 1.4 million and overpaying beneficiaries millions of dollars.²⁶⁵⁷ By only performing medical CDRs when funding is specifically allocated by Congress, SSA is sending the clear message that it will only properly perform program integrity when Congress forces it to do so.

In the same way SSA reviews disability beneficiaries medically, they also are required to review them to see if they are working and no longer qualify for benefits. Currently though, SSA is not properly performing CDRs to determine if beneficiaries have employment and are working. In fact, the SSA Office of Inspector General found that if SSA were to properly performed work CDRs, SSA would have saved taxpayers (and the SSDI Trust Fund) $1.3 billion in overpayments that went completely undetected by SSA.²⁶⁵⁸ Additionally, last year the Government Accountability Office reported on 1,500 disability beneficiaries who had been receiving disability payments for 12 months or more and were also collecting a federal paycheck and working above SGA.²⁶⁵⁹

Clearly, SSA should strengthen its review and examination of enrolled beneficiaries, and remove ineligible beneficiaries from the program. Elimination of the current backlog of 1.5 million medical CDRs would result in saving $15.8 billion in improperly paid lifetime federal benefits.²⁶⁶⁰ Such a review process would be labor-intensive, but the return on investment is high for this work, with a savings-to-cost ratio of $12 to $1. Unfortunately, despite this high return on investment, SSA's resource limitations and choice to prioritize the application backlog have resulted in a decline in medical CDRs.

Increase Program Integrity for the SSI Program

Despite a range of known program vulnerabilities, SSA has failed to properly oversee and administer the SSI program. SSI recipients are required to report changes in income, resources, and living arrangements, all of which determine the amount a beneficiary is paid each month.²⁶⁶¹ To ensure that proper benefit amounts are being paid, SSA performs "Redeterminations" of SSI recipients' non-medical factors.²⁶⁶² However, SSA has failed to properly allocate funding and resources to Redeterminations. A recent report by the SSA Inspector General's office found that Redeterminations dropped 60 percent from 2003 to 2008. If SSA allocated proper resources to performing Redeterminations at the same level that it did in 2003, SSA would have saved taxpayers $3.3 billion during FYs 2008 and 2009.²⁶⁶³

Another way that SSA fails to protect the integrity of the program is by paying SSI beneficiaries that are not even in the United States. Under current law, SSI beneficiaries are required to report to SSA if they plan to travel outside the United States for more than 30 days, because doing so would make them ineligible to receive benefits .²⁶⁶⁴ Yet, SSA fails to enforce this requirement. As a result of this administrative failure, according a 2008 report by the SSA Office of the Inspector General (OIG), the agency made $225 million in overpayments to 40,560 SSI beneficiaries that withdrew funds from an ATM outside the United States.²⁶⁶⁵ SSA OIG estimates that if SSA policed this requirement, it would save $100.5 million annually or $1.005 billion over ten years.²⁶⁶⁶

SSA is also failing to correctly administer and enforce existing requirements that SSI recipients accurately report real property and vehicle ownership. Under current law, SSI beneficiaries are allowed to exempt from resource limits the house they live in and the land that it is on, as well as one vehicle. However, using a simple LexisNexis search of SSI claimants, SSA OIG found $551 million in unreported vehicles and $2.2 billion in unreported real property.²⁶⁶⁷ SSA OIG reported the agency could have saved taxpayers $2.751 billion in overpayments to SSI recipients during the years reviewed, and said that just utilizing LexisNexis to locate unreported real property alone would save SSA $350 million in SSI payments annually, or $3.5 billion over ten years.²⁶⁶⁸ Taxpayers should not be paying for welfare recipients to own multiple homes and vehicles. SSA should utilize LexisNexis cross-checks for all applicants who apply for SSI.

Despite the wealth of data showing the need for increased oversight and tighter controls by SSA, it is unclear why SSA is not prioritizing basic program integrity responsibilities. Sadly though, the cost to taxpayers is clear, as taxpayers lost $4 billion in overpayments for the SSI program in just 2009 alone.²⁶⁶⁹

Since SSA apparently eschews its responsibility to implement basic program integrity measures, Congress must fulfill its job of conducting rigorous oversight and require the agency to perform necessary functions. Reprioritizing program integrity will save the SSDI Trust Fund and precious tax dollars. Stronger program integrity management will also eliminate the incentive for able Americans to bilk the system, thus encouraging capable men and women to regain their self-sufficiency through gainful employment.

The way to implement stronger program integrity is straightforward. SSA should use a portion of the funds currently directed toward reducing the application backlog to perform needed program integrity. In addition, funds previously used to pay the lump sum death benefit should be reallocated to supplement program integrity efforts. Under this proposal, the SSA OIG will be responsible for certifying the SSA performed all scheduled CDRs on time as part of the annual financial statement audit.

In light of the abundance of program weaknesses and financially unsustainable status quo, leadership is needed to accomplish a culture shift at SSA. Presently, SSA primarily views its role as an entitlement agency that is charged to hand out benefits. But the agency also fundamentally has a role to ensure the accurate, timely, and careful administration of taxpayer dollars. To prioritize scarce dollars for disabled Americans truly in need, the agency needs to adopt a culture that prizes program integrity measures. This change will ensure those benefitting are only those who are truly disabled. Individuals who do not receive SSA disability benefits may still be eligible for a wide range of taxpayer-funded federal programs, grants, and benefits. Americans are right to be concerned when benefits for the truly disabled risk being jeopardized by lazy or ineffective program administration.

2. Implement Additional Program Integrity Reforms

Eliminate the Mailer CDR

When SSA does medically reevaluate disability beneficiaries, the majority of the time the process is handled through a form mailed to the beneficiary asking if he or she is "better, worse, or the same."²⁶⁷⁰ The process is simple: when the beneficiary receives the form, he or she checks the applicable box and sends the form back to SSA. In FY2009, SSA performed 1.1 million medical CDRs, of which 785,023 were mailer CDRs.²⁶⁷¹ This approach is vulnerable to fraud or abuse and is not the program integrity Congress envisioned. SSA must eliminate the use of this form and return to full medical Continuing Disability Reviews.

Eliminate the Medical Improvement Standard

Under current law, to remove a beneficiary from the rolls during a medical CDR, SSA must find evidence of medical improvement related to the ability to perform work. This may be a well-intended standard, but there are two significant problems with this threshold.

First, SSA does not consistently provide proper guidance on the interpretation and application of the standard. SSA fails to clearly define the improvement necessary to meet the standard, resulting in inconsistent decision-making.²⁶⁷²

Second, the standard does not take into account whether or not some individuals are improperly accepted to the disability rolls, making medical improvement insignificant. In other words, the standard merely assumes all current beneficiaries were rightly admitted to the program.

This standard is unacceptable and should be replaced with a determination of whether the beneficiary is truly disabled under program terms. To not carefully enforce eligibility rules of a program is a disservice to those truly in need who do quality for the program.

Benefits Should Cease When a Medical CDR Finds a Beneficiary Able to Work

When SSA performs a medical CDR on a beneficiary and determines the beneficiary no longer meets the medical criteria, the individual is no longer eligible for disability benefits. The recipient can then appeal the decision through the SSA appellate process. Should the beneficiary decide to appeal, he or she will continue to receive benefits through the appellate process.²⁶⁷³

Unfortunately, the continuation of benefits through the appeal process means taxpayers may be paying for individuals who are ineligible for the program. In fact, an SSA OIG report found that from October 2002 to September 2004, SSA overpaid $146.1 million to SSI beneficiaries who were appealing a medical CDR that was later affirmed by an administrative law judge.²⁶⁷⁴ At the same time, the SSDI program overpaid $43.9 million to beneficiaries whose medical CDR appeal was later affirmed by an administrative law judge.²⁶⁷⁵ When a beneficiary no longer qualifies as disabled, benefits should cease immediately. If the beneficiary chooses to appeal the decision, awarding back-pay is a smarter approach than for SSA to overpay a beneficiary and have to chase dollars already paid.

Require the Collection of Civil Monetary Penalties

Under current law, an individual that makes a false or misleading statement to SSA with the intent to improperly receive benefits may be subject to a Civil Monetary Penalty ("CMP") of $5,000 per statement. For example, a disability recipient states to SSA that she is not working, but an investigation later finds that she is working and earning wages.

The SSA Office of the Inspector General ("OIG") runs the CMP program by investigating beneficiary fraud, imposing monetary penalties, and negotiating collection payment plans.²⁶⁷⁶ The OIG then turns the responsibility for collecting those fraudulently obtained funds over to SSA.

Unfortunately, even after the OIG has proven that the beneficiary defrauded SSA and negotiated a payment plan with that beneficiary, SSA is currently not collecting CMPs as scheduled and sometimes fails to collect them altogether. As a result, there is virtually no enforced penalty for defrauding the disability programs. This is an outrage to taxpayers and a poor use of scarce taxpayer dollars. SSA must enforce CMPs for beneficiaries to take their reporting responsibilities seriously. Therefore, collection of CMPs should remain with SSA OIG and not be transferred to SSA for collection.

SSA Must Utilize Administration Sanctions

As an agency, SSA itself also has the ability to impose administrative sanctions when a beneficiary defrauds or misleads SSA regarding that beneficiary's eligibility for benefits. For example, this might include a beneficiary's failure to report an event that affects benefit eligibility or amount.²⁶⁷⁷ If SSA decides to impose a sanction, the individual will not receive benefits for the duration of the sanction period.²⁶⁷⁸

Tragically, again SSA has failed to fully use the program integrity tools at its disposal. A report by SSA OIG found that SSA rarely imposed administrative sanctions, and completely failed to properly train field office workers on how to impose them.²⁶⁷⁹ Troublingly, field office workers were reported as believing that implementing sanctions was too "harsh" a punishment for defrauding SSA.

As a result of SSA's administrative neglect, from October 2000 through March 2008, SSA only imposed 275 administrative sanctions in the SSDI program. Despite this, SSA referred thousands of cases of fraud to the OIG and overpaid beneficiaries billions of dollars during the same time period, resulting in $123.2 million lost in potential administrative sanctions.

It is increasingly concerning that SSA appears to runs its programs in a way that allows beneficiaries to defraud programs (and taxpayers) with virtually no repercussions, creating a culture that does not believe in penalties for refusing to play by the rules.²⁶⁸⁰ SSA must utilize its administrative sanction power more fully and effectively.

Remove the Maximum Collection Amount from SSI Overpayments

As previously stated, the SSI program made $4 billion in overpayments in 2009.²⁶⁸¹ SSA, however, is limited in the amount of overpayments it can collect from beneficiaries. Under current law, the maximum amount that SSA can deduct from a beneficiary's monthly payment is the lesser of two amounts: the individual's entire monthly SSI benefit or 10 percent of the individual's total monthly include (minus certain exclusions). As a result, for SSI recipients that have no other source of income, SSA can only recover 10 percent of their monthly SSI benefit.²⁶⁸² The current threshold is needlessly restrictive. According to the nonpartisan Congressional Budget Office ("CBO"), removing this 10 percent maximum cap would result in recovery of SSI overpayments totally $1.4 billion from 2010 to 2019.²⁶⁸³ To maximize program integrity and protect taxpayer dollars, the 10 percent cap maximum should be lifted and the collection of SSI overpayments certified by the SSA OIG through the annual financial audit.

Simplify the Formula Used to Calculate SSI Payments

SSI payments are calculated each month based on a complicated formula that considers earned income and unearned income (including Social Security benefits). In figuring a beneficiary's SSI payment each month, the benefit formula specifies that $20 be excluded from the amount used to calculate an individual's benefits. At the same time, $65 is excluded from earned income, which is meant to encourage individuals to work. After that amount, benefits are reduced dollar for dollar. For administrative simplicity and efficiency, the $20 exclusion from unearned income should be eliminated, which, according to CBO, would reduce SSI program outlays by almost $8 billion between 2010 and 2019.²⁶⁸⁴ In additional, the rules regarding excluded resources should be re-evaluated and limited in scope.

Reduce SSI Payments for Children by the Number of Qualifying Children Per Family

In 2008, SSA paid about $8 billion in SSI benefits for children covered by the program. However, unlike other means-tested benefit programs, SSI payments for each additional child do not decline as the number of SSI eligible members of a family increases.

SSA should create a sliding scale for SSI benefits so that a family would get incrementally fewer benefits per child as the number of children in each family that qualified for SSI increased. According to CBO, doing so would reduce SSI program outlays by almost $1.7 billion from 2010 through 2019.²⁶⁸⁵ In the same vein, extending the school attendance requirement to students aged 16 to 17 who have not graduated from high school in order to receive Social Security benefits would save $1.57 billion in program costs from 2010-19 and reduce dropouts by one-quarter.²⁶⁸⁶ This proposal would adopt both of these policies.

3. Using Common Sense To Update the Disability Application Process

One Applicant, One Application

Currently, a disability claimant can file more than one application for disability. Some individuals may do this in hopes of being evaluated by a more sympathetic DDS examiner or ALJ; others use a subsequent application to game the system after an ALJ has denied their claim and they are waiting for the Social Security Advisory Committee to hear their appeal. As a result, duplicative and unnecessary applications are added to the growing backlog of disability applications. The ability to submit more than one application by a single claimant must be eliminated; a claimant should be limited to one application pending in the appellate process at a time.

Elimination of the Reconsideration Level of Appeal

As explained elsewhere in this proposal, a disability claimant is given a number of chances to appeal after a denial at the Initial Determination stage: Reconsideration by the DDS; hearing by an Administrative Law Judge ("ALJ") in SSA's Office of Disability Adjudication and Review ("ODAR"); request for review by the Social Security Appeals Council ("SSAC"); and appeal to federal district court.

After an individual is denied benefits at the Initial Determination stage with the state DDS, within 60 days, denied claimants are able to appeal the determination and request "Reconsideration." This reconsideration step is unnecessary for several reasons.

First, reconsideration of the denial is performed by another claims examiner in the same state DDS office. New evidence is rarely provided at the Reconsideration level and the review is essentially the same as the review done in the Initial Determination, just by a different person.

Second, the number of denials that are overturned at Reconsideration is low. SSA-published statistics show that only 9.7 percent of denials were overturned at this stage in 2008.²⁶⁸⁷ In fact, in a pilot program,

Third, SSA has shown the step may be duplicative and unnecessary. SSA has already eliminated Reconsideration in ten states: Alaska, Alabama, California (Los Angeles West and North Branches), Colorado, Louisiana, Michigan, Missouri, New Hampshire, New York, and Pennsylvania.

The Reconsideration level of appeal should be eliminated. Doing so would not only eliminate redundancy, but also free-up DDS claims examiners to better document initial decisions and execute CDR responsibilities.²⁶⁸⁸

Record Should Close One Week Prior to the ALJ Hearing

Under current law, claimants are able to supplement their application with additional medical records and diagnoses throughout the appellate process. A claimant may submit new medical evidence at any time. There is no finality with regard to the record or schedule for the submission of evidence. For example, a claimant could submit evidence on the day of the hearing before an ALJ, or even after the ALJ has made a decision.

The current leniency in the ability to continue to add supplementary medical records is highly inefficient and unnecessary. In fact, the ability to continue to submit additional documents may perversely incentivize longer adjudication times.

Since attorneys and claims representatives are paid a percentage of back-pay awarded to a claimant, an open record provides an incentive to prolong cases to increase attorney fees. At minimum, the open record allows attorneys and representatives to pursue additional supportive medical evidence (and incur additional cost) only as a result of an unfavorable hearing decision.

Closing the record would heighten the importance of developing a claimant's record as fully as possible before the ALJ makes a decision. Furthermore, since the majority of claimants are represented at the ALJ hearing level of appeal, these professionals should be responsible for submitting evidence in a timely manner.

Establishing uniform procedures for claimant representatives to follow and requiring attorneys (absent good cause) to submit all evidence a specified number of days prior to the hearing would provide for a more orderly and expeditious process.²⁶⁸⁹ SSA should also require claimant representatives to certify that the case is fully developed and ready for a hearing, prior to the hearing. This proposal would require all evidence supporting a claimant's application for benefits be submitted one week before the scheduled ALJ hearing date.²⁶⁹⁰

The Government Should be Represented at the ALJ Hearing

Under current law, a disability ALJ is responsible for wearing three "hats" during hearings:

Update SSA Vocational Grids

In making a disability determination, if an individual's alleged disability does not qualify as a disability under SSA's medical listing, SSA assesses whether the claimant is disabled based on his or her residual functional capacity ("RFC"). A claimant's RFC is defined as the most work a claimant can still do (despite the claimant's limitations) based on the relevant evidence in the case record of all medically determinable impairments. The RFC assessment also includes an analysis of the claimant's ability to meet the physical, mental, sensory, and other requirements of work.²⁶⁹⁴

To analyze whether a claimant's RFC qualifies them as disabled, in 1978 SSA developed "vocational grids" based on a number of factors, including age, education, and past work experience, to determine if an individual is employable or disabled.²⁶⁹⁵ These grids function as a kind of checklist, or worksheet, use to determine an individual's RFC.

However well-intended, these grids are clearly outdated and even pejorative. Under these grids, SSA considers individuals aged 50-54 as "approaching advanced age" and individuals over the age of 55 as "advanced age." Due to age, these individuals are considered to be less likely to learn new skills to transfer to a new job when their alleged impairment prevents them from performed past work. SSA believes these claimants to be "significantly limited in vocational adaptability if they are restricted to sedentary work," and therefore, disabled.²⁶⁹⁶

With 5.9 million beneficiaries (or 66 percent) currently on SSDI aged 50 and older, it is clear that SSA has made it much easier for these individuals to enter the disability programs.²⁶⁹⁷ These grids are clearly outdated and inconsistent with life expectancy and medical improvements. It is not longer the case that aged 55 and older are "advanced" in their age. Therefore, these ages should be raised to at least 58-60 for "approaching advanced age" and 61 and older to "advanced age."²⁶⁹⁸ The vocational grids also take into account the inability to speak English, which should be removed as a consideration.

4. SSA Disability Program Reforms

Convert Disabled Beneficiaries to Retirement Benefits at the Early Entitlement Age ("EEA").

At present, SSA converts disabled beneficiaries to retirement benefits at age 65. Individuals, however, can begin to collect Social Security retirement benefits as early as age 62, or EEA. For conversation at EEA, a benefit reduction would apply as if the beneficiary was applying as a retiree at EEA. The reduction will be the reduction at EEA (currently 30 percent). This conversion will encourage individuals that seek disability benefits as an early retirement program to remain in the work force.

Promote Work Earlier

Under current law, for an individual to be accepted to disability, he or she must establish that they cannot work. This requirement encourages disability claimants to remain out of the labor force while they are applying for benefits. Additionally, individuals claiming disability are not allowed to sign up for rehabilitation services until after they are awarded disability benefits.

These are the wrong incentives. Indeed, most experts agree that the most effective intervention is to help disabled individuals return to work as quickly as possible.²⁶⁹⁹ In fact, one study found that participation in back-to-work programs was higher for disability beneficiaries who were allowed to participate during the initial determination of their eligibility, suggesting those individuals with recent participation in the labor force are more likely to return to work.²⁷⁰⁰

Currently, SSA provides work incentives to disabled beneficiaries, but they are only eligible to use those incentives after they are accepted onto the program. While participation in SSA's back to work program "Ticket to Work" by disabled beneficiaries has increased, participation in the program overall remains low.²⁷⁰¹ Although opportunities to improve the program may exist, SSA does not currently have basic data to analyze how to improve the program because SSA does not evaluate beneficiaries that participate in the "Ticket to Work" program and has not consistently monitored or enforced individuals' progress toward self-supporting employment.²⁷⁰² Clearly, SSA is not placing adequate attention on helping disabled Americans return to work and be productive members of society.

If SSA is truly interested in helping disabled Americans, it should assist them in being independent and productive members of society by encouraging disability applicants to consider attempting to work before accepting them onto the disability rolls. The "Ticket to Work" program should be replaced with a more effective back-to-work program that claimants are able to access earlier in the disability application process, even before individuals apply for benefits.

Time Limit Disability Benefits to Encourage Beneficiaries to Return to Work

At present, when an individual is approved for SSDI or SSI benefits, they remain on the program until they return to work or SSA determines they have improved medically and are no longer disabled. When a claimant is accepted onto the disability rolls, SSA assigns a classification to the beneficiary regarding the likelihood of recovery. These classifications will be used to time-limit benefits for the following periods of time:

• A beneficiary classified as "medical improvement expected" will receive two years of disability benefits;

• A beneficiary classified as "medical improvement possible" will receive three years of disability benefits; and

• A beneficiary classified as "medical improvement not expected" will receive five years of disability benefits.

For claimants that truly remain disabled and unable to work, they could re-apply for benefits at any point during the final year of the benefit term. If a claimant were to be re-accepted for an additional benefit term, the five month wait period for benefits would not apply.²⁷⁰³ The use of time-limiting benefits also takes the administrative burden off of SSA to perform medical CDRs, which it consistently states it lacks funds to properly perform.

Development of a Treatment Plan

Upon becoming eligible for disability benefits, all disabled beneficiaries should be required to develop a treatment plan if SSA finds they have a condition where medical improvement is expected or possible. The plan should include vocational rehabilitation and medical treatment, and would have return-to-work as its goal within a designated time period. This would put the emphasis on returning to work and not staying on disability benefits indefinitely. This simple policy correction would help many beneficiaries reclaim the freedom of self-sufficiency and enjoy the dignity of gainful employment.

Increase State Involvement in the Management of SSI

In 1996, under bipartisan federal welfare reform legislation, states became responsible for administering the welfare program, technically called Temporary Assistance to Needy Families ("TANF"). TANF's mission is to help needy families to become self-sufficient, including reducing the dependency of needy parents by promoting job preparation, work, and marriage.²⁷⁰⁴ Under the historic, bipartisan reform, states received federal block grants to cover benefits, administrative expenses, and services targeted to needy families with wide flexibility to develop state-run welfare programs.

The SSI program also provides disabled individuals with benefits, effectively making it essentially a welfare program for individuals with health problems. Not surprisingly, statistics show an overlap in the populations served by TANF and SSI. In fact, GAO estimates indicate that almost all TANF offices encourage some TANF recipients with impairments to apply for SSI.²⁷⁰⁵ This overlap means that taxpayers may be overpaying for programs that have at least partially duplicate functions. Congress should shift the management of the SSI program to the states to take advantage of the states experience in encouraging TANF recipients to return-to-work and become independent and productive Americans.²⁷⁰⁶

Shifting management of the SSI program to the states would also benefit children that are currently enrolled in the SSI program. For example, instead of making payments directly to parents, states could divert SSI funds directly to educational supports to fund the improved education of children with disabilities. The Individuals with Disabilities Education Act ("IDEA") authorized the federal government to make grants to states that fund special education and related services for students with disabilities. In 2009, IDEA could provide up to $4,200 per child to states to fund educational supports. Program funding, however, only provided about $1,370 per child. In fact, CBO recently advocated an increase in IDEA funds to provide states with the authorized maximum grant for educating children with disabilities.²⁷⁰⁷ By diverting SSI funding to states, these payments could meaningfully fund programs that would provide much needed educational support for children with disabilities to become productive and independent members of society.

The proposed changes to the SSI program will save over $17.175 billion over the next ten years.

The tax code is long overdue for comprehensive restructuring. Yet, instead of considering broad reform to simplify the code and lower rates, Washington continues to make the problem worse -- doling out new tax breaks and subsidies in the form of tax credits to well-connected companies and special interests with powerful lobbyists who seem to have more influence than most members of Congress. The result is a complex tax structure that benefits only a few, hinders economic growth and drives up costs and taxes for many working families and businesses across the country.²⁷⁰⁹

In part, the complexity of the tax code arises from the countless spending programs hidden within it. Masquerading as tax cuts, many of these programs are no different from any other federal program that spends taxpayer money. Cleaning up the code by eliminating the most egregious tax giveaways will pave the way to reducing tax rates for all Americans and small businesses.

The need for fundamental tax reform is clear: as government has grown so has the tax code. It was designed to collect from citizens only those resources truly needed to fund basic federal functions, but has become the latest playground for Washington politicians to hand out benefits to their favorite special interests. At more than 3,800 pages, the code is a labyrinth of exclusions, deductions, exemptions, and credits, making it nearly incomprehensible. By most estimates, these special preferences add up to more than $1 trillion in annual spending, all administered by a Treasury Department that receives little oversight from Congress, leaving virtually no way to stop runaway costs.

In his recent National Affairs analysis of the tax code, "Spending in Disguise," former member of President Bush's Council of Economic Advisers Donald Marron explains how the code has become a tool for secret spending programs, stating "[t]ax preferences are social safety-net programs. They are middle- and upper-income entitlements." Marron concludes, "The federal government is therefore bigger than we typically think it is. Conventional budget measures miss hundreds of billions of dollars that are implicitly collected and spent each year through spending-like tax preferences."²⁷¹⁰

The nonpartisan Congressional Research Service agrees, explaining how tax expenditures are, "in many ways equivalent to entitlement spending.²⁷¹¹ That is, tax expenditures are available to everyone who qualifies and federal budgetary costs depend on program rules (the tax code), economic conditions, and behavioral responses. Furthermore, they often remain in the tax code until changed or eliminated by congressional action."²⁷¹²

Congress' tax code spending spree has created an unfair system in which taxpayers with similar incomes and businesses with similar profits often do not pay similar rates. For example, a recent report found eleven major U.S. corporations with $163 billion in profits from 2008-2010 had effective federal tax liabilities averaging only 3.3 percent -- far below the corporate rate of 35 percent. In the case of General Electric, the company had a negative income tax liability of 61.3 percent, receiving $4.7 billion from the federal Treasury over the last three years.²⁷¹³

Loose requirements for various tax write-offs allow clever taxpayers to reduce their taxable income for bizarre and dubious expenditures. One family was allowed to deduct the cost of cat food as a business expense, claiming cats were needed to keep animals out of their junkyard.²⁷¹⁴ Meanwhile others have allowed deductions include elective abortion services, toupees for some balding men and breast augmentations for exotic dancers.²⁷¹⁵

Some of the most expensive provisions in the code are wrought with waste or are poorly targeted, often benefiting upper income tax filers instead of those most in need. For example, individuals with over a million dollars in income benefited from more than $7 billion in tax relief through mortgage interest deduction in one year alone.²⁷¹⁶ In fact, the IRS recently found that in 2008, more than 18,000 individuals earning at least $200,000 used these tax credits, deductions, and other preferences to reduce their personal income tax liability to zero. This resulted in the highest percentage of high-income taxpayers who avoided paying taxes since this data collection began in 1977.²⁷¹⁷

Worse still, the government does not even collect all of the taxes it is legally owed. The IRS loses billions of dollars every year to erroneous payments and poor oversight of spending programs found in the tax code. Consider, the Earned Income Tax Credit Program was identified as having nearly $17 billion in improper payments in 2010,²⁷¹⁸ while the IRS Inspector General found that more than 1,200 prisoners, 241 of whom are serving life sentences, mistakenly received $9.1 million in first-time homebuyer tax credits just one year.²⁷¹⁹ Simply requiring beneficiaries to provide a valid Social Security number to receive the Additional Child Tax Credit could save another $17 billion annually.²⁷²⁰

Allowing deductions for everything from clown wigs to basketball jerseys²⁷²¹, the tax code not only misdirects federal funding, but it imposes a significant drag on the overall economy, hindering growth and slowing the recovery. As wages continue to stagnate and many Americans are still unemployed, the sluggish economy has produced below-average levels of federal revenue in recent years. Combined with Washington spending at an all time high and record deficits of more than $1.65 trillion, we simply can no longer afford a tax code that loses hundreds of billions of dollars in revenue every year.

Ultimately, attempting to force all taxpayers, both corporate and individual, to pay the full standard rates is futile -- there are simply too many escape hatches to avoid taxation. More importantly, our economy simply cannot grow under such a burdensome level of taxation. The only way to fix the tax code is to eliminate most preferences, eliminate the Alternative Minimum Tax, and sharply lower standard rates for businesses and individuals. In addition, the corporate code should be reformed to move from a worldwide system to a competitive territorial system, like nearly all major industrial countries. While some favor a temporary repatriation holiday, transition to a territorial system would create a permanent incentive for companies to bring their foreign earnings home.

At a time of divided government and record deficits, it is unrealistic to believe we can put the federal budget back in black without looking at both spending and revenue. This plan eliminates waste and duplication in every corner of the federal budget, including the tax code. By a ratio of 8 to 1, the report focuses heavily on reducing mandatory and discretionary spending, but also calls for ending wasteful spending in the tax code. Ending special interest giveaways, selling unused federal assets, and eliminating spending through the tax code will bring in more revenue, but without increasing tax rates.

Sweeping tax reform that creates a level playing field, eliminates tax subsidies, and dramatically reduces both personal and corporate income tax rates is clearly needed. Congress can act now to remove some of the most egregiously unfair, unwarranted tax preferences in the code. Many of the costly and unproven tax provisions contained in the stimulus bill earmarked for specific politically favored agendas are repealed in this plan. Preferences like many included in this report cost the government billions of dollars and do little for the economy. Meanwhile, other reforms proposed in this plan could be considered with rate reductions to promote a flatter, simpler code. These reforms will also begin to make the tax code fairer for those who cannot afford to hire a lobbyist to represent them in Washington. Immediately ending dozens of special interest giveaways and reforming other major tax provisions will help remove these distortions generating nearly $1 trillion over the next ten years.

Congress should eliminate these tax expenditures and focus on ensuring a smaller subset of the hundreds of economic development programs work as intended. Ending the New Markets Tax Credit along with the Empowerment Zone, Renewal Community, and District of Columbia Tax Incentives, would result in savings of more than $15 billion over ten years.²⁷²²

New Markets Tax Credit

Individuals investing in businesses that provide capital to low-income residents in low-income communities can apply for the New Markets Tax Credit.²⁷²³ New Market Tax Credits reduce an individual's taxes by a portion of their investment over several years, creating an incentive for investment. Rather than working this way, the program rewards past behavior, but does little to incentivize new development. Some of the "community development entities" benefiting from this special tax break are actually multi-million dollar companies.

Recipients of the tax break are often subsidiaries of major banks, like two divisions of Chase Bank, which were awarded $204 million worth of tax credits through this program in only three years (2007-2009); or the Merrill Lynch Community Development Company, which received $174 million in the same period; or Wachovia Community Development Enterprises, which received $521 million in awards from 2004-2009.²⁷²⁴

These credits have been used to subsidize expensive construction projects like the $116 million renovation of the landmark Blackstone Hotel in downtown Chicago, a Marriott hotel. This project's main beneficiary was Prudential Financial Inc., the second-largest U.S. life insurer, which received $15.6 million in New Market Tax Credits.²⁷²⁵

In 2009 alone, over $3.5 billion in federal funding was directed via this tax break for projects not seemingly intended to benefit low-income regions:

• $19.9 million for a multiplex movie cinema and retail development;

• $8 million for a hockey arena;

• $5 million for 3D digital products and software application sales;

• $1.1 million for a cable television station;

• $15.7 million for a performing arts venue and school;

• $2.2 million for the "development of enhanced streetscapes;"

• $4.9 million for an 86 Room Fairfield Inn & Suites;

• $3.75 million for the historic rehabilitation of a "Vacant Hotel;"

• $9.8 million for a movie studio and entertainment venue;

• $4.5 million for "architecture studios;

• $10.7 million for a historic rehabilitation of the headquarters of a global entertainment and convention venue management company; and

• $31 million for two "historic theater rehabilitations."²⁷²⁶

Empowerment Zone, Renewal Community, and District of Columbia Tax Incentives

Similarly, Empowerment Zones (EZs) and Renewal Communities (RCs) are federally designated geographic areas characterized by high levels of poverty and economic distress, where businesses and local governments are often eligible to receive federal grants and tax incentives.

Since 1993, Congress has authorized three rounds of EZs and one round of RCs with the objective of revitalizing federally selected economically distressed communities. These designations unlock a combination of federal tax incentives and grants.

Nearly $1.8 billion in grant incentives provided to EZs and ECs have been expended since 1993 have mostly been expended. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010²⁷²⁷ enacted on December 17, 2010 extended EZ tax benefits, but not RCs, until the end of 2011.

There are several Empowerment Zone (EZ) tax incentives²⁷²⁸ intended to help "economic development" struggling economically.²⁷²⁹ One of these provisions allows businesses to receive a credit equal to 20 percent of the first $15,000 in wages paid to an employee who is a resident of the empowerment zone and who performs most of their work within the empowerment zone. The idea is to make it easier for companies to hire individuals in these poor areas. RC tax incentives, which have not been extended since they expired in 2009,²⁷³⁰ are similarly allowed for businesses to collect an employment tax credit equal to 15 percent of the first $10,000 in wages paid to an employee who is a resident of the renewal community and who performs most of their work within the renewal community.

Other investment incentives apply to both the EZ and RC programs with the goal of fostering economic development through an increase in the capital stock within the designated geographic areas. Firms may expense the cost of new and used qualified property/assets they acquire when the assets are placed in service up to $35,000, for a total of $285,000 if they are located in an EZ. Empowerment zone tax-exempt bonds can be issued for economic development projects in EZs. Capital gain deferral options are also available for investments within EZs and 50-75 percent of the gain from the sale of EZ small business stock held for more than five years is excluded from gross income.

There is also a special carve out for the District of Columbia (DC) Enterprise Zone, which includes census tracts in the District of Columbia with a poverty rate of at least 20 percent. Businesses in the DC Zone are eligible for the following tax benefits: (1) a wage credit equal to 20 percent of the first $15,000 in annual wages paid to qualified employees who resided within the District of Columbia; (2) $35,000 in increased Section 179 expensing; and (3) tax-exempt bond financing. Additionally, a capital gains exclusion is allowed for certain investments in small business stock held more than five years and made within the affected areas. These incentives were extended through 2011 after expiring in 2009.²⁷³¹

Since federal grant programs also exist to assist these economic development zones/communities, it is unclear why these tax incentives should be extended. For entities applying for government funding, additional points are awarded on grant applications for the Department of Housing and Urban Development, Treasury, and Health and Human Services, and Department of Education programs.

Government-sponsored studies by the Government Accountability Office (GAO) and the Department of Housing and Urban Development (HUD) have failed to demonstrate EZ designation generating improvement in community outcomes.

In 2001, HUD published a progress report examining the first five years of the Empowerment Zone and Enterprise Communities programs.²⁷³² HUD investigators found little evidence that the EZ program resulted in community improvement. The small growth that did occur within these communities, given the low take-up rate of the tax incentives, may have been attributable to activities not related to EZ activities.

In 2006, GAO also released a report on the EZ program.²⁷³³ This study found "none of the federal agencies that were responsible for program oversight -- including HHS and the Departments of Housing and Urban Development (HUD) and Agriculture (USDA) -- collected data on the amount of program grant funds used to implement specific program activities. This lack of data limited both federal oversight and GAO's ability to assess the effect of the program."

Despite a previous request by GAO as part of a 2004 study for these federal agencies to address this deficiency, GAO found this issue had not been addressed two years later. Based on the limited data GAO had, it could not determine that the EZ program was effective.²⁷³⁴

Tribal Economic Development Bond Program

Established in the 2009 stimulus legislation, the Tribal Economic Development Bonds (TEDB) program authorizes tribes to issue up to $2 billion in bonds for economic development purposes, with each tribe selected for participation eligible to issue as much as $30 million.

Unlike previous tribal bonds, this provision does not require bonded projects to fulfill an "essential government function," and thus can be used for a wide variety of initiatives including tourism development, convention facilities, golf course, and marinas. Tribes contend the provision brings them into parity with state and local government bond provisions.

The bonds are not always put to the best use. Thanks in part to the new tax free bond provision, the Salt River Pima-Maricopa Indian Community in Arizona constructed the new spring training facility for Major League Baseball's Colorado Rockies and the Arizona Diamondbacks. With twelve baseball fields, including an 11,000 seat central stadium, two soccer fields, clubhouses, separate workout facilities for both teams, and a theater, the Salt River Fields complex is conveniently located near the tribes Talking Stick Resort, casino, and golf course.²⁷³⁵

The New York Times describes the new facility this way: "Simply put, it's the nicest spring training facility in the majors." Legendary former Yankees manager Joe Torre gushed, "This is amazing. I've never seen anything like this in a major league place, much less a spring training facility. It's incredible. It's enormously impressive, it really is."²⁷³⁶

Also, these bonds are provided for the development of certain facilities associated with casinos. Although Congress in the Recovery Act excluded gaming as a permitted use of TED Bonds, the IRS opened a very large loophole, as the prohibition does not explicitly extend to ancillary facilities, such as a hotel, if they are structurally independent. As such, a hotel built on top of the casino would be ineligible, but a hotel built next to the casino would qualify -- even though they serve exactly the same function.

This proposal would prohibit the further issuance of any new bonds under the program. Eliminating this provision could save $400 million over the next ten years.²⁷³⁷

Millions of dollars in tax benefits were recently used to fund the $27 million development of a beer garden and microbrewery at a former Coca-Cola syrup plant in St. Louis.²⁷³⁸ This includes $14.4 million of financing for the project was provided through a HUD-insured mortgage. The project also benefited from $1.25 million in state brownfields credits, $2.8 million in tax-increment financing, and a $5.3 million federal historic preservation tax credit.²⁷³⁹

The brewery, a beer tasting room and beer garden were developed in a 12,000 square feet building. In addition to the brewery there are 77 apartment units along with 16,000 square feet of commercial space available.

The $18-$20 million conversion of Milwaukee's historic Loyalty Building into a Hilton Garden Inn is also expected to be financed in part with federal historic preservation tax credits. The 6-story building was purchased for $1.7 million in March -- an amount less than half of the tax credit the developer would receive if the final project cost is $20 million.²⁷⁴⁰

A similar $40 million project is expected to utilize these tax credits in Buffalo to renovate the Lafayette Hotel, after it was added to the National Register of Historic Places in August. The redevelopment project will see the upper floors converted into 115 one and two-bedroom apartments and a 34-room boutique hotel will occupy the second floor.²⁷⁴¹ Prior to the renovation, the building was home to a number of social services organizations that use the rooms for "short-term emergency housing clients."²⁷⁴²

Current law provides for two separate tax credits for historic preservation of structures.²⁷⁴³ One of them is applied to structures certified by the National Park Service as historic structures on the National Register of Historic Places or by the Secretary of Interior. This subsidy is expected to total $500 million in federal funds for fiscal year 2011 (including $400 million for corporations) and $600 million in fiscal year 2012.²⁷⁴⁴ There is no upper limit on the amount of rehabilitation expenditures that can be claimed.

Additionally, there is a historic preservation tax credit for other structures not certified as historic. The credit provides up to 10 percent of renovation and rehabilitation costs for individuals and corporations for non-residential buildings built before 1936.²⁷⁴⁵ This subsidy is expected to total $200 million in federal funds for fiscal year 2011 (including $100 million for corporations) and $300 million in fiscal year 2012.²⁷⁴⁶ There is no upper limit on the amount of rehabilitation expenditures that can be claimed.

These tax credits are highly duplicative of numerous other federal grant programs allowing federal funds to be used for promotion of historic preservation, such as the Community Development Block Grant, the National Community Development Initiative, and USDA's Rural Development program.

Many states have a similar state tax credit in place, including:

• Minnesota, which has a 20 percent tax credit in addition to the federal tax credit;²⁷⁴⁷

• Wisconsin, which has a 5 percent tax credit in addition to the federal tax credit;²⁷⁴⁸

• Rhode Island had one that has been at least temporarily discontinued because of fraud and budget concerns;²⁷⁴⁹ and

• Michigan had one that was recently eliminated.²⁷⁵⁰

NASCAR Tax Break

The cost of NASCAR tracks or "motorsports entertainment complexes" can be written off over seven years.²⁷⁵² One of the main beneficiaries of this tax subsidy is the International Speedway Corp, owners of the Daytona Speedway and 11 other NASCAR tracks.²⁷⁵³ Estimates have put the company's benefit from this provision at approximately $38 million.²⁷⁵⁴

In order to qualify for the special seven-year recovery period, the racing track facility must be permanently situated on land and host a racing event within thirty-six months of its completion.²⁷⁵⁵ These businesses can also use a 15 year depreciation schedule for "land improvements" if the venue hosts an event within thirty-six months of its completion.²⁷⁵⁶ The provision encompasses all facilities including grandstands, and food and beverage concession stands.²⁷⁵⁷ Local track owners have received plenty of other tax breaks from states and other local authorities eager to keep the speedway in their community.²⁷⁵⁸ The depreciation schedule in the tax code for similar non-residential real property is typically 15 to 39 years.²⁷⁵⁹

The IRS previously questioned whether these types of racetracks belong in the same tax category as amusement parks until Congress interceded on NASCAR and other track owner's behalf.²⁷⁶⁰ Since 2004, this provision has been extended several times, and would cost $400 million over the next decade.²⁷⁶¹

Dog and Pony Show Tax Breaks

Foreigners who gamble at horse and dog tracks in the United States were once subject to a withholding tax on their winnings, though no longer.²⁷⁶² In 2004, Congress eliminated the tax for bets placed by foreign bettors on live horse or dog races in the United States through certain wagering pools if the wager was initiated from outside the United States.²⁷⁶³ Supporters and detractors contend this provision assists these tracks with their Internet betting operations.

The provision exempts a certain type of betting known as as pari-mutuel. Rather than placing a bet against the track, pari-mutuel betting allows horse racing bettors to wager against each other. This type of betting system allows payouts to range from less than the amount wagered "to astronomical amounts."²⁷⁶⁴ A horse or dog racing track then takes a minimal commission from all wagers as a handling fee.²⁷⁶⁵

Some have raised concerns that the consumer behavior promoted by this type of tax subsidy may be harmful to the economy. According to the Federal Communications Law Journal, "Internet gambling deprives state and local governments of valuable tax revenues required to maintain services. Internet gambling also forces consumers to pay higher fees and interest rates as a result of uncollectable gambling debts."²⁷⁶⁶

Some news reports from 2003 claim this tax earmark was inserted in a key tax bill at the behest of powerful lawmakers for parochial interests. ²⁷⁶⁷ Ending this provision would save $30 million dollars over the next ten years.²⁷⁶⁸

Hollywood Tax Breaks

Designed as an incentive to encourage Hollywood to produce feature films and television programs in the United States, entertainment companies may currently elect to deduct up to $15 million in certain costs associated with the production of television episodes and movies where at least 75 percent of the compensation costs are for work performed on U.S. soil.^27692770 Allowing Hollywood to benefit from this accelerated cost recovery results in federal revenue losses of at least $30 million year.

While benefitting from special tax treatment, the entertainment industry is not lacking in privately generated revenue. The year's top grossing film, Hangover Part II, brought in more than $232 million less than one month after hitting theaters. With a production budget of $80 million, the film netted a profit in its first weekend, as moviegoers spent more than $85 million to catch the latest installment of this series.²⁷⁷¹ Likewise setting new records was Harry Potter and the Deathly Hallows, Part 2, which set an opening day record of $92.1 million and $168.6 in its first weekend.²⁷⁷² Despite a tough economy, taxpayers are still choosing to spend their own money at the box office. They should not be forced to pay for Hollywood flicks twice -- once at the box office and once with a federal subsidy program for a multi-billion dollar a year industry.

Hollywood film production is also being subsidized through state tax incentives in nearly 40 states -- to the tune of $1.5 billion in 2010, according to the Center on Budget and Policy Priorities (CBPP), which suggests states consider scaling back their Hollywood tax breaks.²⁷⁷³ According to the Motion Picture Association only 11 states do not provide "significant tax incentive for [entertainment] production."²⁷⁷⁴ However, in light of chronic budget shortfalls, many states are now considering eliminating these tax subsidies altogether.²⁷⁷⁵

It is unclear if these incentives, whether at the state or federal level, actually pay for themselves by bringing in enough revenue during production to offset the cost of the multi-million dollar write offs and tax breaks. An independent commission in the state of Missouri recommended eliminating the credit in 2011, stating "This tax credit serves too narrow of an industry and fails to provide a positive return on investment to the state. There is currently no long term opportunity for the location of production facilities for films in Missouri."²⁷⁷⁶ CBPP echoes this sentiment outlining, "The revenue generated by economic activity induced by film subsidies falls far short of the subsidies' direct costs to the state. To balance its budget, the state must therefore cut spending or raise revenues elsewhere, dampening the subsidies' positive economic impact."

Unlike Washington, many states are forced to live within their means and cannot run large deficits to fund low-priority spending during an economic downturn. Congress should follow their lead and eliminate this tax break for a highly profitable industry in little need of taxpayer support -- other than their purchase of popcorn and movie tickets on a Friday night. Eliminating this provision could save more than $1 billion over ten years.²⁷⁷⁷

Indian Employer Tax Credit

When businesses locate on Indian reservations they can qualify for enhanced accelerated depreciation rules for property and an employment tax credits when they hire tribal members. The original intent was to spur economic development on reservations, among the most isolated and depressed economies in the nation.²⁷⁷⁸

The tax credit is available to employers for up to $20,000 of qualified wages and health insurance costs paid by the employer for tribal members. The credit is worth 20 percent of the excess of eligible employee wages and health insurance costs this year over the amount of such wages and costs incurred by the employer during 1993.²⁷⁷⁹

The law had been amended to include all former Indian reservation lands in Oklahoma, which represents the vast majority of land in the state. However, Oklahoma stands in stark contrast to the reservation economies that prompted the original incentive. Though it is home to 39 tribes, no reservations existed after statehood in 1907. American Indians make up 8.6 percent of the Oklahoma population and the percent of former Indian land in private ownership, 97 percent, is among the highest in the nation.²⁷⁸⁰ Unemployment, conversely, is among the lowest in the nation at 5.3 percent.²⁷⁸¹ Yet, because much of Oklahoma had reservation status prior to statehood, two-thirds of Oklahoma lands qualify for this special tax status -- regardless of proximity to tribal communities

Oklahoma Chamber of Commerce and business development officials remain strong proponents of the incentive and believe it to be an important recruiting tool.²⁷⁸² However, it is unclear whether these types of tax subsidies are successful or not. In describing the Indian Lands Tax Credit and other similar credits, the Congressional Research Service finds, "if the main target of these provisions is an improvement in the economic status of individuals currently living in these geographic areas, it is not clear to what extent these tax subsidies will succeed in that objective."²⁷⁸³

While supporters may be able to point to a benefit on occasion, the reservation economy still remains in third-world conditions and has generally not seen discernable improvement since this provision was enacted. Ending this provision could save $1 billion over the next 10 years.²⁷⁸⁴

 

²⁷⁸⁵

 

The federal tax code has several breaks for tree planting in the timber industry, including annual expensing and deductions that can provide significant benefits to the industry.

While taxes are deferred until a company harvests its timber, deductions for timber growing expenses can be made at the time of expenditure. Maintenance costs, such as thinning, disease and pest management, and fire cost can be deducted as they occur.²⁷⁸⁶

Up to $10,000 in reforestation expenses may also be deducted per taxpayer per unit of property, with amounts over that being amortized over seven years.²⁷⁸⁷ This allows multiple individuals to claim the same benefit for the same unit of property, which by regulation, only has to be one acre or more in size.

Reforestation expenditures include costs associated with forestation or reforestation by planting, artificial seeding, or natural seeding.

The current expensing provision allows for immediate expensing (especially in light of deferred tax assessment) while other industries may be required to capitalize these costs and amortize them over a longer periods of time or, alternatively, only recover them upon a future disposition.

Eliminating these provisions could save $4.8 billion over the next ten years.²⁷⁸⁸

Tackle Box Tax Break

Manufacturers, producers and importers of fishing tackle boxes were required to pay a 10 percent excise tax on all equipment they sold until 2004 when the law was changed, reducing the amount of the tax to only three percent.²⁷⁸⁹

Yet, other sport fishing equipment is still subject to the full excise tax, including manufacturing of fishing rods and poles (capped at $10), fishing reels, lures and hooks. The revenue produced from the tackle boxes and other fishing equipment pays for federal and state sport-fishing programs.²⁷⁹⁰

Sports-fishing businesses have paid a federal excise tax on their products for more than 60 years. These funds were initially deposited in the general treasury until 1950. But in that year, sportsmen and businesses teamed with lawmakers to redirect the revenue to the sport-fishing programs. They hoped the program would encourage more people to fish and that the sale of fishing equipment would therefore increase.²⁷⁹¹

In 2009, taxes and duties on the sport-fishing industry totaled $123 million.²⁷⁹² Over the next ten years, the cost is estimated to be $11 million dollars.²⁷⁹³ Ending this specialty tax break would once again treat tackle boxes the same as other sport fishing equipment.

Eliminate IRS Tax Exemptions for Bailout Recipients

As part of the effort to stabilize the economy the Treasury Department used its authority under the Troubled Asset Relief Program ("TARP")²⁷⁹⁴ to become a major shareholder in several companies. Through a series of subsequent agency-issued "Notices," the IRS excluded major bailout recipients and their other owners, perhaps improperly, from certain tax obligations for potentially the next 20 years.

Generally, when one company buys another's assets, it does not also acquire its tax losses. In order to limit "trafficking" in tax losses, the tax code limits a buyer's ability to use the Net Operating Losses ("NOLs") of a loss corporation it buys. The limits apply whenever the stock owned by shareholders holding 5 percent or more in the loss corporation increase by 50 percentage points within a three-year period. These limits then restrict the amount of the NOLs the firm can use to an amount equal to "(A) the value of the old loss corporation, multiplied by (B) the long-term tax-exempt rate."²⁷⁹⁵

From 2008 to 2010, the Treasury Department issued a series of "Notices"²⁷⁹⁶ exempting firms in specified industries from the statutory restrictions under section 382:

• Notice 2008-100 declared that an acquisition by Treasury of acquired stock in a loss corporation would not trigger 382 limitations.²⁷⁹⁷

• Notice 2009-14 purported to "amplify" 2008-100, and explicitly covered the auto industry.²⁷⁹⁸

• Notice 2010-2 declared that fur purposes of the 5 percent rule above, (1) stock previously held by treasury should be treated as if it had never been outstanding; and (2) Treasury selling stock to a new public group would not be considered to have increased the Group's ownership.²⁷⁹⁹

As a response to Notice 2010-2, legislation was introduced, which would have deemed that Internal Revenue Service Notice 2010-2 shall have no force and effect of tax law. It would have also amended the Internal Revenue Code of 1986 to restrict the authority of the Secretary of the Treasury to prescribe regulations under section 382 of such Code.

The result is that these carve-outs provide special benefits to just three companies: General Motors, AIG and Citigroup -- all major recipients of TARP funding. Although some argue the carve-outs will result in additional above the line revenue for the Treasury upon the sale of these assets, there is no guarantee of this. Instead, repealing these notices immediately would prevent any further significant revenue loss from these TARP recipients, which could avoid paying more than $90 billion combined in taxes because of this special tax treatment.²⁸⁰¹

3 Major Recipients

General Motors: ("Old GM") was a publicly traded auto manufacturer that reported losses of $88 billion between 2005 and 2009. Over the course of 2008, the Treasury loaned "Old GM" $49.5 billion. When "Old GM" declared bankruptcy in June, 2009, the Treasury took a 61 percent stake in the assets of "New GM." GM's re-organization was conducted as a "363-sale" under the bankruptcy code,²⁸⁰² limiting creditors' rights and allowing it to reform as a "G reorganization," which allowed "New GM" to absorb many of "Old GM's" assets and liabilities tax-free, most notably the NOL carry-forwards and other credit carryovers.²⁸⁰³ "New GM" stands to avoid as much as $45.4 billion in taxes because of the Treasury Department's exemptions.²⁸⁰⁴

American International Group ("AIG"): AIG is a publicly traded insurance company that received $85 Billion from the Federal Reserve in September, 2008, giving the U.S. Government a 79.9 percent stake in the company. AIG received an additional $37.8 billion securities agreement later that month, followed by a $40 Billion share purchase with TARP funds in November. At its peak, the U.S. Government owned 92 percent of AIG. Following a recent share sale, the U.S. Treasury's stake has now been reduced to 77 percent. AIG officials have touted the tax benefits as "a source of funds," and accumulated over $25.6 billion in NOL carry-forwards and other tax-deferred assets.²⁸⁰⁵ A slideshow prepared for the company's first quarter earnings call indicates some of the accumulated tax assets do not need to be used until 2030.²⁸⁰⁶ Chief Financial Officer David Herzog said on a recent AIG earnings call "We're really not going to pay much income tax to the U.S."²⁸⁰⁷

Citigroup ("Citi"): Citi is a publicly traded bank that received $25 billion from the original TARP lending program in October, 2008. In November, it received an additional $20 billion, through Treasury's Capital Purchase Program ("CPP"), along with a loss sharing agreement with Treasury, the Federal Reserve, and the FDIC. The Treasury received $27 billion in preferred stock and warrants in exchange, giving it a 34 percent stake in Citi. University of Cincinnati Tax Law Professor Paul Caron called the issuance of Notice 2010-2 a $38 billion tax break for Citi in exchange for a partial repayment of TARP funds.²⁸⁰⁸ Although Citi has now repaid much of its TARP money and the Treasury sold its remaining stake in the bank, Citi has expressed an intention to use $23.2 billion in NOL carry-forwards and other credit carryovers this year.²⁸⁰⁹

Railroad Tax Credit

In 2003, Congress passed legislation to temporarily offer a tax credit to certain railroad companies for railroad track maintenance expenses incurred in 2005, 2006, and 2007. The purpose of this credit was to encourage the rehabilitation, rather than the abandonment, of short-line railroads (Class II or Class III), which were spun off in the deregulation of railroads. Qualified railroad track maintenance expenditures were eligible for a 50-percent business tax credit up to a limit of $3,500 times the number of miles of railroad track owned by an eligible taxpayer.

While the credit expired at the end of 2009, it was retroactively extended to cover both 2010 and 2011 last December.²⁸¹⁰ As a result of the extension, total revenue loss is expected to be $232 million in 2011 and $99 million 2012.²⁸¹¹

This provision substantially lowers the cost of track maintenance for the qualifying short-line railroads, with tax credits covering half the costs for those firms and individuals. For example, with the recent extension of the credit, Iowa Interstate Railroad (IAIS) announced an increase of $4.5 million in the infrastructure portion of its capital spending program for 2011 from $9.5 million to $14 million.²⁸¹² The American Short Line and Regional Railroad Association compiled a document with many of the projects utilizing the tax credit that showed many of the projects being finished, but that their benefits should have been funded by the projects' beneficiaries. As an example, one completed project reduced "operating costs and transit times." Another project "will support streamlined operations, as well as an increase in rail traffic resulting from the opening of a new Archer Daniels Midland dry mill ethanol facility . . . that will employ 80 people and generate an additional 30,000 carloads per year."²⁸¹³

Proponents argue this tax credit is necessary to ensure short railroad lines, many of which were previously abandoned, are kept in good repair. The increase in functional short lines is said to provide more transportation options for manufacturers and farmers.

Unfortunately, such tax credits also substitute the judgment of Congress for that of the market and by favoring certain modes of transportation, such as short-line railroad, over other transportation methods. If improving a rail line will lower operating costs for a railroad, this should provide an ample incentive for the railroad to pay for these improvements. If a nearby ethanol plant wants to increase the amount of ethanol it transports, it should decide how best to accomplish this goal. As the Congressional Research Service finds, "In general, special subsidies to industries and activities tend to lead to inefficient investment allocation since in a competitive economy businesses should earn enough to maintain their capital."²⁸¹⁴

Any government involvement should be through local citizens, concerned with the economic well-being of their community who elect to pay their taxes to fund these specific capital improvements. Repealing this tax credit would enable more efficient allocating of private funds to address transportation needs and result in savings of $2.3 billion over ten years to taxpayers.²⁸¹⁵

Tax Break for Eskimo Whaling Captains

Eskimo whaling captains have braved the frigid arctic waters for decades to hunt the bowhead whale. They are also given significant support for this from U.S. taxpayers.

Traditionally, the captains of the boats are paid in whale meat and "muktuk -- blubber and skin -- and, by custom, donate most of the meat to [the] community."²⁸¹⁶ But as modern times have made whale hunting more expensive, out-of-pocket costs for weapons and whale boat upkeep for the whaling captains increased.²⁸¹⁷

Despite the fact that commercial whaling is banned in U.S. territorial waters,²⁸¹⁸ after seven years of lobbying by elected officials from Alaska, Congress decided to provide a tax benefit to whaling captains, effective in 2005. Specifically, the tax code now allows Native Alaskan whaling captains to claim up to a $10,000 per year charitable tax deduction to offset their equipment and fuel and certain other costs for the annual subsistence whale hunts generally in the Beaufort Sea. The charitable deduction is offered even though the hunting activities are not otherwise charitable within the meaning of the tax code, and donations of whale meat are not required to be made to a charitable organization.²⁸¹⁹

The provision was first proposed in 1997 because of an IRS ruling that prevented whaling captains from deducting their hunting costs from their taxes.²⁸²⁰ However, only certain individuals who are recognized as whaling captains by the Alaska Eskimo Whaling Commission get the break.²⁸²¹ This year, tax preparation officials in Alaska with Jackson Hewitt, have seen "out of the norm returns" for the deduction.²⁸²² Ending this tax break could save taxpayers $4 million over the next ten years.²⁸²³

Brownfields Tax Break

Non-profit organizations are subject to taxes under the unrelated business income tax (UBIT) for activities that are not part of their original tax-exempt purpose. Gains from the sale of assets that were debt-financed in part are subject to the UBIT in proportion to the debt. Currently, qualifying brownfield properties²⁸²⁴ remediated and sold to another party are exempt from this tax.

The exclusion from the tax reduces the cost of remediating and reselling brownfields by tax exempt organizations using debt finance. The savings would typically be 35 percent of the gain in value. The provision targets areas in distressed urban and rural communities that can attract the capital and enterprises needed to rebuild and redevelop polluted sites. This provision was added by the American Jobs Creation Act of 2004 (P.L. 108-357) to address what was considered by some to be an unintentional effect of UBIT on tax exempt entities' ability to invest and redevelop environmentally contaminated real estate.

This expensing provision for businesses enables companies to deduct brownfield remediation costs against income in the year incurred, instead of capitalizing them over several years.²⁸²⁵ The deduction applies to both the regular and the alternative minimum tax. This subsidy is intended to encourage investment and redevelopment of brownfields. According to the Congressional Research Service, this tax subsidy is primarily viewed as an instrument of community development.

While this provision was set to expire in 2000, Congress has instead increased program eligibility and repeatedly extended it, most recently in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.²⁸²⁶

Because only companies with more than $10 million in annual revenue must file an additional tax reform to claim environmental remediation costs on their tax returns (other businesses just combine these costs with other expenses they can write off), the funding data in the past is incomplete. However, according to the IRS, 184 companies filed the separate tax form and claimed $574 million in tax benefits for the last available tax year, 2008.²⁸²⁷

The Congressional Research Service has echoed concerns that this "expensing is inefficient because it makes investment decisions based on tax considerations rather than inherent economic considerations."

CRS also noted some question the effectiveness of the provision: "The effectiveness of that tax subsidy has been questioned, as . . . the main barrier to development appears to be regulatory rather than financial . . . Barring such regulatory disincentives, the market system ordinarily creates its own incentives to develop depressed areas, as part of the normal economic cycle of growth, decay, and redevelopment. As an environmental policy, this type of capital subsidy is also questionable on efficiency grounds."²⁸²⁸

These concerns should be further considered, given the numerous other federal programs intended to aid cleanup and redevelopment efforts of brownfields. Congress should eliminate these duplicative initiatives and focus on ensuring the remaining federal programs do not overlap. Additionally, Congress should revisit current federal regulations of brownfields to ensure federal law does not penalize good-faith attempts to remediate such areas of blight. Ending these tax breaks will save at least $3.2 billion over the next ten years.²⁸²⁹

Low Income Housing Tax Credit

As one of the purest examples of a direct spending assistance program run through the tax code, the Low Income Housing Tax Credit (LIHTC) provides more than $5 billion annually in tax credits for the development of affordable housing. Recipients of the credit often sell the credit to investors who in turn develop housing for upper low-income tenants. Over a period of ten years, the nonrefundable credit compensates companies for roughly 70 percent of their investment,²⁸³⁰ and this reimbursement can reach nearly 90 percent of the private companies' costs.

Using the tax code to promote affordable housing is both inefficient and duplicative of countless programs at the Department of Housing and Urban Development, which provides other forms of federal assistance to help those in need of housing. As a tax credit, the money is funneled first to the companies taking advantage of the tax break, and much of the federal funds are lost to administrative costs and payouts to private companies instead of applied directly to the housing projects. An audit by the state of Missouri, which provides an additional state tax credit with the LIHTC, found that "For every $1 in LIHTC authorized and issued, the current tax credit model provides only about $.35 towards the development of housing. The remaining $.65 goes to investors, syndication firms, and to the federal government in the form of increased taxes resulting from the use of state tax credits."²⁸³¹

The same audit found that a portion of funding for the housing projects even came from other federal sources, including federal loans and even more tax credits-the historic preservation credit and the affordable housing credit.²⁸³² In these cases the LIHTC is also driving up the cost of other federal programs.

In addition, the LIHTC does not necessarily help meet the needs of the very poor and most in need of housing assistance. Specifically, recipients of the credit are required to ensure their rents can be paid by those earning 50 to 60 percent of local median incomes. As a result, these subsidized properties are often available mostly to the higher end of those living in affordable housing who are most likely to make the rental payments every month to the private companies receiving the federal benefit.²⁸³³

Despite decades of federal funding to combat homelessness, many are still without a place to call home. Unfortunately, it is unclear if this expensive tax spending program increases the net supply of available affordable housing, or merely replaces already existing housing structures starting to age. The Congressional Budget Office explains, "the low-income housing credit, like other supply subsidy mechanisms, is unlikely to increase substantially the supply of affordable housing. Subsidized housing largely replaces other housing that would have been available through the private, unsubsidized housing market."²⁸³⁴ Ending this duplicative and inefficient tax program is estimated to save at least $57 billion over the next ten years.²⁸³⁵

One of the most popular provisions in the tax code is the home mortgage interest deduction, even though it is claimed by only about a quarter of all tax filers.²⁸³⁶ For the millions of Americans who claim the deduction every year, though, it helps offset the cost of owning a home. Under current law, homeowners can deduct the interest paid on home mortgages for primary residences and vacation homes loans of up to $1 million, and also on an additional $100,000 home equity line of credit. This is one of the most expensive tax breaks in current law, resulting in lost federal revenue of nearly $88 billion in fiscal year 2011.²⁸³⁷

While most assume the mortgage interest deduction largely benefits middle and lower income earners, economist Martin Sullivan points out this is actually not the case. Sullivan asserts, "The tax benefit provided by the mortgage interest deduction flows overwhelmingly to rich families like those portrayed in the hit television series Beverly Hills, 90210."²⁸³⁸ Data from the Internal Revenue Service further emphasizes this discrepancy. In 2008 alone, millionaires²⁸³⁹ across the country took advantage of more than $7 billion in mortgage interest deduction tax breaks.²⁸⁴⁰ Sullivan explains the disparity, "First, the rich have larger houses and larger mortgages than the poor. Second, the deduction is available only to itemizers. While almost all high-income taxpayers itemize deductions on their returns, very few of the poor do. Finally, the rich have much higher marginal income tax rates than the poor."²⁸⁴¹

As the second home allowance even further highlights, those benefitting from this tax break are among the most well off. Even a yacht can be considered a second residence- as long as the luxury boat has a "sleeping, cooking, and toilet facility" and an individual lives in it for at least two weeks a year.²⁸⁴²

The Seattle Post-Intelligencer exposed numerous examples of vacationers wrongly taking advantage of this deduction, also noting the IRS does little to verify boat-owners actually meet the requirements to consider these floating vacation getaways a second home. In one case, the newspaper found a Seattle businessman who was able to "declare his yacht a second home for tax purposes . . . allowing him to reduce his income by $19,200, the amount he pays in interest on the loan. "According to the paper, he also deducted the annual $3,600 state registration fee, and between the two tax breaks, was able to lower his tax bracket from 36 to 32 percent, greatly reducing his annual tax bill.²⁸⁴³

Reforms are needed to ensure this deduction is not abused to provide tax breaks for vacation homes, yachts, and mansions. Instead, this deduction should be directed to help those in the middle own their home. As proposed by the President's National Commission on Fiscal Responsibility and Reform,²⁸⁴⁴ eliminating the deduction for second homes and equity lines of credit, combined with lowering the cap for the primary deduction to homes worth $500,000, will better target the mortgage deduction to those with the most need, while resulting in significant savings.

Enacting these reforms could save more than $187 billion over the next ten years.²⁸⁴⁵

Earned Income Tax Credit: Allow Up To Five Years of Benefits for Recipients

 

COSTS OF EITC SKYROCKET

 

 

 

When EITC started, 6.2 million filers received the credit at a cost of $1.25 billion, but changes in the 1990s caused the cost of the program to skyrocket. One study found "between 1990 and 1996 the program more than doubled in real terms" and "much of this increase in costs is driven by the increase in the number of recipients -- in 1995, 19 million filers received the EITC, 160 percent more than 10 years earlier."²⁸⁴⁷

The program is now one of the largest federal welfare programs with 24 million people filing to receive a total of $55 billion worth of tax credits during tax year 2009.²⁸⁴⁸

Since the tax credit is refundable, an EITC recipient does not need to owe taxes to receive the benefits. If an individual's income does not exceed a certain level, he or she can receive a credit in the form of a direct payment. As a result of credits like EITC, "30 percent of tax-filing units received more from the federal government in tax credits than the amount of their income tax liability."²⁸⁴⁹ When an individual receives the EITC as a refund payment it is scored as an outlay, meaning money leaves the federal Treasury, just as with a discretionary spending program. This portion of the program EITC resulting in spending through the tax code of more than $54 billion in 2010.²⁸⁵⁰

It is also possible for individuals receiving a tax rebate check to obtain other federal assistance. In addition to the refundable portion of the EITC, hundreds of billions of dollars in federal assistance is directed toward these same low-income individuals, such as Medicaid, Supplemental Nutrition Assistance Program, Supplemental Security Income, Pell Grants, Temporary Assistance for Needy Families, the additional (refundable) Child Tax Credit, and Section 8 Housing Choice Vouchers. Many individuals can qualify for most all of these programs at the same time. According to the Congressional Research Service (CRS), "The federal government spent almost $708 billion in fiscal year 2009 on programs for the low-income, and nearly $578 billion the previous year."²⁸⁵¹

The following CRS chart (Figure 1) shows the percentage of filers eligible for EITC who also reported receiving federal assistance from other welfare programs such as SNAP and WIC benefits. The diagram shows that a significant proportion of EITC recipients are likely receiving other welfare benefits. CRS also explains "EITC is generally not counted as income, nor as a resource, in determining eligibility or benefits in federal need-tested programs."²⁸⁵² This proposal recommends a change in this policy, requiring EITC benefits be considered as income for such purposes.

 

Figure 1. Head of Household Tax Filers, with One or

 

More Children, Qualifying for the EITC, by Household Receipt of

 

Selected Need-Tested Benefits in 2009

 

 

 

In part, EITC was designed to help those at the lower end of the economic scale by effectively re-paying their payroll taxes and thus providing an incentive to keep working even at low paying jobs as they transitioned into the working world to eventually become self-reliant. However, as the program grew, the general purpose started to change from an anti-poverty program to an entitlement welfare program. Studies have found the program is not completely transitional, but is being used for long-term support. Up to 20 percent of EITC claimants receive the credit for over five years.²⁸⁵³

Unfortunately, the EITC program has also become a target of abuse and scams, which only further take away from those it was meant to serve while draining taxpayer resources. According to the Treasury Inspector General for Tax Administration (TIGTA), "the Government Accountability Office (GAO) has listed the Earned Income Tax Credit (EITC) Program as having the second highest dollar amount of improper payments of all federal programs."²⁸⁵⁴ Little if any progress has been made in fixing the problem in the last decade since agencies were required to report improper payments to the Congress.²⁸⁵⁵ The IG estimates between 23 and 28 percent of EITC payments are improper each year. GAO recently reported $16.9 billion in improper payments were made through EITC program in 2010. This represents a massive increase "from approximately $12 billion in 2009."²⁸⁵⁶

The Treasury IG also stated, "While the IRS has implemented some of our recommendations, it has not taken actions to address key recommendations aimed at preventing/reducing EITC improper payments."²⁸⁵⁷ One instance of fraud in Wisconsin involved an individual who filed multiple fraudulent tax returns and claimed earned income tax credits over many years. It is estimated he received about $3.2 million in federal earned income tax credit refunds.²⁸⁵⁸

Limiting the time an individual can claim the EITC will help ensure the program acts primarily "as a safety net for workers experiencing temporary income and employment shocks,"²⁸⁵⁹ not a permanent entitlement program. Limiting this tax benefit to no more than five years may also reduce the amount of improper payments made by the government and prevent some fraud and abuse. This proposal assumes savings of $65 billion over the next ten years. Specifically, the plan recommends EITC be reformed to phase in allowing recipients to receive the benefit for a maximum of five years and directs the IRS to implement reforms proposed by the TIGTA to reduce improper payments in this program.²⁸⁶⁰

Additional Child Tax Credit: Require Proper Beneficiary Identification

The Additional Child Tax Credit (ACTC) is the refundable portion of the child tax credit and directed to individuals with very little or no other tax liabilities.²⁸⁶¹ Millions of individuals are able to obtain the tax credit without a valid Social Security Number (SSN). Instead they use an Individual Taxpayer Identification Number (ITIN), which is available even to those that are "not authorized" to work in the United States.²⁸⁶² In 2000, a total of 62,000 ITIN filers with claims totaling $62 million in the additional child tax credit. By 2010 the number grew to 2.3 million ITIN filers claiming totaling $4.2 billion²⁸⁶³ in tax credits.²⁸⁶⁴ In total, $22.7 billion in ACTC credits were distributed in 2010.²⁸⁶⁵

ITIN number fraud is a growing concern. The Treasury IG explained, "Billions of dollars in ACTC are being provided to ITIN filers without verification of eligibility, and IRS employees have raised concerns about the lack of an adequate process for identifying and addressing improper claims."²⁸⁶⁶ Over 60,000 ITINs were assigned and used on multiple tax returns processed in 2008.²⁸⁶⁷ Seventy percent of these ITIN numbers should never been issued due to shady documentation provided by the applicants.²⁸⁶⁸ Just like Social Security numbers, ITIN numbers are supposed to be "specific to individuals and should be issued to and used only by that individual."²⁸⁶⁹

The use of the ITIN numbers has been controversial for some time because of its susceptibility to fraud. In 2003, a number of states decided to allow ITIN numbers for use on driver's licenses, instead of Social Security numbers. In response, Henry O. Lamar, Jr., IRS Wage and Investment Division Commissioner, wrote a letter to each state motor vehicle department discouraging this practice stating that the IRS does not "subject ITIN applicants to the same rigorous document verification standards as Social Security number or visa/passport applicants."²⁸⁷⁰

Ending the ACTC for individuals without a valid SSN would save at least $8.9 billion over five years,²⁸⁷¹ with potential savings of $17.8 billion over ten years.²⁸⁷² The IRS should also be given more authority by Congress to deny fraudulent claimants.

Reform the Tax Treatment of Employer-Provided Health Insurance

Tax benefits have played an important part in providing health care to millions of Americans for over 60 years. However, excesses in the current benefit structure have actually increased the cost of health care for many, especially the uninsured. Currently, those with the most generous employment benefits gain the most from the existing tax structure. This can be addressed with simple reforms to the employer-provided health exclusion to provide a more balanced benefit to everyone and greater fairness.

Americans receiving health insurance from their employer also benefit from preferential treatment under the tax system, compared with individuals who purchase health insurance on their own. Under current federal law, health insurance coverage provided to individuals by their employers does not count toward employees' income for purposes of determining their federal income taxes. This tax treatment of health coverage is referred to as the "employee exclusion" for employer-sponsored insurance (ESI), since the employer's payment of the health coverage is excluded for tax calculation purposes. Considering the average cost of ESI in 2010 was approximately $13,770 for family coverage, this exclusion results in significant tax savings for many employees while reducing government tax revenues by more than $150 billion annually.²⁸⁷³

While the employer-based tax health benefit initially helped encourage and expand the number of individuals with health coverage, economists from across the political spectrum argue the current tax treatment of health benefits is one key driver of rapidly rising health care costs. The unlimited tax exclusion for employer-provided health coverage hides the true cost of insurance from those covered by it, undermines the health care market, and contributes to more expensive care and more costly insurance for many. Respected economist Roger Feldman explains:

Current Tax Treatment Contributes to Increasing Costs

From the president's economists to Nobel Laureate Milton Freidman, many policy experts and academics agree the tax treatment of health coverage contributes to inefficiency, increased levels of insurance and increased utilization, and rising health care spending.

The nonpartisan Congressional Research Service explains, "One criticism of the exclusion for employer-provided health insurance is that it reduces the after-tax cost of insurance to workers in ways that are not transparent, likely resulting in their obtaining more coverage than they otherwise would. Not being explicitly capped or limited in some other manner, it does little to restrict the generosity of the insurance or annual premium increases. The exclusion thus contributes to what some economists consider an excess of insurance coverage and a significant welfare (or efficiency) loss for insured individuals and society as a whole."²⁸⁷⁵

These tax subsidies increase consumer demand and encourage certain behaviors or decisions that would otherwise be realized without the subsidy. The director of the Congressional Budget Office, Doug Elmendorf, said, "many analysts would agree that the current tax exclusion for employment-based health insurance -- which exempts most payments for such insurance from both income and payroll taxes -- dampens incentives for cost control because it is open-ended."²⁸⁷⁶

The Tax Policy Foundation likewise concludes, "Insulation from the full costs of health care -- and the lack of transparency in the trade-off between wages and benefits -- may drive up overall health care costs by spurring greater demand for health insurance that combines benefits, networks, and management features in more expensive ways than employers and employees might otherwise demand. This can drive up overall health care costs."²⁸⁷⁷

A similar critique was offered by Nobel prize winning economist, Milton Freidman, who said: "The high cost and inequitable character of our medical care system are the direct result of our steady movement toward reliance on third-party payment. . . . The ideal way to do [reverse course] would be to reverse past actions: repeal the tax exemption of employer-provided medical care."²⁸⁷⁸ The tax code effectively subsidizes the purchase of health insurance by making it artificially inexpensive for a consumer related to what they pay out of pocket for other goods or services. The critique is not an ideological one, however, as one liberal economist also acknowledged, saying "no health expert today would ever set up a health system with such an enormous tax subsidy to a particular form of insurance coverage."²⁸⁷⁹

The distorting impact of the employee tax exclusion for health coverage can be quantified. According to estimates from the Tax Policy Center, "even when we adjust for medical price inflation as recorded by increases in medical insurance premiums -- which has far outstripped overall price growth -- the employer exclusion still grows in real terms between 1988 and 2002 (a 36 percent rise)."²⁸⁸⁰ The gross size of the employee exclusion makes it effectively one of the largest tax subsidies in federal law.

Current Tax Treatment Is Inequitable, Regressive

There is a second reason to reform ESI, related to how it treats lower-income individuals, compared to top income-earners. As one economist explained, "the tax exclusion of employer expenditures from individual taxation. . . . is a regressive entitlement, since higher income families with higher tax rates get a bigger tax break; about three-quarters of these dollars go to the top half of the income distribution."²⁸⁸¹ In other words, the current tax treatment of ESI is inequitable, generally yielding a larger tax benefit for higher-income Americans who receive more generous benefits, compared with lower-income Americans who receive less. The Tax Policy Foundation further details this shortfall of the health exclusion:

Current Tax Treatment Depresses Wages

The current tax treatment of ESI also effectively depresses wages. Employee compensation includes not only an employee's salary, but any additional benefit contributions from their employer (life insurance, health insurance, parking benefits, etc.). As has been shown, employees benefitting from ESI currently receive disproportionate compensation through the employer share of their health care. The diversion of employer dollars from salaries to benefits effectively depresses net wages. CRS explains: "There is general understanding about these matters -- it is reasonable to assume that much of the employer contribution is actually borne by workers through reduced wages."²⁸⁸⁴ In fact, one significant reason wages have stagnated in real dollars in recent decades is due to employers shifting compensation dollars toward health care coverage under ESI, which in turn feeds the disconnect between employees and their health care choices.

Policy Reform Realizes Savings, Realigns Incentives

Because the current tax treatment of health insurance inflates costs, depresses wages, and is regressive, this proposal caps the tax benefit of the individual employee exclusion at $7,500 for individual premiums and $15,000 for premiums for families. The policy would start in 2013 and the cap would remain frozen through 2017, growing with a mix of health inflation and consumer inflation thereafter. This cap is well above the average premium levels for employer-sponsored health insurance in 2010 of $5,050 for an individual and $13,770 for families.

This proposal is similar to the one put forward by the bipartisan National Commission on Fiscal Responsibility and Reform, which recommended capping the exclusion at the 75th percentile of premium levels in 2014, with cap frozen in nominal terms through 2018 -- though unlike the Commission plan, this plan does not phase out the tax exclusion.²⁸⁸⁵ As the Commission noted, "reducing . . . the exclusion for employer-provided health insurance will help decrease growth in health care spending, according to virtually all health economists."²⁸⁸⁶

Implementing this reform to the health tax exclusion could save more than $200 billion over the next decade.²⁸⁸⁷ The cap grows with a blend of health and consumer inflation, providing a long-term approach to helping reduce the distortion in the tax code. This approach is balanced, maintaining the majority of the tax preference from the current ESI exclusion, but also putting downward pressure on health spending. Over the longer term, this reform has the effect of encouraging some individuals and families to choose lower cost plans.

 

Distribution of Annual Premiums for Single and Family Coverage

 

Relative to the Average Annual Single or Family Premium, 2010

 

 

 

Implement Chained CPI

Many provisions throughout the tax code are automatically adjusted each year based on inflation, including the size of the standard deduction to income bracket thresholds and exemption amounts.²⁸⁸⁹

As with other government programs also adjusted for inflation, the consumer price index (CPI) is applied to some in the tax code. For more than 15 years, many budget experts have agreed the current CPI mechanism outpaces actual inflationary growth, causing the cost of government programs to rise rapidly, needlessly adding to the deficit.²⁸⁹⁰ As the CBO Director Doug Elmendorf explained last year, "According to many analysts . . . the CPI overstates increases in the cost of living because it does not fully account for the fact that consumers generally adjust their spending patterns as some prices change relative to other prices."²⁸⁹¹

The Bureau of Labor Statistics developed a more accurate measure of inflation, known as Chained CPI, which over the last ten years has grown at a slightly slower rate than the current measure for CPI.²⁸⁹² As a more accurate measure of inflation, it is only appropriate it be applied government-wide, even throughout the tax code. The nonpartisan Congressional Budget Office explains, "Indexing allows those tax parameters to grow over time in nominal terms but keeps them relatively stable in real (inflation-adjusted terms). . . . Indexing with that lower measure would increase the amount of income subject to taxation over time and thus result in higher tax revenues."²⁸⁹³

The Washington Post editorial board points out in their support of a government-wide transition to Chained CPI, noting academics and economists across the political spectrum agree this is an area of government spending and automatic growth that can and should be addressed. The Post says, "Among the organizations that have endorsed a switch to the Chained CPI are the president's fiscal responsibility commission (better known as Simpson-Bowles), the Bipartisan Policy Center's Deficit Reduction Task Force, the conservative Heritage Foundation and the liberal Center for American Progress."²⁸⁹⁴

Applying Chained CPI to the tax code would save $59.6 billion over the next ten years.²⁸⁹⁵

The Foreign Earned-Income Exclusion

Citizens who live and work in other countries are permitted to exclude from U.S. federal income tax up to $92,900 of their foreign earned income.²⁸⁹⁶ They may also exclude approximately $13,000 in employer-provided housing costs.²⁸⁹⁷ The combined exclusion of over $100,000 is available even to U.S. citizens who pay no taxes in the country where they are currently working.

A form of the foreign earned income exclusion has existed for decades and long been seen as a way to make American companies overseas more competitive in the global economy by increasing exports and equalizing the tax treatment of employees regardless of where they worked (as most American citizens overseas are taxed by their resident country). However, it is not clear this goal is being met through this tax exemption.

In 2006, more than 300,000 taxpayers lived overseas and reported approximately $36.7 billion in income. About half of this amount was not taxed as a result of this provision. Nearly 60 percent of taxpayers who took advantage of this provision paid no taxes to the United States in 2006.²⁸⁹⁸

Regardless of where they live, U.S. citizens with identical incomes should have similar tax liabilities.²⁸⁹⁹ The Congressional Research Service also found this provision is potentially a subsidy for business because it "subsidizes employers sending employees overseas" and it "may work against U.S. domestic interests by encouraging highly compensated U.S. citizens to work overseas . . . expatriating U.S. intellectual capital and reducing U.S. tax revenue."²⁹⁰⁰

Also of note, citizens working overseas are not just working for American companies. In the 21^st century global economy, many Americans are working overseas for non-U.S. companies, yet taking advantage of this tax break. The tax exemption is provided for these employees, but is not necessarily encouraging U.S. competitiveness. In fact, depending on the country, some employees working for non-U.S. companies may not be subject to Medicare and Social Security taxes, in addition to enjoying the income tax exclusion.²⁹⁰¹

Beneficiaries argue they should not be required to pay taxes because they receive limited government services. However, a majority of the discretionary budget of the U.S. government funds the Departments of Defense, State, and Veterans Affairs, as well as interest on the national debt. Clearly American citizens benefit from our embassies and consulates. This includes the significant protection from the United States military through treaties and other international agreements. The U.S. military's global presence with the worldwide deployment of ground troops and constant patrol of naval warships along commercial shipping lanes ought to be paid for by all citizens who benefit from this protection. U.S. citizens should be allowed to retain the tax credit for the taxes they pay to other governments while overseas, but should be required to include all of the earnings in what they report to the IRS as part of their taxable income. According to the Congressional Budget Office, ending the exclusion would save at least $71.3 billion over ten years.²⁹⁰²

The Health Coverage Tax Credit

The Health Coverage Tax Credit (HCTC) is a federal income tax credit that covers most of the cost of qualified health insurance for eligible Americans and their family members. Individuals eligible to claim the credit include those receiving income support or wage subsidies under the federally funded Trade Adjustment Assistance program and individuals between the ages of 55 and 64 receiving payments from the U.S. Pension Benefit Guaranty Corporation, because the government took over their company's failed pension system.

The credit's well-intended purpose is to help offset the cost of health coverage for Americans who may be in unique need due to job loss. However, there is little interest in taking advantage of the credit among the eligible population, eligible participants have other similar federal health benefits to select from, and the credit has extremely costly overhead for an under-utilized program. Meanwhile, the credit is poorly targeted, as some participants earn more than the median income, yet siphon funding from those who need it most.

Despite its high cost to taxpayers, the tax credit is largely underutilized by those who could receive the benefit. For each year the credit has been available, less than 30,000 individuals have participated, out of hundreds of thousands of individuals who potentially are eligible for the credit. For example, in tax year 2008 -- the most recent year data is available -- the program had only 24,790 participants.²⁹⁰³ One reason for low participation is the offer of the credit might be duplicative for individuals already enrolled in other government-funded health programs, such as Medicare, Medicaid, Children's Health Insurance Program, and Federal Employees Health Benefits Program. The law states individuals who receive the credit cannot be enrolled in most other federal health programs, but this does not preclude otherwise eligible individuals from being eligible to participate in another federal health program.

Nonpartisan experts note the widespread lack of participation in the Health Coverage Tax Credit program. According to the Congressional Research Service, "data for the HCTC indicate[s] that it is not widely used, raising questions about its effectiveness. At this time it is not clear whether changes to the HCTC program will lead to more taxpayers using the credit, or if participation will always be low."²⁹⁰⁴

Even recent changes in the credit program have not boosted enrollment. The stimulus bill directed $150 million be spent through the Department of Labor's Employment and Training Administration (ETA) on "National Emergency Grants." The grants were designed to cover the cost of health insurance coverage for eligible Americans until they could be enrolled in the Health Coverage Tax Credit program. A 2010 report by the Labor Department's Office of Inspector General found as of December 2009, only "3 grants totaling $8 million of the appropriated $150 million had been awarded to 6 states."²⁹⁰⁵ The Inspector General's office found that "while ETA conducted various outreach activities, these outreach efforts were not completely effective," and noted that their "primary concern was ETA has not determined the need for the full $150 million given the low participation in the program." If participation in the program is low during both a strong economy and during a recession, it certainly highlights the fundamental question of whether or not the program is even needed. In fact, prior to the stimulus bill, only about 14,000 individuals per month received the tax credit as advance payments.²⁹⁰⁶

Canceling the credit will also save in administrative costs, which are significant given the program's low participation. From 2003-2008 the administrative costs for the program were a steep $161 million.²⁹⁰⁷ In fiscal year 2009 alone, taxpayers paid $28 million to run the program.²⁹⁰⁸ CRS notes high administrative costs are not limited to just the start-up of the credit program. "Observers of the HCTC have voiced concerns regarding the efficiency with which the program is run," CRS states. Specifically, CRS found that "administrative costs remain high even after a few years of operation," and cited a GAO estimate program administrative costs at nearly one-fifth of total program costs during a five-year period.²⁹⁰⁹ CRS notes another study "estimated that of the federal funding going towards advance payments in 2007, a full third would be spent on administration," which would leave "only 66 cents for every federal dollar spent on the advance payment component for purchasing health coverage."²⁹¹⁰ Additionally, from 2009 through this year, the IRS will spend about $40 million to implement changes to the credit program from the stimulus bill and update its computer systems for the program.²⁹¹¹

Because the health coverage tax credit is a refundable credit, there is also a question of equity under the law. As a refundable credit, Americans may claim the full credit amount even if they have little or no federal income tax liability. This allows individuals who have not paid any federal income taxes to benefit directly from the subsidy of other Americans whose income taxes fund the program through general revenues. Most participants in the credit program had a bachelor's degree with household income between $35,000 and $74,000.²⁹¹² According to the 2010 Census, the national median income is over $50,000. As such, families receiving subsidies could have had income well within -- or above -- the national average.

Additionally, this special tax break is poorly targeted. The credit currently covers 80 percent of the premium for qualified health insurance purchased by an enrollee, with the enrolled individual responsible for covering the remaining 20 percent of the premium. This level of subsidization exceeds the customary cost-sharing most Americans experience in their employer-based insurance. Additionally, while individuals who benefit from the credit may be enrolled in COBRA insurance, individuals on COBRA who are ineligible for the credit usually pay about 102 percent of the premium cost of their former employer-sponsored health insurance plan. The Congressional Research Service highlights that the current 80 percent subsidy rate is available to all enrollees regardless of income, even though wealthy enrollees can more readily pay for their insurance. "For example," CRS notes, "in the case of a $3,000 self-only policy, the HCTC would provide $2,400 in tax savings to taxpayers with incomes of $50,000, as well as those with incomes of $5,000."

Unfortunately, more inequities abound. As CRS pointed out, "Unemployed workers who do not receive TAA allowances may question why they are denied the credit, particularly if they too have lost their jobs because of trade competition. Similarly, early retirees whose pensions are not paid in part by the PBGC may question not being eligible for the credit, as may those who receive no pension at all."

While most Americans benefitting from the credit certainly have experienced the true hardship of job loss, taxpayers can do better than to pay for a program with few users, high administrative costs, and entrenched inequities for individuals not enrolled in the program. Eliminating the tax credit would save $1.8 billion over the next ten years.²⁹¹³

Exclusion of Certain Allowances for Federal Employees Abroad

Federal government civilian employees who work abroad and pay federal income taxes, but no taxes to a foreign government, are allowed to exclude from income taxes certain cost-of-living special allowances such as housing, travel, and food. The rationale is that costs of living, such as food, fuel, and living expenses for those living abroad are generally higher.²⁹¹⁴ However, incomes for federal civilian workers overseas are generally higher than average incomes in the United States, in part because of this discrepancy. As a result, this tax expenditure is not addressing a true need and largely benefits higher-income earners.

There is no similar tax exclusion for federal workers employed in high cost-of-living areas in the United States such as metropolitan areas or other high-cost areas like Hawaii and Alaska. In addition, some federal workers, such as Department of State employees, even earn Washington, D.C. 'locality' pay while serving overseas to compensate for the higher cost of living. It is unclear why federal employees receive both additional salary for a higher cost of living and tax-free benefits for the same reason.

As a result of the hidden costs of this tax provision, federal agencies may not make the most prudent decisions on where to base their personnel. Agency budgets do not include the amount of money lost to the Treasury through these allowances and exemptions. As such, what may appear to be a better deal to taxpayers may actually cost more than another option when the cost of this tax benefit is taken into consideration.

Part of the underlying assumption for this special tax break is that federal employees are driven primarily by financial considerations when looking at overseas employment. But foreign federal jobs also provide the opportunity to live and work in a foreign country with a steady paycheck and benefits. With a nine percent unemployment rate in the United States, it is unlikely federal workers will leave the federal workforce if this tax provision were repealed. However, it is also clear should any federal employees choose to leave such a desirable overseas post, there would likely be plenty of qualified applicants for any such job openings.

Repealing the exclusion from income taxes certain cost-of-living special allowances such as housing, travel, and food for federal employees is also part of a bipartisan proposal and is included in tax reform legislation sponsored by Senators Ron Wyden (D-Oregon) and Dan Coats (R-Indiana).²⁹¹⁵

In fiscal year 2010 these exclusions cost the federal government $1.6 billion.²⁹¹⁶ Eliminating this provision would save $18 billion over the next 10 years.²⁹¹⁷

Transit and Parking Tax Subsidy

Businesses can provide their employees up to a $230 per month in monthly tax-free benefits to commute to work via transit, vanpool, or park their vehicle at work. For bike commuting, employers can provide employees $20 each month.²⁹¹⁸

For parking alone, this perk is expected to cost taxpayers $4.2 billion in fiscal year 2011, and more than $22 billion over five years. For mass transit and van pools, the cost is nearly $800 million in fiscal year 2011 and more than $4 billion over five years.²⁹¹⁹

In 1978, Congress temporarily eliminated this provision but brought it back in 1981. Three years later during the 1984 debate over the Deficit Reduction Act, Congress rewrote tax rules on employee fringe benefits. At the time, the lawmaker remained concerned "that without clear boundaries on the use of these fringe benefits, new approaches could emerge that would further erode the tax base and increase inequities among employees in different businesses and industries."²⁹²⁰

Federal employees enjoy a similar subsidy for mass transit and parking, but they are directly subsidized to the tune of about $470 million, according to numbers from the Transit Benefit Program. Recently costs have increased significantly because of the upper limit increase for transit benefits.²⁹²¹

In 1993, Congress authorized selected federal agencies to elect to pay all or a portion of employees' public transportation costs.²⁹²² In fiscal year 2000, the subsidy program was expanded by Executive Order to all other government agencies.²⁹²³ To be eligible to receive the transportation subsidy, employees must use public transportation to commute to and from their offices. DOT manages this program and takes a cut of almost five percent out of the total amount disbursed in subsidies. Most federal workers do not actually pay for parking, but are provided free parking spots -- a very valuable perk in cities like Washington D.C. where parking is always at a premium.

In 2006, the Treasury Inspector General for Tax Administration (TIGTA) found the IRS did not adequately verify whether or not employees receiving subsidies were actually eligible for the subsidy or the amount awarded.²⁹²⁴

With generous benefits such as these, one recipient concluded, "Where can you go for that price, drive all month and have all your maintenance, safety sticker, registration, insurance and not have to pay for it?"²⁹²⁵

Other states have also instituted similar tax credits. New Jersey has the Urban Transit Hub Tax Credit, which recently incentivized Panasonic to move its headquarters closer to a rail station and reap $102 million in tax credit benefits.²⁹²⁶ New Jersey is currently considering expanding this tax credit to residential buildings as well.²⁹²⁷

Maryland has a tax credit of up to $50 per month per person for mass transit and van pools.²⁹²⁸ Washington State has a similar tax credit of up to $60 per month,²⁹²⁹ and so does the state of Minnesota.²⁹³⁰

While employers and employees alike enjoy having their travel subsidized by others, such programs are not national priorities -- especially when numerous states have enacted their own subsidies for similar costs in order to encourage certain types of transportation and/or economic development. Given the fact that the tax expenditures alone total more than $5 billion annually rescinding this tax subsidy would result in substantial savings over ten years of more than $51.6 billion.²⁹³¹

Two tax credits are available for certain advanced clean coal and gasification technologies. Created in 2005, these credits cost taxpayers more than $1.6 billion initially, and in 2008, Congress allocated an additional $1.5 billion in sum for both credits.²⁹³² Of this, $1.25 billion was authorized for investments using "integrated gasification combined cycle (IGCC) or other advanced coal-based electricity generation technologies." Investments that are approved may be eligible for a 30 percent tax credit. These tax breaks are only available for specific projects approved by the Secretary of the Treasury, together with officials at the Department of Energy,²⁹³³ and are distributed similar to direct grants more typically found in discretionary spending programs.

Last year, a $417 million clean coal investment tax credit was awarded to a 602-megawatt facility in Taylorville, Illinois. The company that received the award believed the credit "to be the largest ever granted to a single project." The same facility had already received a $2.579 billion loan guarantee, which brought the federal support for this one facility to $3 billion out of its $3.6 billion total cost.²⁹³⁴ Despite the significant federal investment, the project has been held up by delays. Opponents also remain concerned the electricity from the facility will be more expensive and "drive up their energy costs and lead to job losses."²⁹³⁵

Close to 45 percent of the U.S. electric market is coal-based and supporting the industry should remain an important priority. However, there is still "uncertainty surrounding the economic feasibility and commercial viability" of these type of facilities. While these incentives may feel appropriate to some, the Congress is still supporting an industry with "economically unproven technologies in the sense that none may have become commercial without significant subsidies" and may be incapable of standing on its own.²⁹³⁶

More than $1 billion in the clean coal credit has been allocated to three specific projects, while $250 million in the gasification credit has been directed to two other initiatives. According to the IRS, roughly $240 million in credits have yet to be directed to any recipients.²⁹³⁷ These tax credits, which provide direct federal aid through the tax code should be ended, all unallocated funds should be returned to the Treasury, and any unused funding from projects already in receipt of the credit should be directed to the Treasury for debt reduction. It is important to end this special interest break now or taxpayers will be liable for technology that likely cannot exist without significant federal subsidies. This proposal would rescind the remaining $240 million and end the tax credit immediately.

Renewable Energy Tax Credits

The Department of Energy plays an important role to furthering fledgling technology. In recent years though, private investment has started to increase commensurate with the maturity and profitability of the technology itself. Combined global public and private renewable energy financing reached $243 billion in 2010, up from $186.5 billion in 2009.²⁹³⁹

The United States began funding research and development for renewable energy nearly 40 years ago.²⁹⁴⁰ The American Recovery and Reinvestment Act (stimulus bill) provided an infusion of over $90 billion in tax cuts and spending in 2009 alone.²⁹⁴¹ In 2010, the federal government provided $34 billion.²⁹⁴²

While federal renewable energy research and development is a worthy goal, it is no longer essential as the technology and scale of renewable energy generation are reaching a point where industry and private investors can best provide this funding.

Alternative energy technology is a growing market, with billion-dollar industries that have many applications already available on a commercial scale. Energy security, as it relates to DOE's purview, should not mean investing in projects the private sector is already very interested in supporting or deploying non-competitive technology.

Before continuing to spend taxpayer dollars in this way, policymakers should first ask, "Are we addressing a market failure or unmet need?" The fact that renewable energy technologies are not being applied on a cost-competitive, commercial scale is not necessarily a market failure. It may simply mean that a given product is not a good investment.

"Ray Lane, venture capital backer of Google, Amazon.com, and other Internet groundbreakers says the alternative energy investment boom 'is bigger than the Internet by an order of magnitude. Maybe two.'"²⁹⁴³ Even initiatives considered too risky for private investment eventually catch on if determined to have potential.²⁹⁴⁴ There is a desire among multiple levels in supply chains to produce efficient, cost-effective technology that consumers will demand.

Renewable energy development is not without its risks. These risks, however, are a cornerstone to a working market, because they force entrepreneurs to address glitches in technology and delivery systems, ultimately providing the highest quality good or service in response to consumer demand rather than the political whims of Congress. Misguided subsidies foster an attitude of apathy by removing the natural link revenues share with performance and merit. They also neutralize the competitive advantage investors and companies have earned by risking capital on cutting edge innovation. Providing subsidies allows others to catch up without true risk and potentially discourages risks essential to innovation.

Billions of private sector dollars and venture capital²⁹⁴⁵ are already dedicated to next generation energy technologies. The U.S. led the world in venture capital and private equity investments in renewable energy by a long shot in 2010 with over $4 billion.²⁹⁴⁶ In the same year, global venture capital reached $8.8 billion, up 28 percent from 2009.²⁹⁴⁷

Philanthropists are now playing a significant role as well. Richard Branson pledged $3 billion for renewable energy technologies,²⁹⁴⁸ Warren Buffet invested $5.4 billion for wind energy developments,²⁹⁴⁹ and Bill Gates invested in algae biofuels²⁹⁵⁰ and energy-tech startups.^29512952

American companies are also being proactive. Started in 2005, GE's Ecomagination program is on pace to invest $10 billion between 2010 and 2015 in renewable energy and energy efficiency technologies, such as buildings and appliances.²⁹⁵³ GE recently marked a milestone in thin-film solar and will construct what will likely be the largest manufacturing plant for solar panels in the country, estimated to cost $600 million.²⁹⁵⁴ To date, Google has totaled $780 million in renewable energy investments, including solar, wind, and transmission.²⁹⁵⁵ The company does not seem to be slowing down either as it recently announced a $280 million contribution to a solar energy fund, its largest renewable energy investment to date.²⁹⁵⁶ With Citi, it is investing $102 million in a wind energy project.²⁹⁵⁷ Goldman Sachs went beyond its original commitment to invest $1 billion in renewable energy and energy efficiency projects and has now invested over $2 billion.²⁹⁵⁸

Some countries subsidize the renewable energy industry more heavily than ours and have created a tax environment unrealistically favorable to renewable energy. These efforts can be attributed, in part, to why some American renewable energy manufacturing moved overseas in recent years. For example, Spain subsidized its renewable energy industry so heavily that when it scaled back subsidies (particularly for solar), the bubble it had created for renewable energy production burst, resulting in thousands of lost jobs and plummeting prices for solar panels.²⁹⁵⁹

States with similar provisions also experienced similar consequences in recent years. In Pennsylvania, a swath of tax credits from various levels of government depressed market prices for solar by 75 percent to the point it could not be made profitable. Now state legislators are seeking corrective measures requiring utilities to buy solar power -- essentially increasing the state's clean energy standard -- that will initially increase prices for them but ultimately be passed on to consumers.²⁹⁶⁰

While there may be a limited role for DOE research where market investments do not reach, this is done most efficiently at the Office of Science where the Department is already at work in these areas.

Business Energy Investment Tax Credit

The Business Energy Investment Tax Credit (ITC) provides a 30 percent credit to owners or long-term lessees for constructing both commercial and individual renewable energy properties. It is scheduled to expire at the end of 2016.

The ITC is primarily used for solar projects. Large wind has not been eligible since the 1980s.²⁹⁶¹ According to the Solar Energy Industries Association (SEIA), the U.S. solar market is becoming more attractive both domestically and abroad and international markets for solar, particularly as Italy and Germany, have slowed. According to Solarbuzz, a market research and analysis provider for solar power, the U.S. will account for 9 percent of global solar photovoltaic demand through 2011 and 14 percent by 2015.²⁹⁶² SEIA attributes this growth in the U.S. in part to declines in infrastructure costs, better business models, and state-based incentives.²⁹⁶³

The ITC is structured to reward capital investment rather than electricity generation itself, which can be problematic. For example, a company could construct a wind turbine that does not spin, yet the project would be eligible for the tax credit. Eliminating this credit would save $5 billion over ten years.²⁹⁶⁴

Renewable Electricity Production Tax Credit

The Renewable Electricity Production Tax Credit provides a per kilowatt hour (kWh) tax credit for electricity generated from renewable energy sources. The credit began at 1.5 cents per kWh in 1992 and is annually adjusted for inflation. By 2005, $2.1 billion (23 percent) of energy tax expenditures were associated with the PTC, which was largely claimed by large wind projects. Between 2009 and 2013, approximately 75 percent of funding is expected to go towards wind projects. Biomass facilities are expected to take the second largest share followed by closed-loop biomass, geothermal, hydropower, solar, small irrigation, and municipal solid waste facilities. Refined coal producers also benefit from this credit. Around 60 facilities around the country have been approved by the IRS to receive a $6.27 per ton credit for coal they produce.

The PTC is available for ten years and is provided at a reduced amount if a project is also receiving federal assistance through other means. Unlike the ITC, the production tax credit rewards actual generation of electricity rather than just the investment in renewable energy infrastructure.

The structure of the PTC may lend itself to excessive subsidy values, though, because the credit is not considered taxable income. A 2006 analysis described the true value of the PTC using as an example a normal investment in a qualifying wind energy project with totals of approximately $1.5 million and 1 megawatt of capacity. If such an investment is made in an area with high wind potential, harnessing 35 percent of capacity in a given area, annual production would reach three million kilowatts per hour (kWh), generating $58,000 from the PTC. This amount, however, would be the equivalent to $90,000 of corporate revenue taxed at the 35 percent corporate tax rate. When examined over a ten-year time period at an 8 percent discount rate, the value of the PTC in this scenario would reach $625,000 for a total of $1.5 million investment over its lifetime. This is the equivalent to a 42 percent ITC.²⁹⁶⁵

Such credits may not be necessary, however. Wind power accounted for 26 percent of all new U.S. electric capacity in 2010 with 15 percent growth in the same year. There were over 400 wind-related manufacturing facilities in the U.S. in 2010 with over 38 states operating utility-scale facilities.²⁹⁶⁶

Ending this provision would save $14 billion over ten years.²⁹⁶⁷

Sec. 1603 Grants in Lieu of Tax Credits

The Grants in Lieu of Tax Credits program was created as an option by the stimulus bill to allow for the monetization of the Production Tax Credit or Investment Tax Credit or 48C, effectively making each refundable by allowing recipients to receive grants instead of credits.

Under the program, renewable energy developers earn almost immediate grants of 30 percent of project costs. The program was originally intended to expire after one year but remains in existence today.²⁹⁶⁸ Investigative news stories found the program was subsidizing jobs overseas as eight out of ten stimulus dollars spent on wind energy farms went to foreign companies, creating approximately 4,500 jobs overseas.²⁹⁶⁹ Of the 11 American wind farms that received grants from the U.S. Treasury, 695 of the 982 turbines were imported.

Moreover, the investigation found the program funded projects already underway that would have continued regardless.²⁹⁷⁰ A total of 19 wind farms, which received $1.3 billion, were built before any of the stimulus money was distributed. Fourteen were already sending electricity to the grid.²⁹⁷¹ Ending this provision could save $29.86 billion over ten years.²⁹⁷²

Qualifying Advanced Energy Manufacturing Investment Tax Credit

The Qualifying Advanced Energy Manufacturing Investment Tax Credit provided $2.3 billion in the form of 30 percent tax credits for investments by manufacturers into new, expanded, or reequipped domestic renewable energy facilities.²⁹⁷³ While this provision has not yet expired, it has been fully exhausted of funding. This proposal would repeal the authorization for the provision.

Under this program there was no cap on the number of projects an individual investor could apply for the credit, and applicants were not disqualified if they already received a federal grant or loan for similar purposes.²⁹⁷⁴ A large portion of the tax subsidy benefits went to foreign entities. Of the $2.3 billion made available, solar received $1 billion.²⁹⁷⁵ REC Silicon, a subsidiary of a Norwegian company, received the largest credit of $155 million.²⁹⁷⁶ A German subsidiary also received $128.4 million for a project in Tennessee.²⁹⁷⁷ Not allowing this provision to be extended could save $2.3 billion.²⁹⁷⁸

The Residential Renewable Energy Tax Credit

The Residential Renewable Energy Tax Credit provides a 30 percent credit to homeowners for renewable electricity generating property.

There are two components to this tax credit. The first is the Non-Business Energy Property Tax Credit (26 USC 25C), which originally provided a 10 percent credit up to $500 for appliance upgrades to existing homes. The stimulus bill expanded the credit to 30 percent up to $1,500. This has since returned to its original value and is extended through the end of 2011. This credit is discussed more thoroughly in the energy efficiency portion of this proposal.

The second component is the Residential Renewable Generation Tax Credit, which provides a 30 percent credit for renewable electricity generating property (26 USC 25D) for solar panels, small wind turbines, and geothermal systems. This component expired at the end of 2010.

The cost for this provision was $200 million in 2010, and ending it would save $2 billion over ten years.²⁹⁷⁹

Clean Renewable Energy Bonds and Qualified Energy Conservation Bonds

Clean Renewable Energy Bonds (CREBs) are issued with a zero percent interest rate, allowing the borrower to repay only the principal of the bond and the bondholder to receive federal tax credits in lieu of the traditional bond interest. Effectively, it allows those who issue them to receive an interest-free loan, while the cost of the interest payments is shifted to the government.

In the CREBs program, the benefit is provided to finance renewable energy projects for state, local, and tribal governments, utilities, and rural electric cooperatives. Public sector utilities are the primary target of this provision. The American Recovery and Reinvestment Act provided $1.6 billion, which raised the previous $800 million cap and the maximum cap to $2.4 billion.²⁹⁸⁰

Like CREBs, Qualified Energy Conservation Bonds (QECBs) are issued with a zero percent interest rate, allowing the borrower to repay only the principal of the bond and the bondholder to receive federal tax credits in lieu of the traditional bond interest. The credit's rate is set daily by the Treasury Department, and it can be claimed quarterly to offset the tax liability of the bondholder. Credits that exceed the bondholder's tax liability may be carried forward to the next year but cannot be refunded.

In contrast to CREBs, QECBs are not subject to the approval of the Department of Treasury. Instead, they are distributed to each state government based on population and are, in turn, allocated to local governments on the basis of population. Its broad definition of eligible projects allows for increased participation. The original provision was limited to $800 million but was expanded by the stimulus bill to $3.2 billion.²⁹⁸¹ This plan would repeal these tax benefits, preventing any future federal expenditures for these conservation bonds.

Alternative Motor Vehicle Credit (26 USC 30B)

Providing a $1,300 tax credit for alternative vehicles, the Alternative Motor Vehicle Credit has experienced significant structural problems. According to the U.S. Treasury Inspector General for Tax Administration (TIGTA), approximately $33 million in tax credits claimed by 12,920 individuals were paid erroneously through this tax credit, out of $163.9 million in credits that were reviewed by the IG. Among the number of false claims were 29 prisoners who claimed the credit while incarcerated. Additionally, the report found IRS was not able to monitor credits that were claimed on paper-file tax returns.²⁹⁸²

Others have raised concerns that federal tax credits for alternative motor vehicles are not the most effective way to encourage widespread purchases. A study published in the Journal of Environmental Economics and Management found state-based tax incentives have a greater impact on purchases of hybrid vehicles than federal income tax incentives. The study demonstrated that only a small percentage of motorists attribute their purchase of hybrid vehicles to tax incentives while most purchase them for personal preferences or high fuel costs.²⁹⁸³ Eliminating these tax breaks will save $3.1 billion over ten years.²⁹⁸⁴

Ethanol Tax Incentives

In the 1970s, Congress began providing federal assistance for the domestic production of ethanol, which included the establishment of the Renewable Fuels Standard (RFS) that created a permanent market for the industry. Since that time federal assistance has grown to include multiple tax incentives and federal grant programs. Most recently, EPA issued a decision to increase the current fuel blend wall from ten percent to fifteen percent (E15), effectively creating an even larger market for ethanol producers.

While born of good intentions, federal subsidies for ethanol now face sizeable roadblocks as consumers have protested the required use of ethanol in their fuel. Ethanol-blended fuel is nearly a third less efficient than gasoline (ethanol burns at 68 percent the energy content of gasoline), has contributed to the increased price of corn (as well as land, feed, and other input costs), and can cause engine damage.²⁹⁸⁵

Overall, ethanol subsidies are outdated and have failed to achieve their goals of helping our nation to achieve energy independence. The Congressional Budget Office recently found consumers incur a cost of $1.78 per gallon as a result of federal subsidies before they even pay at the pump.²⁹⁸⁶ Meanwhile, U.S. biofuels consumption remains a small share (4.3 percent) of national transportation fuel use.

The original federal ethanol mandates stemmed from several events, foremost of which was the global energy crisis of the 1970s and a desire to achieve energy independence. Over four decades later, our nation seeks this goal more than ever, but ethanol has not helped achieve this target. It is time to give taxpayers a break and allow the ethanol industry a chance to stand on its own or fail.

Volumetric Ethanol Excise Tax Credit (VEETC)

While various forms of federal assistance continue to sustain the ethanol industry, foremost among them is the Volumetric Ethanol Excise Tax Credit (VEETC), which provides 45 cents per gallon to blenders of ethanol. This subsidy alone accounts for $6 billion in federal spending. It is available in unlimited quantities to blenders, including companies such as Exxon, Valero, BP, and Chevron, which has drawn the ire of some environmentalists. While it was intended to encourage the use of ethanol, the Congressional Research Service determined the VEETC only duplicates what the Renewable Fuels Standard already requires. Now the VEETC only functions to incentivize the consumption of fuel.²⁹⁸⁷

The U.S. Senate recently voted overwhelmingly on a bipartisan basis to repeal the VEETC by a margin of 73-27, clearly demonstrating that taxpayers are ready to end costly and redundant ethanol subsidies. When VEETC is eliminated, the import duty should be eliminated as well.

The cost for this provision is $4.8 billion in 2011. Ending this provision would save $2.4 billion for the rest of this year.²⁹⁸⁸

Small Ethanol Producer Credit

The Small Ethanol Producer Tax Credit provides 10 cents per gallon for the first 15 million gallons of ethanol produced for any producer with capacity below 60 million gallons and has been valued at $440 million annually. It is estimated to cost nearly $500 million. It is scheduled to expire at the end of 2011. This tax credit is intended to target small businesses and farmer cooperatives.

The Los Angeles Times recently interviewed an ethanol producer about the efforts in Congress to end ethanol subsidies. When asked what impact ending this tax credit would have, one CEO of a longtime small ethanol production company expressed a widely held view, noting, "I don't see a fatal effect." The tax credit is valued at $1.5 million annually for his company.²⁹⁸⁹

While ethanol fuel has yet to capitalize on the ample opportunity given it by taxpayers to achieve economic viability on its own merit, eliminating this tax credit would likely have minimal impacts, considering the Renewable Fuels Standard continues to mandate ethanol be blended with gasoline. Eliminating this provision would save $4 billion over the next decade.²⁹⁹⁰

Biodiesel Tax Credit

Biofuels such as ethanol and biodiesel are renewable fuels made from organic sources such as crop wastes and animal fat. This biodiesel tax credit provides $1 per gallon, available in unlimited amount to all qualifying biodiesel producers. The credit was created in 2004 and briefly expired two different times and later extended retroactively. It is now scheduled to expire at the end of 2011.²⁹⁹¹

U.S. biodiesel production is much smaller than its ethanol counterpart but has also shown strong growth, rising from 0.5 million gallons in 1999 to an estimated 776 million gallons in 2008. Without the tax credit, biodiesel is more expensive than gasoline, demonstrating the fuel is not economical to produce without federal assistance. According to the Congressional Research Service, "Demand for biofuels [both ethanol and biodiesel] to fulfill a mandate is not based on price, but rather on government fiat. As long as the consumption of biofuels is less than the mandated volume, its use is obligatory."²⁹⁹²

The cost for this provision was $500 million in 2010. Ending this tax subsidy would save $5 billion over ten years.²⁹⁹³

Cellulosic Ethanol Production Tax Credit

The Cellulosic Ethanol Production Tax Credit provides $1.01 per gallon and expires at the end of 2012. While not yet being produced commercially, cellulosic ethanol holds great promise, and is included as a component of the Renewable Fuels Standard (RFS). The Environmental Protection Agency's recent draft of the RFS for 2012 projects a reduced production from the previous estimate of 500 million²⁹⁹⁴ down to 3.45 to 12.9 million of cellulosic ethanol.²⁹⁹⁵

Still, industry stakeholders still claim this goal is too high.²⁹⁹⁶ While this should not be taken as a sign cellulosic has no future, it should give strong caution to policymakers not to artificially enhance the capital environment of cellulosic projects. Although the fuel appears to hold great promise, Congress would be wise to avoid another situation similar to its experience with corn-based ethanol and, instead, allow markets to direct the capital as the technology merits it. Already, venture capital, oil and natural gas companies, banks, and agricultural research and technology companies have teamed with industry experts to invest in cellulosic biofuels, and this will likely continue so long as the technology merits additional funding.²⁹⁹⁷

This plan calls for the elimination of this tax credit. Currently, the costs associated with this giveaway are minimal under current conditions. However, if production increases to meet RFS requirements, its costs would be substantial. In fact, some estimates project it could cost $10 billion by 2015 and $20 billion by 2020 if cellulosic biofuels fulfill their expectations.²⁹⁹⁸

Energy Efficiency Tax Credits

Energy efficiency provides a way for consumers to be more knowledgeable, thoughtful, and responsible with household and commercial energy consumption. More generally, it provides a greater degree of conservation of our nation's natural resources.

Despite the benefits that energy efficient appliances and upgrades hold, the federal government offers a variety of tax credits to incentivize consumers to make these improvements.

The Department of Energy provides an economic justification for each product's efficiency based on life cycle costs and payback periods.³⁰⁰⁰ For example, when analyzing conservation standards for residential refrigerator-freezers, DOE found that certain efficient products can generally be more cost-effective in the long run.³⁰⁰¹ In one scenario, the average number of years it takes to recoup the cost of consumers' investments for three versions of refrigerator-freezers are 5.8 years, 6.7 years, and 6.9 years.

In short, taxpayers are paying consumers in the short-term to save more money in the long-term. Federal tax credits for energy efficiency measures double the financial benefit of purchasing more efficient products or upgrading appliances or equipment and essentially pay individuals or companies to take steps a savvy consumer would likely take anyway.

For other social classes, efficiency -- and the cost savings that result from it -- is a sufficient financial reward in itself. Double payment or otherwise further encouragement of consumers to take cost-savings efficiency steps (even ones that would not have otherwise) is an example of promoting political policy positions through the tax code.

To counter the cost burden of these mandates, Congress provides tax credits to purchase the equipment it requires be built (and purchased), essentially serving as political cover for the burdens of federally mandated efficiency standards. Since these costs are often passed along to consumers, efficiency tax credits are provided both commercially and residentially.

This behavior is not new to Washington. Congress did the same thing when it mandated certain levels of corn-based ethanol by establishing the Renewable Fuels Standard, which requires a certain percentage of gasoline be blended with biofuels. This was, and continues to be, a burdensome policy, because it requires the consumption of inefficient and, in some cases, non viable (cellulosic) fuels. However, Congress masked some of the burden related to corn-based ethanol by creating the Volumetric Ethanol Excise Tax Credit (VEETC), which pays blenders of ethanol to follow the federal mandate, allowing companies to recoup their costs and Congress to achieve its public policy agenda.

Congress is essentially paying consumers to save -- a practice many would pursue without federal incentives. It is the responsibility of consumers to decide whether the initial cost of an energy-efficient appliance can be recouped before the product's lifecycle ends.

The Residential Energy Efficient Tax Credit For Existing Homes

The Residential Energy Efficient Tax Credit provides up to $500 to homeowners (increased to $1,500 by ARRA and scheduled for termination at the end of 2011) for the purchase of high-efficiency improvements (appliances) to existing homes. Over $5.8 billion has been allocated to 6.8 million taxpayers through the end of 2010.³⁰⁰⁹

The U.S. Treasury Investigator General (IG) recently exposed structural problems in the administration of this tax credit, revealing that it has led to abuse of taxpayer dollars. Of the IG's findings, it was shown the tax credits were wrongly awarded to 262 prisoners and 100 underage individuals, 100 of whom were under 18 years old, 26 under 14 years old, and at least one under 3 years old.³⁰¹⁰ The IRS was not able to confirm whether the individuals who claimed the credit were qualified at the time their returns were processed.

IRS also failed to require documentation from a third-party showing that an individual did in fact make a qualified purchase. In a sample of 6.8 million people who claimed over $5.8 billion in energy-efficiency tax credits for 2009, the IG found 30 percent of taxpayers had no record of even owning a home.³⁰¹¹ Such insufficient safeguards leave taxpayers vulnerable to erroneous payments.³⁰¹²

The cost for this provision in 2011 is $1.2 billion. Over the next 10 years, the provision will cost $12 billion, and should be eliminated.³⁰¹³

Energy Efficient New Homes Tax Credit for Homebuilders

This credit provides up to $2,000 for builders of new efficient homes and is scheduled to terminate at the end of 2011.

The Congressional Research Service describes this provision as the type of tax subsidy that, "promote(s) specific types of investment [that] are economically inefficient, as they direct resources away from what would generally be their most productive use."³⁰¹⁴

The cost for this provision in 2011 is $66 million.³⁰¹⁵ Over the next 10 years, the provision is estimated to cost $620 million, and should be eliminated.³⁰¹⁶

Energy Efficient Appliance Tax Credit for Manufacturers

This credit provides a tax credit up to $25 million in value for industrial companies or appliance manufacturers for new clothes washers, dishwasher, or refrigerators that meet Energy Star 2007 requirements. Ending this provision would save $2 billion over 10 years.³⁰¹⁷

Residential Energy Conservation Subsidy Exclusions for Businesses and Individuals

This exclusion provides that conservation subsidies provided by public utilities either directly or indirectly are nontaxable. It does not have a scheduled expiration date. Residential and multifamily residential entities qualify.

Qualified installations include solar water heat, solar space heat, photovoltaics, or other energy efficiency technologies not identified on houses, apartments, condominiums, mobile homes, boats and similar properties. If a building or structure contains both dwelling units and other units, any subsidy must be properly allocated.³⁰¹⁸

The individual exclusion provides that conservation subsidies provided by public utilities either directly or indirectly are nontaxable. A residential energy conservation measure includes "installations or modifications primarily designed to reduce consumption of electricity or natural gas, or to improve the management of energy demand. Eligible dwelling units include houses, apartments, condominiums, mobile homes, boats and similar properties."³⁰¹⁹

These two exclusions should be eliminated.

Oil and Gas Tax Credits

The U.S. tax code is riddled with tax credits and subsidies that distort energy markets. While deductions allow companies to keep more of their own money and allocate capital as they see fit, tax credits are more akin to a direct spending program. While there can be a benefits associated in certain economic conditions, it would benefit taxpayers to end the tax credits for production of low-producing wells -- the Enhanced Oil Recovery Tax Credit in particular.

These tax credits are neither spending programs hidden in the tax code nor provisions intended to allow companies to manage more of their own capital. Rather, they are safety net programs that pay energy companies, typically smaller independent oil and natural gas producers, in times when it is not economical to produce oil from expensive, low-producing wells. It should be noted the enhanced oil recovery tax credit could have an initial economic impact in certain parts of the country. However, this volatility would likely be temporary as markets would adjust to reflect the true cost of energy.

Repeal of Enhanced Oil Recovery Credit

The Enhanced Oil Recovery (EOR) Credit provides a 15 percent credit for the costs of oil recovery technologies. Enhanced Oil Recovery costs include those paid for depreciable tangible property, intangible drilling and development expenses, tertiary injectant expenses (such as CO2, nitrogen, or steam) to supplement natural well pressure leveraged to extract oil from underground), and construction costs for certain natural gas facilities in Alaska.³⁰²⁰

The credit is available when crude prices dip below $28 per barrel with a $6 phase-out range that occurs once prices reach $34 per barrel. Price triggers are determined by the annual average price of domestic crude oil from the previous calendar year. This credit is currently inactive but has cost $2.4 billion since its inception in 1990.³⁰²¹ Some believe eliminating this credit would not have a significant impact on production as prices are expected to remain high. Although the potential savings are unclear, this repeals this tax credit, preventing future revenue losses associated with dispensing federal benefits to cover the costs of enhanced oil recovery methods.

Marginal Well Tax Credit

Marginal wells average no more than 15 barrels per day, produce heavy oil, and no less than 95 percent water with not more than 25 barrels per day of oil. Marginal gas wells do not produce more than 90 metric cubic feet (Mcf) per day.³⁰²² Collectively, they are believed to comprise 20 percent of oil production and 12 percent of natural gas production. Marginal wells produce 17.8 percent of U.S. domestic oil and 9 percent of domestic natural gas. There are approximately 119,255 of these wells across the country.³⁰²³

This credit was created in 1994 to keep these low-production, marginal wells in operation during period of low pricing and on-hand surpluses. The credit provides $3 per barrel on the first three barrels of daily production and $0.50 per Mcf tax credit for the first 18 Mcf of daily natural gas production.

Though currently inactive, under current law, a $3 a barrel tax credit is available for the first 3 barrels of daily production from an existing marginal oil well, plus a $0.50 per mcf tax credit for the first 18 mcf of daily natural gas production from a marginal well. The credit is available only if prices in the previous year were below designated averages -- $18/barrel in the case of oil and $2/mcf in the case of gas. This credit is currently phased-out and should be ended permanently.

Advanced Nuclear Power Credit

The Advanced Nuclear Power Credit provides 1.8 cents per kilowatt hour for nuclear power from new facilities (kWh) for the first eight years of operation. The credit is capped at 6,000 megawatts, which is enough for approximately four to five reactors. However, applicants have filed applications for more than five times that amount of nuclear energy generation capacity by the end of 2008.³⁰²⁴ Recent estimates for production put new energy capacity at about 17,000 megawatts by 2021.³⁰²⁵ This credit was established in the same Act as Sec. 1703 nuclear energy loan guarantees, which are sufficient to bridge the gap between consumer demand and private investment to meet the high capital costs of nuclear construction.

As new nuclear power comes online, this provision could become very expensive, its current costs are negligible.³⁰²⁶ However, in order to prevent significant future revenue losses, this plan repeals the Advanced Nuclear Power Credit.

As an example, the Department of Transportation could sell the right to name federal highways, inviting individuals to propose naming the highway after particular individuals or events they wish to commemorate. Finally, the federal government owns considerable online real estate, and could sell ad space on its websites at market rates as most private websites do.

Each of these proposals would include rules to ensure conflicts of interests do not exist between agencies and the private companies they regulate. If implemented properly however, these proposals would generate revenue for deficit reduction and help address runaway deficits.

By enacting the reforms below, the federal government will better utilize existing resources, generating generate over $30 billion over the next ten years.

Sell Federal Lands

The government now owns so much land that federal land experts are only able to provide rough estimates of the total acreage under federal control. The Congressional Research Service, which estimates a total of 650 million acres, notes, "The total federal land in the United States is not definitively known, and this figure is an estimate based on several government sources."³⁰²⁷ This estimate of total acreage translates into the federal government owning one of every three acres nationwide, or nearly one of every two acres in the western United States.³⁰²⁸

With untold acres of land under federal purview, it is little wonder maintenance costs are soaring. In fact, the federal government is struggling to meet some of the most basic and urgent upkeep needs on public lands. According to the Government Accountability Office, the nation's largest land management administrator, the Department of the Interior, faces a maintenance backlog estimated to range from $13.5 billion to $19.9 billion.³⁰²⁹

Yet, in an era of record budget deficits and soaring maintenance costs the federal government continues to purchases more land, costing taxpayers billions of dollars. Since the start of the most recession, the federal government has spent more than $724 million to purchase additional land, and over the past ten years, it has spent more $2.5 billion to acquire more land.³⁰³⁰

This proposal calls for a five year moratorium on new purchases and require the disposal of lands with net proceeds equal to the amount spent -- $2.5 billion -- to acquire additional lands since fiscal year 2001. Emphasis should be on land already identified by land management agencies as suitable for disposal, while continuing to preserve access to our nation's most treasured public lands.

Opponents may argue the disposal of any land, however small, in response to budget deficits is short-sighted and threatens environmental protection and public access. This ignores previous analyses, including one by the Department of the Interior performed during the Clinton administration that identified more than three million acres suitable for disposal.³⁰³¹

This reform could generate more than $2.5 billion over the next ten years.

Real Property Reform

Office buildings, warehouses, hospitals, laboratories, and ports of entry are just a few examples of the types of over 1.2 million properties that make up the federal government's real property portfolio.³⁰³²

For decades now, the federal government has faced serious problems managing this portfolio, which has lead to millions of tax payer dollars being wasted on excess, not utilized and underutilized federal properties. Excess property is defined as property identified by an agency to be no longer needed, while not utilized property is currently vacant but may or may not have a future use for the agency.³⁰³³ Meanwhile, underutilized property may still be part of the agency's mission, but only a percentage of the building is in use.³⁰³⁴

To draw much needed attention to this systemic problem, the Government Accountability Office, in 2003, added federal real property to its bi-annual High-Risk list of government programs susceptible to waste, fraud, and abuse.³⁰³⁵ Increased oversight by GAO and Congress, as well as action taken by the Bush Administration and renewed by President Obama has moved property reform in the right direction. Problems still exist, however, much more needs to be done to reduce the vast number of buildings the federal government no longer needs. In fact, the GAO included real property yet again in its 2011 High-Risk List.³⁰³⁶ At a time when our country faces an uncertain future due to out of control spending and excessive borrowing, agencies must use every tool available to manage this vast portfolio so to be good stewards of taxpayer dollars.

The government currently has over 63,000 underutilized and not utilized buildings in its real estate portfolio. Of these properties, over 57,000 are underutilized. That is an increase of over 12,000 underutilized properties from 2009.³⁰³⁷ These buildings are costing the American taxpayer over $1.2 billion to operate. According to OMB, the federal government has roughly 14,000 excess properties that cost the federal government costing over $131.8 million annually to operate.³⁰³⁸ In addition, federal agencies leased almost 635 million square feet of building space with a total of $8.1 billion in operational fees in fiscal year 2009.³⁰³⁹

This proposal will require the federal government to dispose of all excess federal real properties within five years. Disposal includes selling, demolition and public and private conveyance. If an agency does not sell the excess property, they will be prohibited from building or leasing any new property until they have certified that the excess properties has been disposed of. The proposal would also require OMB to make the Federal Real Property Database available to certain Committees in the House and Senate. This will provide greater transparency and oversight into the problems associated with disposing federal real property. In addition, each federal agency, with the help of OMB, should also examine the unacceptable numbers of underutilized properties and find ways to consolidate properties where possible. The President proposed a civilian BRAC process that, if enacted, may be able to reduce the majority of the unneeded and mismanaged property. According to the Obama Administration, there is a potential saving of at least $15 billion in savings if the federal government gets rid of properties it no longer needs.³⁰⁴⁰

Collect Unpaid Taxes From Federal Employees

In 2009, the Internal Revenue Service found nearly 100,000 civilian federal employees were delinquent on their federal income taxes, owing over $1 billion in unpaid federal income taxes.³⁰⁴¹

Federal employees have a clear obligation to pay their federal income taxes. The very nature of federal employment and the concept inherent to "public service" demands those being paid by taxpayers to also pay their share of taxes. Federal workers should not be exempt from the laws they enforce. In fact, they should lead by example. Failure to do so is an affront to taxpayers and to the rule of law.

This proposal will save taxpayers at least $1 billion by requiring the Internal Revenue Service to collect unpaid federal income taxes from civilian federal employees.

Rent Smithsonian Buildings for Events

Under current rules, the public is not allowed to rent Smithsonian buildings to host events, which is a privilege retained only for corporate donors.³⁰⁴² All 19 Smithsonian museum buildings should be opened up for rental at a rate of $10,000 per evening. If each building were made available ten evenings a month and booked at fifty percent capacity, it would generate $38 million each year. This plan assumes $422 million in generated revenue over ten years from this provision.³⁰⁴³

Charge $5 Admission Fee for Entrance to Museums

President Obama's National Commission on Fiscal Responsibility and Reform called for charging admission fees as high as $7.50 per person at the Smithsonian's museums, thus keeping pace with the national average.³⁰⁴⁴ Charging slightly less at $5 per visitor, with 30 million visitors in 2010, would generate $150 million in the first year, and potentially $1.67 billion over ten years.³⁰⁴⁵

Collection of Billions in Unpaid Federal Fines

The federal government has failed to collect tens of billions of dollars of penalties owed by swindlers, criminals and others cited for violating federal laws and regulations and this amount has increased dramatically. More than $65 billion in fines and restitution is owed to the federal government as of last year. Yet, the Department of Justice only collected $2.84 billion of this amount.

According to the USA Today, "During the past decade, federal judges have ordered hundreds of the nation's biggest swindlers to repay millions of dollars they stole." The newspaper's analysis also found "so far, the government has collected about 2 cents on the dollar."³⁰⁴⁶ There are few consequences for not making the payments, according to the Government Accountability Office.³⁰⁴⁷

"White-collar crime cases account for the largest amount of uncollected debt" according to GAO, but only seven percent of the restitution in such cases is paid. GAO blames a "fragmented processes and lack of coordination" for the failure to pursue the penalties owed.³⁰⁴⁸

These unpaid fines have been levied for a variety of violations, including gasoline spills, substandard nursing home care, and exposing workers to radiation. Over a three year period, the Centers for Medicare & Medicaid Services issued more than $5.3 million penalties to nursing homes in Wisconsin, but collected no more than $500,000. Many of these fines are owed by repeat offenders for shoddy care of the elderly and disabled, including the deaths of more than 50 nursing home residents.³⁰⁴⁹

A $3 million fine levied to a pipeline company for gasoline spill and explosion that killed three people in Washington state was reduced by 92 percent.³⁰⁵⁰

The $2.5 million in fines levied on nuclear laboratories for safety violations, including exposing workers to radiation, were "waived as soon as they were issued."³⁰⁵¹

The fines totally more than $1.3 million owed for deaths, injuries and other risks to miners from Alabama to West Virginia owed by coal companies have gone largely unpaid.³⁰⁵²

Good faith efforts to pay fines over a period of time or come into compliance with laws and regulations merit consideration for some forgiveness in the total amount due. In too many cases, however, the federal government is collecting little or nothing of what is owed. For example, "if a nursing home agrees to accept the financial penalties without appeal, the home is given an automatic 35 percent discount, even in the case of a death," according to the USA Today.³⁰⁵³

It is impossible to collect every penny of all of these fines, but in too many cases there is not even an attempt a single penny.

The federal government should make a more aggressive effort to collect these fines. This should include deducting full amounts owed from the tax returns of individuals, companies and other entities who owe restitution. Those with outstanding fines should also be barred from receiving federal grants, contracts, leases and loans until the fines are repaid, or they should be levied 100 percent. Reductions in fines should not be allowed for simply not appealing a penalty. This may deter appeals but it does not encourage improvements in meeting standards. Reductions should be limited to those demonstrating good faith efforts for compliance and even in this case, a minimal fine to offset the cost of inspections should be levied.

The federal government should collect at least 15 percent of the $65 billion in unpaid fines, resulting in $9.75 billion in additional revenue over the next decade.

Volunteer Debt Check-Off Fund for Millionaires and Billionaires

Some of the wealthiest individuals in America have been very vocal in suggesting they and their w they will have the opportunity.

Warren Buffett has lead this effort, advocating higher taxes for the wealthy, claiming "people at the high end -- people like myself -- should be paying a lot more in taxes. We have it better than we've ever had it."³⁰⁵⁴

This report proposes a new check-off box on individual tax forms, allowing an individual who may not think they are taxed enough to volunteer to contribute more to the federal coffers. This donation would be directed toward deficit reduction.

Currently, individuals wishing to give a financial gift to the government may do so by mailing in a check or money order, payable to the U.S. Treasury. This reform would streamline this process.³⁰⁵⁵

It is unclear how much revenue this provision would generate, but in one year the Bureau of the Public Debt received more than $3 million in financial gifts.³⁰⁵⁶ This plan would require the IRS to report to Congress how much revenue the volunteer debt check-off generated in the first year.

¹⁷²² GAO-11-3118SP, "Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue," Government Accountability Office, March 2011, http://www.gao.gov/new.items/d11318sp.pdf, accessed July 14, 2011.

¹⁷²³ "Conditions of U.S. Highway Bridges," Department of Transportation, Research and Innovative Technology Administration, Bureau of Transportation Statistics, National Transportation Statistics, 2008, Table 1-27, http://www.bts.gov/publications/national_transportation_statistics/html/table_01_27.html, accessed July 14, 2011. Also, "FHWA Bridge Programs Mobility Measures," U.S. Department of Transportation Federal Highway Administration, http://www.fhwa.dot.gov/bridge/mobility.cfm, accessed July 14, 2011.

¹⁷²⁴ Federal Highway Administration Website, "Status of the Nation's Highways, Bridges, and Transit: 2004 Conditions and Performances," http://www.fhwa.dot.gov/policy/2004cpr/chap15c.htm, accessed July 14, 2011.

¹⁷²⁵ Research and Innovative Technology Administration Bureau of Transportation Statistics Website, "Structurally Deficient and Functionally Obsolete Bridges: All Roadways, 1992-2002," http://www.bts.gov/publications/transportation_statistics_annual_report/2004/html/chapter_02/figure_11_05.html, accessed July 14, 2011.

¹⁷²⁶ Federal Highway Administration Website, "2008 Status of the Nation's Highways, Bridges, and Transit: Conditions and Performance," http://www.fhwa.dot.gov/policy/2008cpr/, accessed July 14, 2011.

¹⁷²⁷ E-mail from Department of Transportation Congressional Liaison, July 8, 2011

¹⁷²⁸ CRS Report RL34127, "Highway Bridges: Conditions and the Federal/State Role," Congressional Research Service, August 10, 2007, http://www.crs.gov/pages/Reports.aspx?PRODCODE=RL34127&Source=search, accessed July 11, 2011.

¹⁷²⁹ American Society of Civil Engineers Website, "Roads," http://www.infrastructurereportcard.org/fact-sheet/roads, accessed July 14, 2011.

¹⁷³⁰ "2006 Status of the Nation's Highways, Bridges, and Transit: Conditions and Performance," Department of Transportation, 2006, http://www.fhwa.dot.gov/policy/2006cpr/pdfs/chap3.pdf, accessed July 14, 2011.

¹⁷³¹ American Society of Civil Engineers Website, "Roads," http://www.infrastructurereportcard.org/fact-sheet/roads, accessed July 14, 2011.

¹⁷³² TRIP National Transportation Research Group Website, "Key Facts About America's Surface Transportation System and Federal Funding," http://www.tripnet.org/Fact_Sheet_National.pdf, accessed July 14, 2011

¹⁷³³ American Society of Civil Engineers Website, "Roads," http://www.infrastructurereportcard.org/fact-sheet/roads, accessed July 14, 2011.

¹⁷³⁴ "Business Case for the Next Generation Air Transportation System," Joint Planning Development Office, August 24, 2007, http://www.jpdo.gov/library/nextgen_business_case_ver_1.pdf, accessed July 14, 2011.

¹⁷³⁵ GAO Report: GAO-08-1154T, "Next Generation Air Transportation System: Status of Key Issues Associated with the Transition to NextGen," United States Government Accountability Office, September 11, 2008, http://www.gao.gov/new.items/d081154t.pdf, accessed July 14, 2011.

¹⁷³⁶ Inspector General Report: AV-2008-087, "Observations on Short-Term Capacity Initiatives," FAA Inspector General, September 26, 2008, http://www.oig.dot.gov/sites/dot/files/pdfdocs/WEB_FILE_Short_Term_Capacity_Initiatives_av-2008-087.pdf, accessed July 14, 2011.

¹⁷³⁷ GAO Report: GAO-08-1154T, "Next Generation Air Transportation System: Status of Key Issues Associated with the Transition to NextGen," United States Government Accountability Office, September 11, 2008, http://www.gao.gov/new.items/d081154t.pdf, accessed July 14, 2011.

¹⁷³⁸ Levin, Alan, "Flight Delays Cost Economy $41B in '07," USA Today, May 22, 2008, http://www.usatoday.com/travel/flights/delays/2008-05-22-travel-delays-billions_N.htm.

¹⁷³⁹ Scovel, Calvin, "Testimony before the House Committee on Science and Technology in a hearing titled "The Next Generation Air Transportation System: Status and Issues," FAA Inspector General, September 11, 2008, http://www.gpo.gov/fdsys/pkg/CHRG-110hhrg44270/html/CHRG-110hhrg44270.htm.

¹⁷⁴⁰ U.S. Travel Association Website, "Air Traffic Control Modernization," http://www.ustravel.org/government-affairs/domestic-policy-issues/air-traffic-control-modernization, accessed July 14, 2011.

¹⁷⁴¹ GAO Report: GAO-11-358T, "Airport and Airway Trust Fund: Declining Balance Rises Concerns over Ability to Meet Future Demands," Government Accountability Office, February 3, 2011, http://www.gao.gov/new.items/d11358t.pdf, accessed July 14, 2011.

¹⁷⁴² In 2008, Congress passed the first HTF bailout of $8.017 billion from the Treasury to the HTF (P.L. 110-318). In 2009, Congress passed another for $7 billion (H.R. 3357) and then a third one in 2010 (H.R. 2847) of $20 billion.

¹⁷⁴³ "The Highway Trust Fund and Paying for Highways," Congressional Budget Office, May 17, 2011, http://cbo.gov/ftpdocs/121xx/doc12173/05-17-HighwayFunding.pdf, accessed July 14, 2011.

¹⁷⁴⁴ GAO Report: GAO-11-358T, "Airport and Airway Trust Fund: Declining Balance Rises Concerns over Ability to Meet Future Demands," Government Accountability Office, February 3, 2011, http://www.gao.gov/new.items/d11358t.pdf, accessed July 14, 2011.

¹⁷⁴⁵ Coburn, Tom, "Out of Gas: Congress Raids the Highway Trust Fund for Pet Projects While Bridges and Roads Crumble," July 2009, http://coburn.senate.gov/public/index.cfm?a=Files.Serve&File_id=80b3458b-b6e2-470a-be24-bb82b93d10c2.

¹⁷⁴⁶ Podkul, Cezary and Kort, Gregory, "'Earmarks' to nowhere: States losing billions," USA Today, January 2011, http://abcnews.go.com/Politics/earmarks-states-losing-billions/story?id=12540712.

¹⁷⁴⁷ S.AMDT.64 to S. 223, 112^th Congress.

¹⁷⁴⁸ P.L. 112-10, Section 2211.

¹⁷⁴⁹ E-mail from the Department of Transportation Budget Office to Senator Coburn's office, July 16, 2011.

¹⁷⁵⁰ "Balances of Budget Authority Budget of the U.S. Government, Fiscal Year 2012," Office of Management and Budget, http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/balances.pdf.

¹⁷⁵¹ "Department of Transportation Unspent Grants Prior to FY2002," Department of Transportation Spreadsheet, July 16, 2011.

¹⁷⁵² "Department of Transportation Unspent Grants Prior to FY2002," Department of Transportation Spreadsheet, July 16, 2011.

¹⁷⁵³ Office of Management and Budget, Executive Office of the President, Budget of the U.S. Government, "Fiscal Year 2012 Terminations, Reductions, and Savings," http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/trs.pdf, accessed July 14, 2011.

¹⁷⁵⁴ E-mail response from the Federal Aviation Administration Congressional Liaison to Senator Coburn's office, July 8, 2011.

¹⁷⁵⁵ "Financing Federal Aviation Programs," Congressional Budget Office, May 7, 2009, http://cbo.gov/ftpdocs/101xx/doc10116/FAA_testimony.pdf.

¹⁷⁵⁶ GAO Report: GAO-11-358T, "Airport and Airway Trust Fund: Declining Balance Rises Concerns over Ability to Meet Future Demands," Government Accountability Office, February 3, 2011, http://www.gao.gov/new.items/d11358t.pdf, accessed July 14, 2011.

¹⁷⁵⁷ GAO Report: GAO-11-358T, "Airport and Airway Trust Fund: Declining Balance Rises Concerns over Ability to Meet Future Demands," Government Accountability Office, February 3, 2011, http://www.gao.gov/new.items/d11358t.pdf.

¹⁷⁵⁸ GAO Report: GAO-11-358T, "Airport and Airway Trust Fund: Declining Balance Rises Concerns over Ability to Meet Future Demands," Government Accountability Office, February 3, 2011, http://www.gao.gov/new.items/d11358t.pdf, accessed July 14, 2011.

¹⁷⁵⁹ E-mail from the Federal Aviation Administration Congressional Liaison to Senator Coburn's office, July 8, 2011.

¹⁷⁶⁰ GAO Report: GAO-08-1154T, "Next Generation Air Transportation System: Status of Key Issues Associated with the Transition to NextGen," United States Government Accountability Office, September 11, 2008, http://www.gao.gov/new.items/d081154t.pdf.

¹⁷⁶¹ P.L. 108-176.

¹⁷⁶² GAO Report: GAO-08-1154T, "Next Generation Air Transportation System: Status of Key Issues Associated with the Transition to NextGen," United States Government Accountability Office, September 11, 2008, http://www.gao.gov/new.items/d081154t.pdf, accessed July 14, 2011.

¹⁷⁶³ (49 USC 47109(a)).

¹⁷⁶⁴ P.L. 108-176.

¹⁷⁶⁵ (49 USC 47109).

¹⁷⁶⁶ Frank, Thomas, "72-passenger-a-day airport gets $7.5M for terminal," December 14, 2009, USA TODAY, http://www.usatoday.com/travel/flights/2009-12-13-airports-side_N.htm.

¹⁷⁶⁷ Frank, Thomas, "Feds keep little-used airports in business," September 17, 2009, USA TODAY, http://www.usatoday.com/travel/flights/2009-09-17-little-used-airports_N.htm.

¹⁷⁶⁸ Eder, Andrew, "Airpark's federal grant afloat in jet stream of controversy: Economic merit of runway project debated," The News Journal, January 5, 2010, http://www.delawareonline.com/article/20100105/NEWS/1050335/Airpark-s-federal-grant-afloat-in-jet-stream-of-controversy.

¹⁷⁶⁹ Frank, Thomas, "72-passenger-a-day airport gets $7.5M for terminal," December 14, 2009, USA TODAY, http://www.usatoday.com/travel/flights/2009-12-13-airports-side_N.htm.

¹⁷⁷⁰ Frank, Thomas, "72-passenger-a-day airport gets $7.5M for terminal," December 14, 2009, USA TODAY, http://www.usatoday.com/travel/flights/2009-12-13-airports-side_N.htm.

¹⁷⁷¹ Frank, Thomas, "Airports get $1.1B for pet projects," USA Today, November 2, 2009, http://www.usatoday.com/NEWS/usaedition/2009-11-02-1Aearmark02_ST_U.htm?csp=34.

¹⁷⁷² Frank, Thomas, "UPS, FedEx reap the benefits of airports' pet projects," November 2, 2009, USA TODAY, http://www.usatoday.com/news/washington/2009-11-01-earmarks-side_N.htm?loc=interstitialskip.

¹⁷⁷³ Frank, Thomas, "UPS, FedEx reap the benefits of airports' pet projects," November 2, 2009, USA TODAY, http://www.usatoday.com/news/washington/2009-11-01-earmarks-side_N.htm?loc=interstitialskip.

¹⁷⁷⁴ Frank, Thomas, "Airports get $1.1B for pet projects," USA Today, November 2, 2009, http://www.usatoday.com/NEWS/usaedition/2009-11-02-1Aearmark02_ST_U.htm?csp=34.

¹⁷⁷⁵ Frank, Thomas, "Feds keep little-used airports in business," September 17, 2009, USA TODAY, http://www.usatoday.com/travel/flights/2009-09-17-little-used-airports_N.htm.

¹⁷⁷⁶ Frank, Thomas, "72-passenger-a-day airport gets $7.5M for terminal," December 14, 2009, USA TODAY, http://www.usatoday.com/travel/flights/2009-12-13-airports-side_N.htm.

¹⁷⁷⁷ Executive Office of the President of the United States, Budget of the U.S. Government, "Fiscal Year 2012 Terminations, Reductions and Savings," http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/trs.pdf.

¹⁷⁷⁸ Inspector General Report Number: AV-2007-066, "Review of Congressional Earmarks Within Department of Transportation Programs," Department of Transportation Inspector General, September 7, 2007, http://www.oig.dot.gov/sites/dot/files/pdfdocs/Congressial_Earmarks-_AV-2007-66----508_Compliant.pdf.

¹⁷⁷⁹ Inspector General Report Number: AV-2007-066, "Review of Congressional Earmarks Within Department of Transportation Programs," Department of Transportation Inspector General, September 7, 2007, http://www.oig.dot.gov/sites/dot/files/pdfdocs/Congressial_Earmarks-_AV-2007-66----508_Compliant.pdf.

¹⁷⁸⁰ Frank, Thomas, "Feds keep little-used airports in business," September 17, 2009, USA TODAY, http://www.usatoday.com/travel/flights/2009-09-17-little-used-airports_N.htm.

¹⁷⁸¹ Inspector General Advisory No. AA-2009-003, "ARRA Advisory -- FAA's Process for Awarding ARRA Airport Improvement Program Grants," Department of Transportation Inspector General, August 6, 2009, http://www.oig.dot.gov/sites/dot/files/pdfdocs/Final_ARRA_Advisory_AIP_(3).pdf.

¹⁷⁸² Conkey, Christopher, "FAA Stimulus Recipients Got Low Priority Ratings," Wall Street Journal, October 7, 2009, http://online.wsj.com/article/SB125488410700569995.html.

¹⁷⁸³ GAO-09-753, "National Transportation System, Options and Analytical Tools to Strengthen DOT's Approach to Supporting Communities' Access to the System," Government Accountability Office, July 2009, http://www.gao.gov/new.items/d09753.pdf, accessed July 14, 2011.

¹⁷⁸⁴ "Tax Dollars Wasted on Empty Airline Flights," October 29, 2010, WSBTV.com (Atlanta), http://www.wsbtv.com/news/25567372/detail.html.

¹⁷⁸⁵ Calculations based off of spreadsheets supplied by Department of Transportation Congressional Affairs, July 8, 2011.

¹⁷⁸⁶ "Budget Options Volume 2" Congressional Budget Office, August 2009, http://www.cbo.gov/ftpdocs/102xx/doc10294/08-06-BudgetOptions.pdf.

¹⁷⁸⁷ Calculations based off of spreadsheets supplied by Department of Transportation Congressional Affairs, July 8, 2011.

¹⁷⁸⁸ Department of Transportation Office of Aviation Analysis (website), "Small Community Air Service Development Program," http://ostpxweb.dot.gov/aviation/X-50%20Role_files/smallcommunity.htm#Use, accessed July 14, 2011.

¹⁷⁸⁹ "Subsidized Essential Air Service Outside of Alaska," Department of Transportation EAS and Domestic Analysis Division, January 1, 2010, http://ostpxweb.dot.gov/aviation/x-50%20role_files/NonAlaska010110.pdf.

¹⁷⁹⁰ Report Number: CR-2008-051, "The Small Community Air Service Development Program," Department of Transportation, May 13, 2008, http://ostpxweb.dot.gov/aviation/X-50%20Role_files/OIG_Report_May_2008.pdf.

¹⁷⁹¹ Docket Number: OST-2009-0149, "Mississippi Tunica Airport Proposal," Department of Transportation Office of Aviation Analysis, August 28, 2009, http://www.regulations.gov/#documentDetail;D=DOT-OST-2009-0149-0039.

¹⁷⁹² Tunica Airport (website), "Flight Schedule," http://www.tunicaairport.com/flight-information/flight-schedule, accessed July 14, 2011.

¹⁷⁹³ Bona, Thomas V, "RFD gets $500,000 grant to attract more passengers," Rockford Register Star, February 12, 2010, http://www.rrstar.com/carousel/x1025060394/RFD-gets-500K-grant-to-attract-more-fliers.

¹⁷⁹⁴ "Los Angeles World Airports, City of Palmdale Request Airline Proposals for Commercial Air Service at Palmdale Regional Airport," Market Wire, November 20, 2006, http://www.redorbit.com/news/business/738703/los_angeles_world_airports_city_of_palmdale_request_airline_proposals/index.html.

¹⁷⁹⁵ Weikel, Dan, "Officials seek to boost regional airports," Los Angeles Times, November 18, 2008, http://articles.latimes.com/2008/nov/18/local/me-regional18.

¹⁷⁹⁶ Clines, Keith, "Huntsville International Airport receives $1 million federal grant to woo low-fare carrier," The Huntsville Times, February 19, 2010, http://blog.al.com/breaking/2010/02/huntsville_international_airpo_3.html.

¹⁷⁹⁷ Docket: DOT-OST-2009-0149, "Dothan Regional Airport," U.S. Department of Transportation, August 28, 2009, http://www.regulations.gov/#documentDetail;D=DOT-OST-2009-0149-0007.

¹⁷⁹⁸ Dickerson, Paige "Kenmore Air eyes setting up Expedia, Travelocity links," Peninsula Daily News, August 9, 2010, http://www.peninsuladailynews.com/article/20100810/NEWS/308109993/kenmore-air-eyes-setting-up-expedia-travelocity-links.

¹⁷⁹⁹ "Fiscal Year 2012 Budget of the U.S. Government Appendix," Office of Management and Budget, http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/appendix.pdf, (page 890).

¹⁸⁰⁰ GAO Report: GAO-08-1154T, "Next Generation Air Transportation System: Status of Key Issues Associated with the Transition to NextGen," United States Government Accountability Office, September 11, 2008, http://www.gao.gov/new.items/d081154t.pdf, accessed July 14, 2011.

¹⁸⁰¹ CRS Report: RL30304, "The Federal Excise Tax on Gasoline and the Highway Trust Fund: A Short History, Congressional Research Service," April 4, 2006.

¹⁸⁰² GAO-08-400, "Surface Transportation: Restructured Federal Approach Needed for More Focused, Performance-Based, and Sustainable Programs," Government Accountability Office, March, 2008, http://www.gao.gov/new.items/d08400.pdf, accessed July 14, 2011.

¹⁸⁰³ GAO-09-845T, "Highway Trust Fund: Options for Improving Sustainability and Mechanisms to Manage Solvency," Government Accountability Office, June 25, 2009, http://www.gao.gov/new.items/d09845t.pdf.

¹⁸⁰⁴ "The Highway Trust Fund and Paying for Highways," Congressional Budget Office, May 17, 2011, http://cbo.gov/ftpdocs/121xx/doc12173/05-17-HighwayFunding.pdf.

¹⁸⁰⁵ In 2008, Congress passed the first HTF bailout of $8.017 billion from the Treasury to the HTF (P.L. 110-318). In 2009, Congress passed another for $7 billion (H.R. 3357) and then a third one in 2010 (H.R. 2847) of $20 billion.

¹⁸⁰⁶ GAO-11-318SP, "Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue," Government Accountability Office, March, 2011, http://www.gao.gov/new.items/d11318sp.pdf, accessed July 14, 2011.

¹⁸⁰⁷ GAO-11-318SP, "Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue," Government Accountability Office, March, 2011, http://www.gao.gov/new.items/d11318sp.pdf, accessed July 14, 2011.

¹⁸⁰⁸ "Budget of the U.S. Government for Fiscal Year 2012, Department of Transportation Funding Highlights," Office of Management and Budget, http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/transportation.pdf.

¹⁸⁰⁹ House of Representatives Transportation and Infrastructure Committee Website, "Press Releases," July 7, 2011, http://transportation.house.gov/news/PRArticle.aspx?NewsID=1337, accessed July 15, 2011.

¹⁸¹⁰ Coburn, Tom, "Out of Gas: Congress Raids the Highway Trust Fund for Pet Projects While Bridges and Roads Crumble," July 2009, http://coburn.senate.gov/public/index.cfm?a=Files.Serve&File_id=80b3458b-b6e2-470a-be24-bb82b93d10c2.

¹⁸¹¹ Coburn, Tom, "Out of Gas: Congress Raids the Highway Trust Fund for Pet Projects While Bridges and Roads Crumble," July 2009, http://coburn.senate.gov/public/index.cfm?a=Files.Serve&File_id=80b3458b-b6e2-470a-be24-bb82b93d10c2.

¹⁸¹² Ridley, Gary, "Testimony of Gary Ridley, Oklahoma Secretary of Transportation for a hearing before the Senate Environment and Public Works Committee entitled 'Issues for Surface Transportation Authorization,'" April 14, 2011, http://epw.senate.gov/public/index.cfm?FuseAction=Minority.Blogs&ContentRecord_id=5555a932-802a-23ad-4071-d449105588d5&Issue_id=

¹⁸¹³ Section 133(d)(2) title 23, & Section 1132 of the Energy Independence and Security Act of 2007.

¹⁸¹⁴ CRS Report: R41512, "Surface Transportation Program Reauthorization Issues for the 112^th Congress," Congressional Research Service, December 1, 2010, http://www.crs.gov/pages/Reports.aspx?PRODCODE=R41512&Source=search.

¹⁸¹⁵ Department of Transportation Website, "Apportionments and Obligations, FY2009," http://www.fhwa.dot.gov/environment/te/appor_res_2009.htm, accessed July 14, 2011.

¹⁸¹⁶ E-mail from Department of Transportation Congressional Liaison to Senator Coburn's Office, October 26, 2010.

¹⁸¹⁷ "Obama administration spends $1.2 billion on cycling and walking initiatives," The Telegraph, June 16, 2010, http://www.telegraph.co.uk/news/worldnews/northamerica/usa/7834334/Obama-administration-spends-1.2-billion-on-cycling-and-walking-initiatives.html.

¹⁸¹⁸ Coburn, Tom, "Out of Gas: Congress Raids the Highway Trust Fund for Pet Projects While Bridges and Roads Crumble," July 2009, http://coburn.senate.gov/public/index.cfm?a=Files.Serve&File_id=80b3458b-b6e2-470a-be24-bb82b93d10c2.

¹⁸¹⁹ U.S. Department of Transportation Website, "Transportation Enchancement Activities," http://www.fhwa.dot.gov/environment/te/, accessed July 14, 2011.

¹⁸²⁰ Leaderman, Daniel, "Sunken ship may contain piece of Bladensburg history: Archeologists work to unearth piece of War of 1812 battle," Business Gazette, September 2, 2010, http://www.gazette.net/stories/09022010/bowinew160236_32545.php

¹⁸²¹ Griffith, Randy, "Museum refurbishing former city trolley," The Tribune-Democrat, April 18, 2010, http://tribune-democrat.com/local/x993504637/Museum-refurbishing-former-city-trolley

¹⁸²² Inspector General Report Number: AV-2007-066, "Review of Congressional Earmarks Within Department of Transportation Programs," Department of Transportation Inspector General, September 7, 2007, http://www.oig.dot.gov/sites/dot/files/pdfdocs/Congressial_Earmarks-_AV-2007-66----508_Compliant.pdf.

¹⁸²³ Inspector General Report Number: AV-2007-066, "Review of Congressional Earmarks Within Department of Transportation Programs," Department of Transportation Inspector General, September 7, 2007, http://www.oig.dot.gov/sites/dot/files/pdfdocs/Congressial_Earmarks-_AV-2007-66----508_Compliant.pdf, accessed July 14, 2011.

¹⁸²⁴ Executive Office of the President of the United States, Budget of the U.S. Government, "Fiscal Year 2011 Terminations, Reductions and Savings," http://www.whitehouse.gov/sites/default/files/omb/budget/fy2011/assets/trs.pdf, accessed July 14, 2011.

¹⁸²⁵ Executive Office of the President of the United States, Budget of the U.S. Government, "Fiscal Year 2010 Terminations, Reductions and Savings," http://www.whitehouse.gov/sites/default/files/omb/budget/fy2010/assets/trs.pdf, accessed July 14, 2011.

¹⁸²⁶ Executive Office of the President of the United States, Budget of the U.S. Government, "Fiscal Year 2011 Terminations, Reductions and Savings," http://www.whitehouse.gov/sites/default/files/omb/budget/fy2011/assets/trs.pdf, accessed July 14, 2011.

¹⁸²⁷ U.S. Department of Transportation Website, "Fact Sheets on Highway Provisions," http://www.fhwa.dot.gov/safetealu/factsheets/highpriproj.htm, accessed July 14, 2011.

¹⁸²⁸ GAO-09-219, "Surface Transportation, Clear Federal Role and Criteria-Based Selection Process Could Improve Three National and Regional Infrastructure Programs," Government Accountability Office, February 2009, http://www.gao.gov/new.items/d09219.pdf, accessed July 14, 2011.

¹⁸²⁹ U.S. Department of Transportation Website, "Fact Sheets on Highway Provisions," http://www.fhwa.dot.gov/safetealu/factsheets/natlregl.htm, accessed July 14, 2011.

¹⁸³⁰ U.S. Department of Transportation (website), "Fact Sheets on Highway Provisions," http://www.fhwa.dot.gov/safetealu/factsheets/corridors.htm, accessed July 14, 2011.

¹⁸³¹ GAO-09-219, "Surface Transportation, Clear Federal Role and Criteria-Based Selection Process Could Improve Three National and Regional Infrastructure Programs," Government Accountability Office, February 2009, http://www.gao.gov/new.items/d09219.pdf, accessed July 14, 2011.

¹⁸³² Federal Highway Administration Website, "Fact Sheets on Highway Provisions," http://www.fhwa.dot.gov/safetealu/factsheets/corridors.htm, accessed on July 14, 2011.

¹⁸³³ Federal Highway Administration Website, "Transportation, Community, and System Preservation Program-FY 2010 Grants," http://www.fhwa.dot.gov/tcsp/grantaward.cfm?fy=2010&show=all, accessed on July 14, 2011.

¹⁸³⁴ Federal Highway Administration Website, "TCSP Projects," http://www.fhwa.dot.gov/tcsp/projects.html, accessed on July 14, 2011.

¹⁸³⁵ Federal Highway Administration Website, "Ferry Boat Discretionary Program Information," http://www.fhwa.dot.gov/discretionary/fbdinfo.cfm, accessed on July 14, 2011.

¹⁸³⁶ Federal Highway Administration Website, "Fact Sheets on Highway Provisions," http://www.fhwa.dot.gov/safetealu/factsheets/ferryboats.htm, accessed on July 14, 2011.

¹⁸³⁷ 49 U.S.C. 5309(m)(6)(B).

¹⁸³⁸ Federal Highway Administration Website, "Fact Sheets on Highway Provisions," http://www.fhwa.dot.gov/safetealu/factsheets/bridge.htm, accessed on July 14, 2011.

¹⁸³⁹ Inspector General Report Number: AV-2007-066, "Review of Congressional Earmarks Within Department of Transportation Programs," Department of Transportation Inspector General, September 7, 2007, http://www.oig.dot.gov/sites/dot/files/pdfdocs/Congressial_Earmarks-_AV-2007-66----508_Compliant.pdf.

¹⁸⁴⁰ Federal Highway Administration Website, "Fact Sheets on Highway Provisions," http://www.fhwa.dot.gov/safetealu/factsheets/im.htm, accessed on July 14, 2011.

¹⁸⁴¹ Federal Highway Administration Website, "Public Lands Highway Discretionary," http://www.fhwa.dot.gov/discretionary/plhcurrsola3.cfm, accessed on July 14, 2011.

¹⁸⁴² CRS Report: RL33995, "Surface Transportation Congestion: Policy and Issues," Congressional Research Service, February 6, 2008, http://www.crs.gov/pages/Reports.aspx?PRODCODE=RL33995&Source=search.

¹⁸⁴³ Federal Highway Administration Website, "Congestion Mitigation and Air Quality Improvement (CMAQ) View Photo Library," http://www.fhwa.dot.gov/environment/air_quality/cmaq/reference/photo_library/index.cfm, accessed on July 14, 2011.

¹⁸⁴⁴ Federal Highway Administration Website, "Fact Sheets on Highway Provisions," http://www.fhwa.dot.gov/safetealu/factsheets/cmaq.htm, accessed on July 14, 2011.

¹⁸⁴⁵ Federal Highway Administration Website, "National Historic Covered Bridge Preservation Program," http://www.fhwa.dot.gov/bridge/covered.cfm, accessed on July 14, 2011.

¹⁸⁴⁶ E-Mail from Congressional Research Service to the Office of Senator Coburn, March 14, 2011.

¹⁸⁴⁷ Lowy, Joan, "New federal budget austerity endangers program aimed at preserving historic covered bridges," Associated Press, March 9, 2011, http://www.startribune.com/nation/117664493.html.

¹⁸⁴⁸ Federal Highway Administration Website, "National Historic Covered Bridge Preservation Program Request for FY 2009 Project Applications," http://www.fhwa.dot.gov/bridge/nhcbp/090112a.cfm, accessed on July 14, 2011.

¹⁸⁴⁹ Milbourn, Todd, "Historic Bridge ready to collapse," KVAL News, http://www.kpic.com/news/local/84644932.html, accessed on July 14, 2011.

¹⁸⁵⁰ Lowy, Joan, New federal budget austerity endangers program aimed at preserving historic covered bridges, Associated Press, March 9, 2011, http://www.startribune.com/nation/117664493.html.

¹⁸⁵¹ S. Amdt. 217 to S. 493, 112^th Congress.

¹⁸⁵² Federal Highway Administration Website, "Safe Routes to Schools," http://safety.fhwa.dot.gov/saferoutes/, accessed on July 14, 2011.

¹⁸⁵³ Federal Highway Administration Website, "Fact Sheets on Highway Provisions," http://www.fhwa.dot.gov/safetealu/factsheets/saferoutes.htm, accessed on July 14, 2011.

¹⁸⁵⁴ Federal Highway Administration Website, "The National Scenic Byways Program" Web page, http://www.byways.org/learn/program.html, accessed July 14, 2011.

¹⁸⁵⁵ Federal Highway Administration Website, "Fact Sheets on Highway Provisions," http://www.fhwa.dot.gov/safetealu/factsheets/scenic.htm, accessed on July 14, 2011.

¹⁸⁵⁶ Federal Highway Administration Website, "Recreational Trails Program," http://www.fhwa.dot.gov/environment/rectrails/, accessed July 14, 2011.

¹⁸⁵⁷ Federal Highway Administration Website, "Fact Sheets on Highway Provisions," http://www.fhwa.dot.gov/safetealu/factsheets/rectrails.htm, accessed on July 14, 2011.

¹⁸⁵⁸ Federal Lands Highway Website, "Park Roads and Parkways (PRP)," http://flh.fhwa.dot.gov/programs/prp/, accessed on July 14, 2011.

¹⁸⁵⁹ Federal Lands Highway Website, "Forest Highways (FH)," http://flh.fhwa.dot.gov/programs/plh/fh/, accessed on July 14, 2011.

¹⁸⁶⁰ Federal Highway Administration Website, "Fact Sheets on Highway Provisions," http://www.fhwa.dot.gov/safetealu/factsheets/fedlands.htm, accessed on July 14, 2011.

¹⁸⁶¹ Federal Lands Highway Website, "Refuge Roads," http://flh.fhwa.dot.gov/programs/rr/documents/rr.pdf, accessed on July 14, 2011.

¹⁸⁶² Federal Highway Administration Website, "Fact Sheets on Highway Provisions," http://www.fhwa.dot.gov/safetealu/factsheets/appalachia.htm, accessed on July 14, 2011.

¹⁸⁶³ CRS Report: 98-973 E, "Appalachian Development Highway Program (ADHP): An Overview," Congressional Research Service, December 7, 1998, http://www.crs.gov/products/rs/pdf/98-973.pdf?Source=404.

¹⁸⁶⁴ Drew Griffin and Steve Turnham, CNN.com, "West Virginia's road to nowhere gets stimulus boost," http://www.cnn.com/2009/US/03/12/corridor.h/index.html, accessed on July 14, 2011.

¹⁸⁶⁵ Executive Office of the President of the United States, Budget of the U.S. Government, "Fiscal Year 2010 Terminations, Reductions and Savings," http://www.whitehouse.gov/sites/default/files/omb/budget/fy2010/assets/trs.pdf.

¹⁸⁶⁶ Federal Grants Wire Website, "Highway Planning and Construction (20.205)," http://www.federalgrantswire.com/highway-planning-and-construction.html, accessed July 15, 2011.

¹⁸⁶⁷ Federal Highway Administration Website, "Fact Sheets on Highway Provisions," http://www.fhwa.dot.gov/safetealu/factsheets/stp.htm, accessed on July 14, 2011.

¹⁸⁶⁸ Federal Grants Wire Website, "Highway Planning and Construction (20.200)," http://www.federalgrantswire.com/highway-research-and-development-program.html, accessed on July 14, 2011.

¹⁸⁶⁹ Federal Highway Administration Website, "Fact Sheets on Highway Provisions," http://www.fhwa.dot.gov/safetealu/factsheets/denali.htm, accessed on July 14, 2011.

¹⁸⁷⁰ "Agency Financial Report (AFR), Annual Performance Report (APR), 2010," Denali Commission Inspector General, http://www.denali-oig.org/Images/IG-PAR-2010.pdf; "Budget Justification Fiscal year 2012," Denali Commission, http://www.denali.gov/index.php?option=com_docman&task=doc_download&gid=343&Itemid=253

¹⁸⁷¹ Executive Office of the President of the United States, "Major Savings and Reforms in the President's 2009 Budget," February 2008, http://www.gpoaccess.gov/usbudget/fy09/pdf/savings.pdf.

¹⁸⁷² Executive Office of the President of the United States, Budget of the U.S. Government, "Fiscal Year 2012 Terminations, Reductions and Savings," http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/trs.pdf.

¹⁸⁷³U.S. Department of Transportation, Federal Highway Administration, "Denali Access System Program" Fact Sheet, http://www.fhwa.dot.gov/safetealu/factsheets/denali.htm, accessed July 15, 2011.

¹⁸⁷⁴ Executive Office of the President of the United States, Budget of the U.S. Government, "Fiscal Year 2012 Terminations, Reductions and Savings," http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/trs.pdf.

¹⁸⁷⁵ Delta Regional Authority Website, "About Us," http://www.dra.gov/about-us/default.aspx, accessed July 14, 2011.

¹⁸⁷⁶ U.S. Department of Transportation Website, "Fact Sheets on Highway Provisions," http://www.fhwa.dot.gov/safetealu/factsheets/deltaregion.htm, accessed July 14, 2011.

¹⁸⁷⁷ U.S. Department of Transportation Federal Motor Carrier Safety Administration Website, "Our Mission," http://www.fmcsa.dot.gov/about/what-we-do/mission/mission.htm, accessed July 14, 2011.

¹⁸⁷⁸ CRS Report R41541, "Federal Transportation Funding: Selected Programs, FY2000-FY2010," Congressional Research Service, December 2, 2010, http://www.crs.gov/pages/Reports.aspx?PRODCODE=R41541&Source=search#_Toc281397762.

¹⁸⁷⁹ National Highway Traffic Safety Administration Website, "Who We Are and What We Do," http://www.nhtsa.gov/About+NHTSA/Who+We+Are+and+What+We+Do, accessed July 14, 2011.

¹⁸⁸⁰ CRS Report R41541, "Federal Transportation Funding: Selected Programs, FY2000-FY2010," Congressional Research Service, December 2, 2010, http://www.crs.gov/pages/Reports.aspx?PRODCODE=R41541&Source=search#_Toc281397762.

¹⁸⁸¹ CRS Report R41650, "Department of Transportation Budget FY2012," Congressional Research Service, February 24, 2011, http://www.crs.gov/pages/Reports.aspx?PRODCODE=R41650&Source=search.

¹⁸⁸² National Highway Traffic Safety Administration Website, "Section 406 SAFETEA-LU Fact Sheet," http://www.nhtsa.gov/Laws+&+Regulations/Section+406+SAFETEA-LU+Fact+Sheet, accessed July 15, 2011.

¹⁸⁸³ National Highway Traffic Safety Administration Website, "Section 408 SAFETEA-LU Fact Sheet," http://www.nhtsa.gov/Laws+&+Regulations/Section+408+SAFETEA-LU+Fact+Sheet, accessed July 15, 2011

¹⁸⁸⁴ National Highway Traffic Safety Administration Website, "SAFETEA-LU High Visibility Enforcement Fact Sheet," http://www.nhtsa.gov/Laws+&+Regulations/SAFETEA-LU+High+Visibility+Enforcement+Fact+Sheet, accessed July 15, 2011.

¹⁸⁸⁵ National Highway Traffic Safety Administration Website, "Section 2010 SAFETEA-LU Fact Sheet," http://www.nhtsa.gov/Laws+&+Regulations/Section+2010+SAFETEA-LU+Fact+Sheet, accessed July 15, 2011.

¹⁸⁸⁶ Coburn, Tom, "Out of Gas: Congress Raids the Highway Trust Fund for Pet Projects While Bridges and Roads Crumble," July 2009, http://coburn.senate.gov/public/index.cfm?a=Files.Serve&File_id=80b3458b-b6e2-470a-be24-bb82b93d10c2.

¹⁸⁸⁷ National Highway Traffic Safety Administration Website, "Section 405 SAFETEA-LU Fact Sheet," http://www.nhtsa.gov/Laws+&+Regulations/Section+405+SAFETEA-LU+Fact+Sheet, accessed July 15, 2011.

¹⁸⁸⁸ National Highway Traffic Safety Administration Website, "Section 2011 SAFETEA-LU Fact Sheet Draft," http://www.nhtsa.gov/Laws+&+Regulations/Section+2011+SAFETEA-LU+Fact+Sheet+Draft, accessed July 15, 2011.

¹⁸⁸⁹ National Highway Traffic Safety Administration Website, "Alcohol-Impaired Driving Countermeasures Incentive Grants," http://www.nhtsa.gov/Laws+&+Regulations/ci.Section+410+SAFETEA-LU+Fact+Sheet.print, accessed July 15, 2011.

¹⁸⁹⁰ National Highway Traffic Safety Administration Website, "Section 402 SAFETEA-LU Fact Sheet," http://www.nhtsa.gov/Laws+&+Regulations/Section+402+SAFETEA-LU+Fact+Sheet, accessed July 15, 2011.

¹⁸⁹¹ Department of Transportation Federal Highway Administration Website, "About Us," http://safety.fhwa.dot.gov/about/, accessed July 15, 2011.

¹⁸⁹² E-mail from Congressional Research Service to Senator Tom Coburn's Office, July 11, 2011.

¹⁸⁹³ Department of Transportation Federal Highway Administration Website, "About Us," http://safety.fhwa.dot.gov/about/, accessed July 15, 2011.

¹⁸⁹⁴ GAO-09-36, "Federal Requirements for Highways May Influence Funding Decisions and Create Challenges, but Benefits and Costs Are Not Tracked," Government Accountability Office, December 2008, http://www.gao.gov/new.items/d0936.pdf, accessed July 15, 2011.

¹⁸⁹⁵ Macek, Nathan, "Right of Way and Environmental Mitigation Costs -- Investment Needs Assessment," American Association of State Highway and Transportation Officials, August 2006, http://onlinepubs.trb.org/onlinepubs/archive/NotesDocs/20-24%2854%29_B_%20FR.pdf, July 15, 2011.

¹⁸⁹⁶ Department of Transportation Website, "Evaluating the Performance of Environmental Streamlining: Development of a NEPA baseline for Measuring Continuous Performance," http://www.environment.fhwa.dot.gov/strmlng/baseline/section2.asp, accessed July 15, 2011.

¹⁸⁹⁷ Which includes but is not limited to: the Clean Water Act, the Clean Act, the Endangered Species Act, Section 138, Title 23 of the U.S. Code (preventing the use of parkland or recreational areas in the development of highway projects, except where no feasible and prudent alternative exists), and the National Historic Preservation Act of 1966.

¹⁸⁹⁸ Department of Transportation Website, "Evaluating the Performance of Environmental Streamlining: Development of a NEPA baseline for Measuring Continuous Performance," http://www.environment.fhwa.dot.gov/strmlng/baseline/section2.asp, accessed July 15, 2011.

¹⁸⁹⁹ Department of Transportation Website, "Evaluating the Performance of Environmental Streamlining: Development of a NEPA baseline for Measuring Continuous Performance," http://www.environment.fhwa.dot.gov/strmlng/baseline/section2.asp, accessed July 15, 2011.

¹⁹⁰⁰ Ridley, Gary, "Testimony of Gary Ridley, Oklahoma Secretary of Transportation for a hearing before the Senate Environment and Public Works Committee entitled 'Issues for Surface Transportation Authorization,'" April 14, 2011, http://epw.senate.gov/public/index.cfm?FuseAction=Minority.Blogs&ContentRecord_id=5555a932-802a-23ad-4071-d449105588d5&Issue_id=

¹⁹⁰¹ Audit Report No. 04-04-003-04-420, "Concerns Persist with the Integrity of Davis-Bacon Prevailing Wage Determinations, Department of Labor Inspector General, March 30, 2004, http://www.oig.dol.gov/public/reports/oa/2004/04-04-003-04-420.pdf, accessed July 15, 2011.

¹⁹⁰² CRS Report: 94-408, "The Davis-Bacon Act: Institutional Evolution and Public Policy," Congressional Research Service, November 30, 2007.

¹⁹⁰³ "Modifying the Davis-Bacon Act: Implications for the Labor Market and the Federal Budget," Congressional Budget Office, July 1983, http://www.cbo.gov/ftpdocs/50xx/doc5030/doc12-entire.pdf, accessed July 15, 2011.

¹⁹⁰⁴ HRD-79-18, "The Davis-Bacon Act Should Be Repealed," Government Accountability Office, April 27, 1979, http://www.gao.gov/products/HRD-79-18, July 15, 2011.

¹⁹⁰⁵ "Prevailing Wage Laws," Ohio Legislative Service Commission Staff, February 25, 2005, http://www.lsc.state.oh.us/membersonly/126prevailingwagelaws.pdf, accessed July 15, 2011.

¹⁹⁰⁶ Sherk, James, "Davis-Bacon Act Extensions: The Heritage Foundation 2010 Labor Boot Camp," The Heritage Foundation, January 14, 2010, http://www.heritage.org/Research/Reports/2010/01/Davis-Bacon-Act-Extensions-The-Heritage-Foundation-2010-Labor-Boot-Camp, accessed July 15, 2011.

¹⁹⁰⁷ Cameron, Alex, "Stimulus Funds Going to Handicap Ramps to Nowhere," News On 6, December 16, 2009, http://www.newson6.com/story/11690769/stimulus-funds-going-to-handicap-ramps-to-nowhere.

¹⁹⁰⁸ 23 USC 327.

¹⁹⁰⁹ CRS Report: RL30304, "The Federal Excise Tax on Gasoline and the Highway Trust Fund: A Short History, Congressional Research Service," April 4, 2006.

¹⁹¹⁰ Federal Railroad Administration Website, "About the FRA," http://www.fra.dot.gov/Pages/2.shtml, accessed July 15, 2011.

¹⁹¹¹ CRS Report R41650, "Department of Transportation Budget FY2012," Congressional Research Service, February 24, 2011.

¹⁹¹² E-mail from Department of Transportation Congressional Liaison to Senator Tom Coburn's Office, July 14, 2011.

¹⁹¹³ GAO-05-867, "Amtrak: Improved Management and Controls over Food and Beverage Service Needed," Government Accountability Office, August 24, 2005, http://www.gao.gov/products/GAO-05-867, accessed July 15, 2011.

¹⁹¹⁴ 49 USC 24305(c)(4).

¹⁹¹⁵ "Vote on S.Amdt. 3474 to S.294," United States Senate, October 30, 2007, http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=110&session=1&vote=00397, accessed July 15, 2011.

¹⁹¹⁶ "Intercity Passenger Rail -- AMTRAK Guidance and Application Kit," Department of Homeland Security, December 2009, http://www.fema.gov/pdf/government/grant/2010/fy10_ipr_guidance.pdf, accessed July 14, 2011.

¹⁹¹⁷ Department of Homeland Security Website, "Fiscal Year (FY) 2010 Intercity Passenger Rail -- Amtrak (IPR) Frequently Asked Questions (FAQs)," http://www.fema.gov/pdf/government/grant/2010/fy10_ipr_faq.pdf, accessed July 15, 2011.

¹⁹¹⁸ Department of Homeland Security Website, "Transit Security Grant Program," http://www.fema.gov/government/grant/tsgp/index.shtm, accessed July 14, 2011.

¹⁹¹⁹ Department of Homeland Security Website, Preparedness Grants Programs," http://www.dhs.gov/xlibrary/assets/grants_tsgp_overview_fy2010.pdf, accessed July 14, 2011.

¹⁹²⁰ Executive Office of the President of the United States, Budget of the U.S. Government, "Fiscal Year 2010 Terminations, Reductions and Savings," http://www.whitehouse.gov/sites/default/files/omb/budget/fy2010/assets/trs.pdf.

¹⁹²¹ Executive Office of the President of the United States, Budget of the U.S. Government, "Fiscal Year 2011 Terminations, Reductions and Savings," http://www.whitehouse.gov/sites/default/files/omb/budget/fy2011/assets/trs.pdf.

¹⁹²² Federal Highway Administration Website, "Fact Sheets on Highway Provisions," http://www.fhwa.dot.gov/safetealu/factsheets/railcrossings.htm, accessed July 14, 2011.

¹⁹²³ Federal Transit Administration Website, "Welcome to the Federal Transit Administration," http://www.fta.dot.gov/about_FTA.html, accessed July 14, 2011.

¹⁹²⁴ Senate Report 111-230.

¹⁹²⁵ Federal Transit Administration Website, "Paul S. Sarbanes Transit in Parks Program," http://www.fta.dot.gov/funding/grants/grants_financing_6106.html, accessed July 14, 2011

¹⁹²⁶ "Paul S. Sarbanes Transit in Parks Program Announcement of FY2010 Project Selections," Federal Transit Administration, January 28, 2011, http://www.gpo.gov/fdsys/pkg/FR-2011-01-28/pdf/2011-1840.pdf

¹⁹²⁷ CRS Report R41442, "Public Transit New Starts Program: Issues and Options for Congress," Congressional Research Service, October 5, 2010, http://www.crs.gov/pages/Reports.aspx?PRODCODE=R41442&Source=search

¹⁹²⁸ GAO-01-984, "Mass Transit Bus Rapid Transit Shows Promise," Government Accountability Office, July 14, 2011, http://www.gao.gov/new.items/d01984.pdf

¹⁹²⁹ "National State of Good Repair Assessments," Federal Transit Administration, June 2010 http://www.fta.dot.gov/documents/National_SGR_Study_072010(2).pdf, accessed July 14, 2011.

¹⁹³⁰ "Budget Options Volume 2," Congressional Budget Office, August 2009, http://www.cbo.gov/ftpdocs/102xx/doc10294/08-06-BudgetOptions.pdf, access July 14, 2011.

¹⁹³¹ Federal Transit Administration Website, "Transit Investments for Greenhouse Gas and Energy Reduction -- TIGGER," http://www.fta.dot.gov/index_9440_9326.html#TIGGER, accessed July 14, 2011.

¹⁹³² Federal Transit Administration Website, "Transit Investments for Greenhouse Gas and Energy Reduction -- TIGGER," http://www.fta.dot.gov/index_9440_9326.html#TIGGER, accessed July 14, 2011.

¹⁹³³ Federal Transit Administration Website, "Clean Fuels Grant Program," http://www.fta.dot.gov/funding/grants/grants_financing_3560.html, accessed July 14, 2011.

¹⁹³⁴ "Approved Fiscal 2010 Annual Budget," Washington Metropolitan Area Transit Authority, http://www.wmata.com/about_metro/docs/approved_2010_budget.pdf.

¹⁹³⁵ "Approved Fiscal Year 2011 Annual Budget," Washington Metropolitan Area Transit Authority, http://www.wmata.com/about_metro/docs/ANNUAL_BUDGET_FY2011.pdf.

¹⁹³⁶ Federal Highway Administration Website, "FHWA Transportation Enhancements and FTA Transit Enhancements Compared," http://www.fhwa.dot.gov/environment/te/te_compared.htm, accessed July 14, 2011.

¹⁹³⁷ Federal Transit Administration Spreadsheet, "Revised FY 2010 SECTION 5307 AND SECTION 5340 URBANIZED AREA APPORTIONMENTS," http://www.fta.dot.gov/documents/2010fullyear_-_Table_3_-_Sec_5307_UAF_and_5340_Apportionments.xls, July 15, 2011.

¹⁹³⁸ "Title VI of the Civil Rights Act of 1964: Principles, Policies, Guidance to FTA Recipients," Federal Transit Administration, Slide 16, http://www.google.com/url?sa=t&source=web&cd=3&sqi=2&ved=0CCcQFjAC&url=http%3A%2F%2Fwww.fta.dot.gov%2Fdocuments%2FTitle_VI_of_the_Civil_RIghts_Act_of_1964.ppt&rct=j&q=civil%20rights%20act%20%22disparate%20impact%22%20fare&ei=mznITP6HC4H_8Ab-j7Ek&usg=AFQjCNHG1kPlUBsr51inCbqSSyId-9gSNA&cad=rja, July 15, 2011.

¹⁹³⁹ Washington Metropolitan Area Transit Authority Website, "MetroAccess Information Materials and Application Form," http://www.wmata.com/accessibility/metroaccess_service/eligibility.cfm, accessed July 14, 2011.

¹⁹⁴⁰ Inspector General Report Number: AV-2007-066, "Review of Congressional Earmarks Within Department of Transportation Programs," Department of Transportation Inspector General, September 7, 2007, http://www.oig.dot.gov/sites/dot/files/pdfdocs/Congressial_Earmarks-_AV-2007-66----508_Compliant.pdf, accessed July 15, 2011.

¹⁹⁴¹ Inspector General Report Number: AV-2007-066, "Review of Congressional Earmarks Within Department of Transportation Programs," Department of Transportation Inspector General, September 7, 2007, http://www.oig.dot.gov/sites/dot/files/pdfdocs/Congressial_Earmarks-_AV-2007-66----508_Compliant.pdf, accessed July 15, 2011.

¹⁹⁴² Inspector General Report Number: AV-2007-066, "Review of Congressional Earmarks Within Department of Transportation Programs," Department of Transportation Inspector General, September 7, 2007, http://www.oig.dot.gov/sites/dot/files/pdfdocs/Congressial_Earmarks-_AV-2007-66----508_Compliant.pdf.

¹⁹⁴³ Number calculated from FY10 totals for D.C. federal employees plus non-D.C. federal employees provided by Congressional Research Service.

¹⁹⁴⁴ Personal Memo to Senator Tom Coburn, Congressional Research Service, June 14, 2011.

¹⁹⁴⁵ 5 U.S.C. § 7905.

¹⁹⁴⁶ Executive Order 13150, dated April 21, 2000.

¹⁹⁴⁷ Fujimori, Leila, "Vanpool seeks federal funds after rate hike," Honolulu Star Advertiser, June 23, 2011, http://www.staradvertiser.com/news/hawaiinews/20110623__Vanpool_seeks_federal_funds_after_rate_hike.html, accessed July 15, 2011.

¹⁹⁴⁸ GAO-09-845T, "Highway Trust Fund: Options for Improving Sustainability and Mechanisms to Manage Solvency," Government Accountability Office, June 25, 2009, http://www.gao.gov/new.items/d09845t.pdf, accessed July 15, 2011.

¹⁹⁴⁹ Website of the Department of Treasury, "About," http://www.treasury.gov/about/role-of-treasury/Pages/default.aspx, accessed June 29, 2011.

¹⁹⁵⁰ Website of the Department of Treasury, "About," http://www.treasury.gov/about/role-of-treasury/Pages/default.aspx, accessed June 29, 2011.

¹⁹⁵¹ Hatch, Garret, Congressional Research Service, Financial Services and General Government Appropriations: FY2012 Budget Request Fact Sheet, (R41655), June 16, 2011, http://www.crs.gov/pages/Reports.aspx?PRODCODE=R41655&Source=search.

¹⁹⁵² Hatch, Garret, Congressional Research Service, Financial Services and General Government Appropriations: FY2012 Budget Request Fact Sheet, (R41655), June 16, 2011, http://www.crs.gov/pages/Reports.aspx?PRODCODE=R41655&Source=search.

¹⁹⁵³ Chart provided by the U.S. Department of Treasury, Taxpayer Services vs. Enforcement Spending Since FY2004, Adjusted to 2010 Dollars, May 2010, (accessed July 12, 2011), http://www.irs.gov/pub/irs-news/taschart.pdf.

¹⁹⁵⁴ Department of Treasury, Office of Inspector General, Existing Practices Allowed IRS Contractors to Receive Payments While Owing Delinquent Taxes, Reference Number 2011-30-013, February 4, 2011, http://www.treasury.gov/tigta/auditreports/2011reports/201130013fr.html.

¹⁹⁵⁵ Department of Treasury, Office of Inspector General, Existing Practices Allowed IRS Contractors to Receive Payments While Owing Delinquent Taxes, Reference Number 2011-30-013, February 4, 2011, http://www.treasury.gov/tigta/auditreports/2011reports/201130013fr.html.

¹⁹⁵⁶ Official United States Government Improper Payments Website, PaymentAccuracy.gov, "High-error Programs," accessed July 17, 2011, http://paymentaccuracy.gov/content/programs-not-reported.

¹⁹⁵⁷ Government Accountability Office, "Improper Payments: Recent Efforts to Address Improper Payments and Remaining Challenges," GAO-11-575T, April 15, 2011, http://www.gao.gov/new.items/d11575t.pdf.

¹⁹⁵⁸ Department of Treasury, Office of Inspector General, Administration of the First-Time Homebuyer Credit Indicates a Need for Improved Controls Over Refundable Credits, Report Number 2011-41-035, March 31, 2011, http://www.treasury.gov/tigta/auditreports/2011reports/201141035_oa_highlights.html.

¹⁹⁵⁹ Department of Treasury, Office of Inspector General, Administration of the First-Time Homebuyer Credit Indicates a Need for Improved Controls Over Refundable Credits, Report Number 2011-41-035, March 31, 2011, http://www.treasury.gov/tigta/auditreports/2011reports/201141035_oa_highlights.html.

¹⁹⁶⁰ U.S. Department of the Treasury, 2012 Congressional Budget Justification, http://www.treasury.gov/about/budget-performance/Documents/CJ_FY2012_Complete_508.pdf.

¹⁹⁶¹ Department of Treasury, "Community Development Financial Institutions Fund Overview," http://www.cdfifund.gov/what_we_do/programs_id.asp?programid=7, accessed June 29, 2011.

¹⁹⁶² Department of Treasury, "Community Development Financial Institutions Fund Overview," http://www.cdfifund.gov/what_we_do/programs_id.asp?programid=7, accessed June 29, 2011.

¹⁹⁶³ Taub, Richard, "Commentary: After Shorebank," Report of the Institute for Comprehensive Community Development, December 2, 2010, http://www.instituteccd.org/library/1732.

¹⁹⁶⁴ Federal Deposit Insurance Corporation, Office of Inspector General, Material Loss Review of ShoreBank, Chicago, Illinois, Report No. MLR-11-012, February 2011, http://www.fdicoig.gov/reports11%5C11-012.pdf.

¹⁹⁶⁵ Federal Deposit Insurance Corporation, Office of Inspector General, Material Loss Review of ShoreBank, Chicago, Illinois, Report No. MLR-11-012, February 2011, http://www.fdicoig.gov/reports11%5C11-012.pdf.

¹⁹⁶⁶ Department of Treasury, Office of the Inspector General, "Semiannual Report to Congress, http://www.treasury.gov/about/organizational-structure/ig/Documents/Final%20March%202011%20SAR%20-%20April%2029.pdf, accessed June 29, 2011.

¹⁹⁶⁷ Yerak, Becky, "FBOP owner faults U.S. Treasury for failure," Chicago Tribune, November 3, 2009, http://articles.chicagotribune.com/2009-11-03/news/0911020418_1_fbop-tarp-faults.

¹⁹⁶⁸ Yerak, Becky, "FBOP owner faults U.S. Treasury for failure," Chicago Tribune, November 3, 2009, http://articles.chicagotribune.com/2009-11-03/news/0911020418_1_fbop-tarp-faults.

¹⁹⁶⁹ Dietz, David, "Rich Take From Poor as U.S. Subsidy Law Funds Luxury Hotels," Bloomberg, February, 8, 2011, http://www.bloomberg.com/news/2011-02-08/rich-taking-from-poor-as-10-billion-u-s-subsidy-law-funds-luxury-hotels.html.

¹⁹⁷⁰ Attkisson, Sharyl, "Fancy Hotel Renovated with Your Tax Dollars," CBS News, February 9, 2011, http://www.cbsnews.com/stories/2011/02/08/eveningnews/main7330767.shtml.

¹⁹⁷¹ Dietz, David, "Rich Take From Poor as U.S. Subsidy Law Funds Luxury Hotels," Bloomberg, February, 8, 2011, http://www.bloomberg.com/news/2011-02-08/rich-taking-from-poor-as-10-billion-u-s-subsidy-law-funds-luxury-hotels.html.

¹⁹⁷² Government Accountability Office, "New Markets Tax Credit: The Credit Helps Fund a Variety of Projects in Low-Income Communities, but Could Be Simplified," GAO-10-334, January 2010, http://www.gao.gov/new.items/d10334.pdf.

¹⁹⁷³ A more detailed discussion of the New Markets Tax Credit can be found in the Reforming the Tax Code & Ending Special Interest Giveaways section of this report.

¹⁹⁷⁴ Government Accountability Office, "Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue," GAO-11-318SP, March 2011, http://www.gao.gov/new.items/d11318sp.pdf.

¹⁹⁷⁵ Drabenstott, Mark, "A Review of the Federal Role in Regional Economic Development," Center for the Study of Rural America & Federal Reserve Bank of Kansas City, May 2005, ftp://urban.csuohio.edu/utility/ledebur/622-722/Nov%206%20%20Federal%20Policy/Supplemental%20Resources/drabenstott%20federalreview.pdf.

¹⁹⁷⁶ Hughes, Darrell A., "Bank of America Commits $10M in Small-Business Grants," Wall Street Journal, July 29, 2010, http://online.wsj.com/article/SB10001424052748703578104575397321802765204.html.

¹⁹⁷⁷ Government Accountability Office, "U.S. Coins: Replacing the $1 Note with a $1 Coin Would Provide a Financial Benefit to the Government," GAO-11-281, March 2011, http://www.gao.gov/new.items/d11281.pdf.

¹⁹⁷⁸ Government Accountability Office, "U.S. Coins: Replacing the $1 Note with a $1 Coin Would Provide a Financial Benefit to the Government," GAO-11-281, March 2011, http://www.gao.gov/new.items/d11281.pdf.

¹⁹⁷⁹ U.S. Department of the Treasury, 2012 Congressional Budget Justification, http://www.treasury.gov/about/budget-performance/Documents/CJ_FY2012_Complete_508.pdf.

¹⁹⁸⁰ Department of Treasury, Office of Technical Assistance, "Mission Statement," http://www.treasuryota.us/, accessed June 29, 2011.

¹⁹⁸¹ United States Agency for International Development, "Financial Markets," http://www.usaid.gov/our_work/economic_growth_and_trade/eg/financial_markets.html, accessed June 29, 2011.

¹⁹⁸² Government Accountability Office, letter to The Honorable John F. Tierney, "Subject: Multiple U.S. Agencies Provided Billions of Dollars to Train and Equip Foreign Police Forces," GAO-11-402R, April 27, 2011, http://www.gao.gov/new.items/d11402r.pdf.

¹⁹⁸³ Website of the Department of Treasury, Treasury International Programs, Program Summary by Appropriations Account, accessed July 17, 2011, http://www.treasury.gov/about/budget-performance/budget-in-brief/Documents/International%20FY11%20508.pdf.

¹⁹⁸⁴ United States Agency for International Development, "Tropical Forest Conservation Act Program Descriptions," http://www.usaid.gov/our_work/environment/forestry/tfca_descs.html#Brazil, accessed June 21, 2011.

¹⁹⁸⁵ The World Bank, "Projects and Lending," http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/0,,contentMDK:20264002~menuPK:572065~pagePK:41367~piPK:279616~theSitePK:40941,00.html, accessed June 29, 2011.

¹⁹⁸⁶ Greenberg, Steve, and others. 2006. Best Practices for Data Centers: Lessons Learned from Benchmarking 22 Data Centers. Proceedings of the ACEEE Summer Study on Energy Efficiency in Buildings in Asilomar, CA. ACEEE, August. Vol 3, pp 76-87. http://eetd.lbl.gov/emills/PUBS/PDF/ACEEE-datacenters.pdf

¹⁹⁸⁷ U.S. Department of the Treasury, Treasury Inspector General for Tax Administration, Implementing Best Practices and Additional Controls Can Improve Data Center Energy Efficiency and the Environmental and Energy Program, Reference Number 2010-20-044, May 7, 2010, http://www.treasury.gov/tigta/auditreports/2010reports/201020044fr.pdf.

¹⁹⁸⁸ Kauffman, Tim, "IG: IRS wasting money at data centers," Federal Times, June 7, 2010, http://www.federaltimes.com/article/20100607/AGENCY05/6070302/1001.

¹⁹⁸⁹ Office of Management and Budget, Executive Office of the President, Budget of the U.S. Government, "Fiscal Year 2012 Terminations, Reductions, and Savings," http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/trs.pdf.

¹⁹⁹⁰ Office of Management and Budget, Executive Office of the President, Budget of the U.S. Government, "Fiscal Year 2012 Terminations, Reductions, and Savings," http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/trs.pdf.

¹⁹⁹¹ Office of Management and Budget, Executive Office of the President, Budget of the U.S. Government, "Fiscal Year 2012 Terminations, Reductions, and Savings," http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/trs.pdf.

¹⁹⁹² Office of Management and Budget, Executive Office of the President, Budget of the U.S. Government, "Fiscal Year 2012 Terminations, Reductions, and Savings," http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/trs.pdf.

¹⁹⁹³ Government Accountability Office, "Recovery Act: Thousands of Recovery Act Contract and Grant Recipients Owe Hundreds of Millions in Federal Taxes," GAO-11-485, April 2011, http://www.gao.gov/new.items/d11485.pdf.

¹⁹⁹⁴ Office of Management and Budget, Executive Office of the President, Budget of the U.S. Government, "Fiscal Year 2012 Terminations, Reductions, and Savings," http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/trs.pdf

¹⁹⁹⁵ Office of Management and Budget, Executive Office of the President, "Major Savings and Reforms in the President's 2009 Budget," February 2008, http://www.gpoaccess.gov/usbudget/fy09/pdf/savings.pdf.

²⁶¹⁴ The 2011 Annual Report to the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. http://www.ssa.gov/oact/tr/2011/tr2011.pdf

²⁶¹⁵ The 2011 Annual Report to the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. http://www.ssa.gov/oact/tr/2011/tr2011.pdf

²⁶¹⁶ Social Security and Medicare Board of Trustees, "A Summary of the 2011 Annual Reports," http://www.ssa.gov/oact/trsum/index.html, accessed July 15, 2011.

²⁶¹⁷ President Clinton's FY 2000 Budget, Analytical Perspectives, http://www.gpoaccess.gov/usbudget/fy00/pdf/spec.pdf

²⁶¹⁸ President Obama, Interview with CBS Evening News, July 12, 2011. http://www.cbsnews.com/video/watch/?id=7373061n

²⁶¹⁹ The 2011 Annual Report to the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. http://www.ssa.gov/oact/tr/2011/tr2011.pdf

²⁶²⁰ The 2011 Annual Report to the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, pg. 3. http://www.ssa.gov/oact/tr/2011/tr2011.pdf

²⁶²¹ The 2011 Annual Report to the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. pg. 40. http://www.ssa.gov/oact/tr/2011/tr2011.pdf

²⁶²² For more information about the statement from the Social Security Administration's Office of the Chief Actuary, see www.coburn.senate.gov

²⁶²³ Current actuarial deficit is 2.22 percent of taxable payroll.

²⁶²⁴ More details on this function of the formula: to calculate AIME, nominal wages for each individual in each calendar year are multiplied by Social Security's Average Wage Index (AWI). This wage data is tabulated by SSA based on wages reported on W-2s.

²⁶²⁵ Social Security Administration, "Primary Insurance Amounts," http://www.ssa.gov/oact/cola/piaformula.html, accessed July 16, 2011.

²⁶²⁶ A "bend point" is the dollar amount within the benefit formula at which the replacement rates change. Under current law, the two bend points are $749 and $4,517. "Bend point factors," also called replacement factors, are the percentages at which the dollar amounts are replaced. Under current law, there are three replacement factors: 90 percent, 32 percent and 15 percent.

²⁶²⁷ National Commission on Fiscal Responsibility and Reform, "The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform," December 1, 2010, pg. 49, http://www.fiscalcommission.gov/news/moment-truth-report-national-commission-fiscal-responsibility-and-reform, accessed July 11, 2011.

²⁶²⁸ National Commission on Fiscal Responsibility and Reform, "The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform," December 1, 2010, pg. 49, http://www.fiscalcommission.gov/news/moment-truth-report-national-commission-fiscal-responsibility-and-reform, accessed July 11, 2011.

²⁶²⁹ Under current law, the NRA increases to 67 for those attaining age 62 in 2017 or later.

²⁶³⁰ 2010 Social Security Trustees Report, http://www.ssa.gov/oact/tr/2011/tr2011.pdf.

²⁶³¹ Robert Cage, John Greenlees, and Patrick Jackman, U.S. Bureau of Labor Statistics, "Introducing the Chained Consumer Price Index," May 2003, http://www.bls.gov/cpi/super_paris.pdf, accessed July 11, 2011.

²⁶³² National Commission on Fiscal Responsibility and Reform, "The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform," December 1, 2010, http://www.fiscalcommission.gov/news/moment-truth-report-national-commission-fiscal-responsibility-and-reform, accessed July 11, 2011.

²⁶³³ Bipartisan Policy Center, "Restoring America's Future," November 2010, http://www.bipartisanpolicy.org/projects/debt-initiative/about, accessed July 11, 2011.

²⁶³⁴ Heritage Foundation, "Saving the American Dream," 2011, http://savingthedream.org/about-the-plan/plan-details/, accessed July 11, 2011.

²⁶³⁵ Center for American Progress, "The First Step: A Progressive Plan for Meaningful Deficit Reduction by 2015," December 2010, http://www.americanprogress.org/issues/2010/12/pdf/deficit_reduction.pdf, accessed July 11, 2011.

²⁶³⁶ Congressional Budget Office "Budget Options, Volume II," August 2009, Option 650.9 -- Mandatory, http://www.cbo.gov/ftpdocs/102xx/doc10294/08-06-BudgetOptions.pdf, accessed July 13, 2011.

²⁶³⁷ Congressional Budget Office "Budget Options, Volume II," August 2009, Option 650.9 -- Mandatory, http://www.cbo.gov/ftpdocs/102xx/doc10294/08-06-BudgetOptions.pdf, accessed July 13, 2011.

²⁶³⁸ Congressional Budget Office "Budget Options, Volume II," August 2009, Option 650.9 -- Mandatory, http://www.cbo.gov/ftpdocs/102xx/doc10294/08-06-BudgetOptions.pdf, accessed July 13, 2011.

²⁶³⁹See S. Rept. 2133, 84th Cong., 2d sess. (1956), pp. 3 and 4.

²⁶⁴⁰ Transactional Records Access Clearinghouse (TRAC), Syracuse University, Social Security Awards Depend More on Judge Than Facts: Disparities Within SSA Disability Hearing Offices Grow (July 4, 2011), http://trac.syr.edu/tracreports/ssa/254/.

²⁶⁴¹See The 2011 Annual Report to the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, http://www.ssa.gov/oact/tr/2011/tr2011.pdf.

²⁶⁴² The Trustees' report notes that Social Security has succumbed to congressional pressure to reduce the application backlog, at the expense of ignoring other priorities.

²⁶⁴³See The 2011 Annual Report to the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, http://www.ssa.gov/oact/tr/2011/tr2011.pdf.

²⁶⁴⁴ The program was created under Title II of the Social Security Act.

²⁶⁴⁵ The payroll tax is a 15.3% tax on earnings that is split equally between employers and employees. The Social Security portion of the payroll tax is 12.4% (6.2% each per employee and employer) on earnings up to the taxable maximum ($106,800 in 2010). Of the 12.4%, 10.6% is paid to the OASI trust fund and 1.8% is paid to the DI trust fund. The DI trust fund also receives some revenue from the taxation of Social Security benefits.

²⁶⁴⁶ Information provided by Social Security Administration.

²⁶⁴⁷ Social Security Administration, Office of Budget, FY2011 President's Budget, Key Tables, Table 4 - Old Age, Survivors, and Disability Insurance Outlays and Income and Table 5 - OASDI Beneficiaries and Average Benefit Payments (February 2010), http://www.ssa.gov/budget/2012KeyTables.pdf.

²⁶⁴⁸ Information provided by Social Security Administration.

²⁶⁴⁹ Social Security Administration, FY2011 President's Budget: Key Tables, Table 6, http://www.ssa.gov/budget/FY11%20Key%20Tables.pdf.

²⁶⁵⁰ All examples provided by SSA. For a comprehensive list of excludable resources, see http://www.ssa.gov/ssi/text-resources-ussi.htm.

²⁶⁵¹ Social Security Administration Website, http://www.ssa.gov/ssi/text-income-ussi.htm.

²⁶⁵² SSA Inspector General O'Carroll also reported that SSA made $800 million in underpayments to SSI recipients, putting the program as a whole at a 10 percent improper payment rate. This is based on the fact that in 2009, SSA paid $48.3 billion to SSI beneficiaries. See Testimony of SSA Inspector General Patrick O'Carroll before the United States House of Representatives, Subcommittee on Social Security, Committee on Ways and Means (June 14, 2011), http://waysandmeans.house.gov/UploadedFiles/ocarrol222.pdf.

²⁶⁵³ 20 C.F.R. §§ 404.1589 and 416.989.

²⁶⁵⁴ 20 C.F.R. §§ 404.1590 and 416.990.

²⁶⁵⁵ 20 C.F.R. § 404.1589; 20 C.F.R. § 404.1590.

²⁶⁵⁶ This has come to to be known the "medical improvement standard."

²⁶⁵⁷ Social Security Administration, Office of the Inspector General, Statement for the Record, U.S. House of Representatives, Committee on Ways and Means, Subcommittee on Social Security, Hearing on Social Security's Payment Accuracy (June 14, 2011), http://waysandmeans.house.gov/UploadedFiles/ocarrol222.pdf.

²⁶⁵⁸ Social Security Administration, Office of the Inspector General, Follow-Up on Disabled Title II Beneficiaries with Earnings Reported on the Master Earnings File, Report A-01-08-28075 (April 2009),

http://www.ssa.gov/oig/ADOBEPDF/A-01-08-28075.pdf.

²⁶⁵⁹ Government Accountability Office, Social Security Administration: Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Disability Payments, Report No. 10-444 (June 2010), http://www.gao.gov/new.items/d10444.pdf.

²⁶⁶⁰ Social Security Administration, Office of the Inspector General, Full Medical Continuing Disability Reviews, Report A-07-09-29147 (March 2010), http://www.ssa.gov/oig/ADOBEPDF/A-07-09-29147.pdf.

²⁶⁶¹ 42 U.S.C. § 1383(e)(1); 20 C.F.R. § 416.701; 20 C.F.R. § 416.708.

²⁶⁶² 20 C.F.R. § 416.204.

²⁶⁶³ Social Security Administration, Office of Inspector General, Supplemental Security Income Redeterminations, Report A-07-09-29146 (July 2009), http://www.ssa.gov/oig/ADOBEPDF/A-07-09-29146.pdf.

²⁶⁶⁴The Social Security Act § 1611(f)(1); 42 U.S.C. § 1382(f)(1); 20 C.F.R. § 416.215.

²⁶⁶⁵ Social Security Administration, Office of the Inspector General, SSI Recipients with ATM Withdrawals Indicating They Are Outside the United States, Report A-01-07-17036 (April 2008), http://www.ssa.gov/oig/ADOBEPDF/A-01-07-17036.pdf.

²⁶⁶⁶ Estimate provided by the Social Security Administration Office of the Inspector General.

²⁶⁶⁷ Social Security Administration, Office of the Inspector General, Supplement Security Income Recipients with Unreported Real Property, Report A-02-09-29025 (June 2011), http://www.ssa.gov/oig/ADOBEPDF/A-02-09-29025.pdf and Social Security Administration, Office of the Inspector General, Supplement Security Income Recipients with Unreported Vehicles, Report A-02-08-28038 (July 2009), http://www.ssa.gov/oig/ADOBEPDF/A-02-08-28038.pdf.

²⁶⁶⁸ Estimate provided by the Social Security Administration Office of the Inspector General.

²⁶⁶⁹ Inspector General O'Carroll also testified that SSA made $800 million in underpayments to SSI recipients. Social Security Administration, Office of the Inspector General, Statement for the Record, U.S. House of Representatives, Committee on Ways and Means, Subcommittee on Social Security, Hearing on Social Security's Payment Accuracy (June 14, 2011), http://waysandmeans.house.gov/UploadedFiles/ocarrol222.pdf.

²⁶⁷⁰ Social Security Administration, Disability Update Report, Form Approved OMB No. 0960-0511, Form SSA-455, https://secure.ssa.gov/apps10/poms/images/SSA4/G-SSA-455-1.pdf

²⁶⁷¹ The remaining 316,960 medical CDRs were full medical reviews. Numbers provided to Sen. Coburn's staff by SSA.

²⁶⁷² Government Accountability Office, Clearer Guidance Could Help SSA Apply the Medical Improvement Standard More Consistently, Report 07-8 (October 2006), http://www.gao.gov/new.items/d078.pdf.

²⁶⁷³ 42 U.S.C. § 423(g).

²⁶⁷⁴ Social Security Administration, Office of the Inspector General, Impact of Statutory Benefit Continuation on Supplemental Security Income Payments Made During the Appeals Process, Report A-07-05-15095 (May 2006), http://www.ssa.gov/oig/ADOBEPDF/A-07-05-15095.pdf.

²⁶⁷⁵ Social Security Administration, Office of the Inspector General, Impact of Statutory Benefit Continuation on Disability Insurance Benefit Payments Made During the Appeals Process, Report A-07-05-15094 (December 2006), http://www.ssa.gov/oig/ADOBEPDF/A-07-05-15094.pdf.

²⁶⁷⁶ The Social Security Act § 1129; 42 U.S.C. § 1320a-8.

²⁶⁷⁷ The Social Security Act § 201, 42 U.S.C. § 401, 20 C.F.R. § 404.1.

²⁶⁷⁸ The sanction periods are as followed: six months for the first offense; 12 months for the second offense; and 24 months for the third offense.

²⁶⁷⁹ Social Security Administration, Office of the Inspector General, The Social Security Administration's Use of Administrative Sanctions in the Old-Age, Survivors, and Disability Insurance Program, Report A-07-07-17052 (September 2008), http://www.ssa.gov/oig/ADOBEPDF/A-07-07-17052.pdf.

²⁶⁸⁰ SSA OIG analyzed two populations of beneficiaries for potential sanctions. The first population included cases referred to the OIG for fraud, but not selected for prosecution under the CMP program. SSA OIG believed this population should have resulted in $17.6 million in administrative sanctions. The second population included SSDI overpayments. For this population, overpaid beneficiaries in the Non-Annual Retirement population should have resulted in $105.6 million in administrative sanctions.

²⁶⁸¹ Statement by Social Security Inspector General Patrick O'Carroll, U.S. House of Representatives, Committee on Ways and Means, Subcommittee on Social Security, Hearing on Social Security's Payment Accuracy (June 14, 2011), http://waysandmeans.house.gov/UploadedFiles/ocarrol222.pdf.

²⁶⁸² 20 C.F.R. § 404.535.

²⁶⁸³ Congressional Budget Office, Budget Options, Volume 2, Option 600.9, pg. 139, Remove the Ceiling on the Collection of Overpayments from the Supplement Security Income Program (August 2009), http://www.cbo.gov/ftpdocs/102xx/doc10294/08-06-BudgetOptions.pdf.

²⁶⁸⁴ Congressional Budget Office, Budget Options, Volume 2, Option 600.7, pg. 137, Eliminate the Exclusion for Unearned Income Under the Supplemental Security Income Program (August 2009), http://www.cbo.gov/ftpdocs/102xx/doc10294/08-06-BudgetOptions.pdf.

²⁶⁸⁵ Congressional Budget Office, Budget Options, Volume 2, Option 600.8, pg. 138, Create a Sliding Scale for Children's Supplemental Security Income Benefits Based on the Number of Recipients in a Family (August 2009), http://www.cbo.gov/ftpdocs/102xx/doc10294/08-06-BudgetOptions.pdf.

²⁶⁸⁶ Congressional Budget Office, Budget Options, Volume 2, Option 650.7, pg. 151, Require Children Under Age 18 to Attend School Full Time as a Condition of Eligibility for Social Security Benefits (August 2009), http://www.cbo.gov/ftpdocs/102xx/doc10294/08-06-BudgetOptions.pdf.

²⁶⁸⁷ Social Security Administration, Annual Statistical Report on the Social Security Disability Insurance Program, 2009, Outcomes of Applications for Disability Beneficiaries, Table 61, Medical Decisions at the Reconsideration Level, by year of application and program, 1992-2008, http://www.ssa.gov/policy/docs/statcomps/di_asr/.

²⁶⁸⁸ Prior SSA Commissioners have recognized Reconsideration should be eliminated and acknowledging that it would allow for better documentation of decisions. See SSA Press Release, "Commissioner Barnhart Presents Her Approach to Improving the Disability Determination Process," September 25, 2003, http://www.ssa.gov/pressoffice/pr/DDPImprovement-pr.htm.

²⁶⁸⁹ Social Security Advisory Board, Charting the Future of Social Security's Disability Programs: The Need for Fundamental Change (January 2001), http://www.ssab.gov/publications/disability/disabilitywhitepap.pdf.

²⁶⁹⁰ SSA proposed a similar rule requiring all evidence be submitted five days before an ALJ hearing, stating that "program experience has convinced us that the late submission of evidence to the ALJ significantly impedes our ability to issue hearing decisions in a timely manner." See Amendments to the Administrative Law Judge, Appeals Council, and Decision Review Board Appeals Levels, 72 Fed. Reg. 61218 (October 29, 2007). While this was not adopted nationally, ALJs in the Boston region can still require all evidence submitted five days in advance of the hearing. See Eliminating the Decision Review Board, 76 Fed. Reg. 24802 (May 3, 2011).

²⁶⁹¹ Statement of the Hon. Ronald G. Bernoski, President, Association of Administrative Law Judges, Subcommittee on Social Security, United States House of Representatives Committee on Ways and Means, Hearing on the Social Security Disability Programs' Challenges and Opportunities (June 20, 2002).

²⁶⁹² Frank Bloch, Jeffrey Lubbers, and Paul Verkuil, Introducing Nonadversarial Government Representatives to Improve the Record for Decision in Social Security Disability Adjudications, A Report to the Social Security Advisory Board (2003), http://www.ssab.gov/documents/Bloch-Lubbers-Verkuil.pdf.

²⁶⁹³ Social Security Advisory Board, Charting the Future of Social Security's Disability Program: The Need for Fundamental Change (January 2001), http://www.ssab.gov/publications/disability/disabilitywhitepap.pdf.

²⁶⁹⁴ 20 C.F.R. § 416.945.

²⁶⁹⁵ Appendix 2 to Subpart P of Part 404 -- Medical-Vocational Guidelines.

²⁶⁹⁶ Appendix 2 to Subpart P of Part 404, § 201.00(f).

²⁶⁹⁷ Social Security Administration, All Disabled Beneficiaries, Table 4, Number and average monthly benefit, by sex and age, December 2009, http://www.ssa.gov/policy/docs/statcomps/di_asr/.

²⁶⁹⁸ In 2005, under Commissioner Jo Anne Barnhart, SSA attempted to raise the ages in the vocational grids stating the increases were based on "adjudicative experience, advances in medical treatment and healthcare, changes in the workforce since [SSA] originally published [the] rules for considering age in 1978, and current and future increases in the full retirement age under Social Security law." See Age as a Factor in Evaluating Disability, 70 Fed. Reg. 67101 (Nov. 4, 2005). Almost four years later, under Commissioner Astrue, without explanation, Commissioner Astrue withdrew the proposed increase in ages. See Age as a Factor in Evaluating Disability, 74 Fed. Reg. 21563 (May 8, 2009).

²⁶⁹⁹ Social Security Advisory Board, Charting the Future of Social Security's Disability Programs: The Need for Fundamental Change (January 2001), http://www.ssab.gov/publications/disability/disabilitywhitepap.pdf.

²⁷⁰⁰ Social Security Advisory Board, A Disability System for the 21st Century (September 2006), http://www.ssab.gov/documents/disability-system-21st.pdf.

²⁷⁰¹ Ticket to Work is a voluntary program for SSDI and SSI recipients aged 18 to 64. These beneficiaries receive a "ticket" they take to an employer network ("EN") contracted with SSA that provides employment services. The EN and beneficiary work together to develop an individual work plan describing the services the employer network will provide the beneficiary. See Government Accountability Office, Social Security Disability: Ticket to Work Participation has Increased, but Additional Oversight is Needed, Report No. 11-324 (May 2011), http://www.gao.gov/new.items/d11324.pdf.

²⁷⁰² Interestingly, SSA revised the Ticket to Work regulations in 2008 due to low participation rates by both ticket holders and ENs. Government Accountability Office, Social Security Disability: Ticket to Work Participation has Increased, but Additional Oversight is Needed, Report No. 11-324 (May 2011), http://www.gao.gov/new.items/d11324.pdf. To date, it remains a failure. When it was originally passed in 1999, CBO estimated that it would result in millions saved. See CBO, Pay-As-You-Go-Estimate: H.R. 1180 Ticket to Work and Work Incentives Improvement Act of 1999 (Dec. 13, 1999). The same number of beneficiaries, however, are returning to work as before it was implemented. Social Security Administration, Office of the Inspector General, Ticket to Work and Self-Sufficiency Program Cost Effectiveness, Report No. A-02-07-17048 (August 2008).

²⁷⁰³ Timing limiting disability benefits is a concept utilized by the Netherlands in recent reforms to its disability program. See Richard V. Burkhauser, Mary C. Daly, and Philip R. de Jong, Curing the Dutch Disease: Lessons for United States Disability Policy, University of Michigan Retirement Research Center, Working Paper No. 2008-188 (September 2008), http://www.mrrc.isr.umich.edu/publications/Papers/pdf/wp188.pdf.

²⁷⁰⁴ United States Department of Health and Human Services, Administration for Children and Families, Temporary Assistance for Needy Families ("TANF"), About TANF, http://www.acf.hhs.gov/programs/ofa/tanf/about.html.

²⁷⁰⁵ Estimates from GAO's nationwide survey of county TANF offices indicated that almost all offices reported that they refer at least some recipients with impairments to apply for SSI. Government Accountability Office, TANF and SSI: Opportunities Exist to Help People with Impairments Become More Self-Sufficient, Report No. 04-878 (September 2004), http://www.gao.gov/new.items/d04878.pdf.

²⁷⁰⁶ Richard V. Burkhauser, Mary C. Daly, and Philip R. de Jong, Curing the Dutch Disease: Lessons for United States Disability Policy, University of Michigan Retirement Research Center, Working Paper No. 2008-188 (September 2008), http://www.mrrc.isr.umich.edu/publications/Papers/pdf/wp188.pdf.

²⁷⁰⁷ Congress of the United States, Congressional Budget Office, Budget Options, Volume 2, pg. 117, Increase Funding for the Education of Children with Disabilities (August 2009), http://www.cbo.gov/ftpdocs/102xx/doc10294/08-06-BudgetOptions.pdf.

²⁷⁰⁸ "Budget and Economic Outlook: Fiscal Years 2011 to 2021," p. 14, Congressional Budget Office, January 2011, http://www.cbo.gov/ftpdocs/120xx/doc12039/01-26_FY2011Outlook.pdf.

²⁷⁰⁹ Taxpayers spend more than $160 billion annually to comply with the tax code, a sum equal to 11 percent of all the revenue the federal government collects. Written Statement of Nina Olson, National Taxpayer Advocate, Internal Revenue Service, page 12, hearing before the United States Senate Committee on Finance, "Complexity and the Tax Gap: Making Tax Compliance Easier and Collecting What's Due," June 28, 2011.

²⁷¹⁰ Marron, Donal J., "Spending in Disguise," National Affairs, Summer 2011, http://www.urban.org/uploadedpdf/1001542-Spending-In-Disguise-Marron.pdf.

²⁷¹¹ Congressional Research Service Definition: Tax expenditures -- special deductions, exclusions, exemptions, and credits in the tax code -- are often used instead of direct expenditures (mandatory and discretionary spending) to achieve policy goals.

²⁷¹² CRS R41369, "Empowerment Zones, Enterprise Communities, and Renewal Communities: Comparative Overview and Analysis," Congressional Research Service, February 14, 2011, http://www.crs.gov/pages/Reports.aspx?PRODCODE=R41639&Source=search#fn29.

²⁷¹³ Citizens for Tax Justice, "Twelve Corporations Pay Effective Tax Rate of Negative 1.5% on $171 Billion in Profits; Reap $62.4 Billion in Tax Subsidies," June 1, 2011, http://ctj.org/ctjreports/2011/06/twelve_corporations_pay_effective_tax_rate_of_negative_15_on_171_billion_in_profits_reap_624_billion.php.

²⁷¹⁴ Blank, Peter, Kiplinger, "Extraordinary Tax Deductions," March 2010, http://kiplinger.com/features/archives/extraordinary-tax-deductions.html.

²⁷¹⁵ Congressional Research Service, Response to Office of Senator Coburn, "Deductibility of Certain Expenses and Exemption for Certain Gambling Winnings," July 11, 2011.

²⁷¹⁶ IRS, Statistics of Income Division, April 2011.

²⁷¹⁷ Rubin, Richard and Zajac, Andrew, Bloomberg News, "High-Income Returns Reporting No Taxes Almost Doubled in 2008, IRS Says," June 14, 2011, http://www.bloomberg.com/news/2011-06-14/high-income-no-tax-returns-almost-doubled-in-2008-irs-says.html.

²⁷¹⁸ "Improper Payments in the Administration of Refundable Tax Credits," written statement of Nina E. Olson, May 25, 2011, http://waysandmeans.house.gov/UploadedFiles/Olsen_Testimony.pdf.

²⁷¹⁹ Block, Sandra, "Home buyer tax credit fraud includes 1,295 prison inmates," USA Today, June 24, 2010, http://www.usatoday.com/money/economy/housing/2010-06-23-home-buyers-credit-inmates_N.htm.

²⁷²⁰ Estimate made by staff of Senator Coburn.

²⁷²¹ Congressional Research Service, Response to Office of Senator Coburn, "Deductibility of Certain Expenses and Exemption for Certain Gambling Winnings," July 11, 2011.

²⁷²² Staff Estimate based on "Expiring Tax Provisions (xls)," available on website of the Congressional Research Service, The Budget and Economic Outlook: An Update, August 2010, http://www.cbo.gov/doc.cfm?index=11705.

²⁷²³ Internal Revenue Code, Section 45D, http://www.taxalmanac.org/index.php/Internal_Revenue_Code:Sec._45D._New_markets_tax_credit.

²⁷²⁴ Website of the Community Development Financial Institutions Fund, "Spreadsheet from Community Development Financial Institutions Fund website," http://www.cdfifund.gov/docs/nmtc/NMTC_Public_Data_09-17-10.xls, accessed June 29, 2011.

²⁷²⁵ Dietz, David, "Rich Take From Poor as U.S. Subsidy Law Funds Luxury Hotels," Bloomberg News, February 8, 2011, http://www.bloomberg.com/news/2011-02-08/rich-taking-from-poor-as-10-billion-u-s-subsidy-law-funds-luxury-hotels.html, accessed June 29, 2011.

²⁷²⁶ Website of the Community Development Financial Institutions Fund, "Spreadsheet from Community Development Financial Institutions Fund website," http://www.cdfifund.gov/docs/nmtc/NMTC_Public_Data_09-17-10.xls, accessed June 29, 2011.

²⁷²⁷ Public Law 111-312.

²⁷²⁸ Internal Revenue Code, Sections 1396, 179.

²⁷²⁹ Website of the Department of Housing and Urban Development, "Tax Tips," http://www.hud.gov/offices/cpd/economicdevelopment/library/taxincentivesez.pdf, accessed June 29, 2011.

²⁷³⁰ Website of the Department of Housing and Urban Development, "Welcome to the Community Renewal Initiative," February 25, 2011, http://www.hud.gov/offices/cpd/economicdevelopment/programs/rc/index.cfm, accessed June 29, 2011.

²⁷³¹ Section 754 of P.L. 111-312.

²⁷³² Website of the Department of Housing and Urban Development, "Interim Assessment of the Empowerment Zones and Enterprise Communities (EZ/EC) Program: A Progress Report and Appendices," October 31, 2011, "http://www.huduser.org/portal/publications/econdev/ezec_rpt.html, accessed June 29, 2011.

²⁷³³ Website of the Government Accountability Office, "Empowerment Zone and Enterprise Community Program, Improvements Occurred in Communities, but the Effect of the Program is Unclear,"GAO-06-727, September 22, 2006, http://www.gao.gov/new.items/d06727.pdf, accessed June 29, 2011.

²⁷³⁴ Congressional Research Service R41639, "Empowerment Zones, Enterprise Communities, and Renewal Communities: Comparative Overview and Analysis," February 14, 2011, http://www.crs.gov/pages/Reports.aspx?PRODCODE=R41639&Source=search#_Toc286402530.

²⁷³⁵ Website at Salt River Fields at Talking Stick, "Tribes, Teams Dedicate Grand Opening of Salt River Fields, http://www.saltriverfields.com/media/news-archive/11-02-11/Tribes_Teams_Dedicate_Grand_Opening_of_Salt_River_Fields.aspx, accessed June 27, 2011.

²⁷³⁶ Kepner, Tyler, "Salt River Fields, the New Spring Sensation," New York Times, February 26, 2011, http://bats.blogs.nytimes.com/2011/02/26/salt-river-fields-the-new-spring-sensation/, accessed June 27, 2011.

²⁷³⁷ Staff estimate based on Joint Committee on Taxation JCS-3-10, "Estimates Of Federal Tax Expenditures For Fiscal Years 2010-2014," http://www.jct.gov/publications.html?func=startdown&id=3718. A significant portion of the money could be saved by shutting this program down immediately and stopping the issuance of any new bonds. According to the IRS, there have been significant forfeitures in the bond program.

²⁷³⁸ Kelly Robert, "Beer garden, microbrewery set to open at old Coke plant," Post-Dispatch (St. Louis, MO), May 27, 2011, http://www.stltoday.com/business/local/article_14056c5f-5086-5fef-a26f-e4e0d98ff791.html, accessed June 29, 2011.

²⁷³⁹ Information verified by the Office of Sen. Tom Coburn in phone call to Steins Broaday, June 24, 2011.

²⁷⁴⁰ Daykin, Tom, "Developer hopes to begin downtown Hilton project by September, Journal-Sentinel (Milwaukee WI), June 13, 2011, http://www.jsonline.com/business/123789464.html, accessed June 29, 2011.

²⁷⁴¹ Website of Buffalo Rising, "Termini Purchases Lafayette Hotel," May 21, 2011, http://www.buffalorising.com/2011/05/termini-purchases-lafayette-hotel.html, accessed June 29, 2011.

²⁷⁴² Meyer, Brian, "First steps taken to aid Termini plans," Buffalo News, August 10, 2010, http://www.buffalonews.com/city/article20023.ece.

²⁷⁴³ Internal Revenue Code, Section 47.

²⁷⁴⁴ Website of the Senate Budget Committee, "Tax Expenditures: Compendium of Background Material on Individual Provisions" Congressional Research Service, December 31, 2010, http://budget.senate.gov/democratic/index.cfm/files/serve?File_id=8a03a030-3ba8-4835-a67b-9c4033c03ec4, accessed June 25, 2011.

²⁷⁴⁵ Website of the Senate Budget Committee, "Tax Expenditures: Compendium of Background Material on Individual Provisions" Congressional Research Service, December 31, 2010, http://budget.senate.gov/democratic/index.cfm/files/serve?File_id=8a03a030-3ba8-4835-a67b-9c4033c03ec4, accessed June 25, 2011.

²⁷⁴⁶ Website of the Senate Budget Committee, "Tax Expenditures: Compendium of Background Material on Individual Provisions" Congressional Research Service, December 31, 2010, http://budget.senate.gov/democratic/index.cfm/files/serve?File_id=8a03a030-3ba8-4835-a67b-9c4033c03ec4, accessed June 25, 2011.

²⁷⁴⁷ Bjorhus, Jennifer, "Developers line up for historic tax credit," Star-Tribune (Minneapolis, MN), June 15, 2011, http://www.startribune.com/business/123642889.html, accessed June 29, 2011.

²⁷⁴⁸ Website of the Wisconsin Historical Society, "Historic Preservation Tax Credits for Income-Producing Historic Buildings," http://www.wisconsinhistory.org/hp/architecture/iptax_credit.asp, accessed June 29, 2011.

²⁷⁴⁹ Mackay, Scott, "Reinstate the Historic Preservation Tax Credit," WRNI, June 13, 2011, http://www.publicbroadcasting.net/wrni/news.newsmain/article/0/13/1814624/Top.Stories/Reinstate.the.historic.preservation.tax.credit, accessed June 29, 2011.

²⁷⁵⁰ Website of National Public Radio, "Coltrane House, Chicago Hospital Called Endangered," June 15, 2011, http://www.npr.org/templates/story/story.php?storyId=137189590, accessed June 29, 2011.

²⁷⁵¹ Staff estimate based on Joint Committee on Taxation JCS-3-10, "Estimates Of Federal Tax Expenditures For Fiscal Years 2010-2014," http://www.jct.gov/publications.html?func=startdown&id=3718.

²⁷⁵² McMurray, Jeffrey, "Lawmakers Aim to Protect NASCAR Tax Break," Associated Press, May 11, 2004.

²⁷⁵³ Park, Clayton, "Fan loyalty to sponsors' products fuels NASCAR success," February 20, 2011, http://www.news-journalonline.com/business/local-business/2011/02/20/fan-loyalty-to-sponsors-products-fuels-nascar-success.html, accessed June 23, 2011.

²⁷⁵⁴ Website of the Center for American Progress, "Congressman Join Chorus for Calling for Tax Expenditure Scrutiny," June 18, 2010, http://www.americanprogress.org/issues/2010/06/tax_expenditure_scrutiny.html, accessed June 23, 2011.

²⁷⁵⁵ Website of the Joint Committee on Taxation, "Technical Explanation Of The Revenue Provisions Contained In The Tax Relief, Unemployment Insurance Reauthorization, And Job Creation Act Of 2010, December 10, 2010, http://www.jct.gov/publications.html?func=startdown&id=3716, June 23, 2011.

²⁷⁵⁶ Website of the Joint Committee on Taxation, "Technical Explanation Of The Revenue Provisions Contained In The Tax Relief, Unemployment Insurance Reauthorization, And Job Creation Act Of 2010, December 10, 2010, http://www.jct.gov/publications.html?func=startdown&id=3716, June 23, 2011.

²⁷⁵⁷ Website of the Joint Committee on Taxation, "Technical Explanation Of The Revenue Provisions Contained In The Tax Relief, Unemployment Insurance Reauthorization, And Job Creation Act Of 2010, December 10, 2010, http://www.jct.gov/publications.html?func=startdown&id=3716, June 23, 2011.

²⁷⁵⁸ Graves, Will, "Kentucky Speedway to get tax breaks with Cup race," Associated Press, February 17, 2009, http://www.usatoday.com/sports/motor/2009-02-17-4071969232_x.htm, accessed June 23, 2011.

²⁷⁵⁹ Website of Taxpayers for Common Sense, "Holiday Honey Baked Hams -- Special Interest Carveouts at the End of the Year," http://www.taxpayer.net/user_uploads/file/FederalBudget/TaxPolicy/Top_Special_Interest_Carveouts_EndofYear2010.pdf, accessed June 23, 2011.

²⁷⁶⁰ McMurrary, Jeffrey, "Lawmakers Aim to Protect NASCAR Tax Break," Associated Press, May 11, 2004.

²⁷⁶¹ Website for Joint Committee on Taxation, "Estimated Budget Effects Of The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010," December 10, 2010, http://www.jct.gov/publications.html?func=startdown&id=3715, accessed June 23, 2011; Estimate by staff of Senator Tom Coburn.

²⁷⁶² Norris, Floyd, "Multinational Companies Get a Tax Break, as Do Foreign Gamblers," New York Times, October 15, 2004, http://www.nytimes.com/2004/10/15/business/15norris.html?_r=1&scp=2&sq=Multinational%20Companies%20Get%20a%20Tax%20Break&st=cse, June 21, 2011.

²⁷⁶³ Website of IRS.gov, "Gambling winnings from Dog and Horse racing," http://www.irs.gov/publications/p519/ch03.html#en_US_publink1000222289, accessed June 20, 2011.

²⁷⁶⁴ Website of the Sports Geek, "Pari-Mutuel Horse Racing Betting Explained," http://www.thesportsgeek.com/sports-betting/horse-racing/pari-mutuel-betting/, accessed June 20, 2011.

²⁷⁶⁵ Website of the Sports Geek, "Pari-Mutuel Horse Racing Betting Explained," http://www.thesportsgeek.com/sports-betting/horse-racing/pari-mutuel-betting/, accessed June 20, 2011.

²⁷⁶⁶ Hammer, Ryan D., "Does Internet gambling strengthen the U.S. economy? Don't bet on it," Federal Communications Law Journal, December, 2001.

²⁷⁶⁷ McKinney, Joan, "Louisianians and tax cuts," Sunday Advocate (Baton Rouge, LA), May 25, 2003.

²⁷⁶⁸ Joint Committee on Taxation, "Estimated Budget Effects of the Conference Agreement For H.R. 4520, Fiscal Years 2005 -- 2014," October 7, 2004, http://www.jct.gov/publications.html?func=startdown&id=1618, accessed June 20, 2011; Staff estimate from the Office of Senator Coburn (Provision phases out in 2014.)

²⁷⁶⁹ Joint Committee on Taxation, "General Explanation of Tax Legislation Enacted in the 111^th Congress," March 2011.

²⁷⁷⁰ The deduction jumps to $20 million if production took place in areas eligible for designation as a low-income community.

²⁷⁷¹ BoxOfficeMoJo, The Hangover Part 11, accessed June 19, 2011, http://boxofficemojo.com/movies/?id=hangover2.htm.

²⁷⁷² Bowles, Scott, "'Harry Potter' finale shatters weekend record," USA Today, July 17, 2011, http://www.usatoday.com/life/movies/news/2011-07-18-box-office-july-18_n.htm.

²⁷⁷³ Center on Budget and Policy Priorities, "State Film Subsidies: Not Much Bang For Too Many Bucks," Accessed June 19, 2011, http://www.cbpp.org/cms/index.cfm?fa=view&id=3326.

²⁷⁷⁴ Website of the Motion Picture Association of America, State by State Statistics, accessed June 19, 2011, http://www.mpaa.org/policy/state-by-state.

²⁷⁷⁵ Patton, Zach, "The Value of Movie Tax Incentives: States spend billions on incentives to lure film productions away from Hollywood. Some say it's gone too far," Governing, June 2010, http://www.governing.com/topics/economic-dev/The-Value-of-Movie-Tax-Incentives.html.

²⁷⁷⁶ Report of the Missouri Tax Credit Review Commission, November 30, 2010, accessed June 15, 2011, http://tcrc.mo.gov/pdf/TCRCFinalReport113010.pdf.

²⁷⁷⁷ Staff Estimate based on "Expiring Tax Provisions (xls)," available on website of the Congressional Research Service, The Budget and Economic Outlook: An Update, August 2010, http://www.cbo.gov/doc.cfm?index=11705.

²⁷⁷⁸ Website of the Senate Committee on Indian Affairs, "Testimony of Donald Laverdure, Deputy Assistant Secretary, Office of the Assistant Secretary-Indian Affairs, Department of the Interior," January 28, 2010, http://www.indian.senate.gov/public/_files/DonaldLaverduretestimony.pdf, accessed July 1, 2011.

²⁷⁷⁹ Website of the Joint Committee on Taxation, "Technical Explanation of the Revenue Provisions Contained in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010," December 10, 2010, http://www.jct.gov/publications.html?func=startdown&id=3716, accessed July 1, 2011.

²⁷⁸⁰ Website of the Oklahoma Department of Wildlife Conservation, "Partners for Fish and Wildlife Program," "http://www.wildlifedepartment.com/landowner/partners.pdf, accessed July 1, 2011.

²⁷⁸¹ Website of the Bureau of Labor Statistics, "Local Area Unemployment Statistics, http://www.bls.gov/lau/, accessed July 1, 2011.

²⁷⁸² Website of the Oklahoma Department of Commerce, "American Indian Land Tax Credits," http://www.okcommerce.gov/Site-Selection/Incentives/Indian-Land-Tax-Credit, accessed July 1, 2011.

²⁷⁸³ Website of the Senate Budget Committee, "Tax Expenditures: Compendium of Background Material on Individual Provisions" Congressional Research Service, December 31, 2010, http://budget.senate.gov/democratic/index.cfm/files/serve?File_id=8a03a030-3ba8-4835-a67b-9c4033c03ec4, accessed June 25, 2011.

²⁷⁸⁴ Staff Estimate based on "Expiring Tax Provisions (xls)," available on website of the Congressional Research Service, The Budget and Economic Outlook: An Update, August 2010, http://www.cbo.gov/doc.cfm?index=11705.

²⁷⁸⁵ Website of the Oklahoma Department of Commerce, American Indian Lands Tax Credits, accessed July 5, 2011, http://www.okcommerce.gov/Site-Selection/Incentives/Indian-Land-Tax-Credit.

²⁷⁸⁶ Website of the Lewis and Clark Law School, "Reflections on the Environmental Impacts of the Federal Tax Subsidies for Oil, Gas and Timber Production," http://www.lclark.edu/live/files/8324-lcb152art2bogdanski, accessed June 27, 2011.

²⁷⁸⁷ Website of the Lewis and Clark Law School, "Reflections on the Environmental Impacts of the Federal Tax Subsidies for Oil, Gas and Timber Production," http://www.lclark.edu/live/files/8324-lcb152art2bogdanski, accessed June 27, 2011.

²⁷⁸⁸ Staff estimate based on Joint Committee on Taxation JCS-3-10, "Estimates Of Federal Tax Expenditures For Fiscal Years 2010-2014," http://www.jct.gov/publications.html?func=startdown&id=3718.

²⁷⁸⁹ Website of the Joint Committee on Taxation, "General Explanation Of Tax Legislation Enacted in the 108th Congress," Mary 31, 2005, http://www.jct.gov/publications.html?func=startdown&id=2314, accessed June 24, 2011.

²⁷⁹⁰ Website of the Joint Committee on Taxation, "General Explanation Of Tax Legislation Enacted in the 108th Congress," Mary 31, 2005, http://www.jct.gov/publications.html?func=startdown&id=2314, accessed June 24, 2011.

²⁷⁹¹ Website of the Association of Fish and Wildlife Agencies, "Financial Returns to Businesses from the Federal Aid in Sport Fish Restoration Program," March 3, 2011, http://www.fishwildlife.org/files/SportFish-Restoration-ROI-Report_2011.pdf, accessed June 24, 2011.

²⁷⁹² Website of the Association of Fish and Wildlife Agencies, "Financial Returns to Businesses from the Federal Aid in Sport Fish Restoration Program," March 3, 2011, http://www.fishwildlife.org/files/SportFish-Restoration-ROI-Report_2011.pdf, accessed June 24, 2011.

²⁷⁹³ Website of the Joint Committee on Taxation, "Estimated Budget Effects of the Conference Agreement for H.R. 4520 The 'AMERICAN JOBS CREATION ACT OF 2004,' Fiscal Years 2005 -- 2014," October 7, 2004, http://jct.gov/publications.html?func=startdown&id=1618, accessed June 24, 2011.

²⁷⁹⁴ Emergency Economic Stabilization Act of 2008, P.L. 110-343, 122 STAT. 3765, Sec. 101(c)(5)

²⁷⁹⁵ 26 U.S.C. § 382(b)(1)

²⁷⁹⁶ In Revenue Ruling #90-91, the IRS announced that pursuant to the Revenue Reconciliation Act of 1989, all notices and announcements issued by the Service and published in the Internal Revenue Bulletin are considered authority and may be relied upon to the same extent as a revenue ruling or revenue procedure.

²⁷⁹⁷ Internal Revenue Bulletin 2008-44. November 3, 2008.

²⁷⁹⁸ Internal Revenue Bulletin 2009-7. February 17, 2009. Subsequently amplified and superseded by Notice 2009-38, May 4, 2009.

²⁷⁹⁹ Internal Revenue Bulletin 2010-2. January 11, 2010.

²⁸⁰⁰ Willens, Robert, "Treasury Fixed Snag Prior to GM IPO", CFO.com website. September 27, 2010.

²⁸⁰¹ This plan assumes $45 billion in prevented revenue loss from this recommendation.

²⁸⁰² 11 U.S.C. § 363

²⁸⁰³ 26 U.S.C. § 382(g)

²⁸⁰⁴ Smith, Randall and Sharon Terlep, "GM Could Be Free of Taxes for Years." The Wall Street Journal, November 3, 2010.

²⁸⁰⁵ Buhayar, Noah. "AIG Joins Citigroup, GM in Deferred Tax Asset Hall of Fame." Bloomberg News. July 8, 2011.

²⁸⁰⁶ American International Group 1^st Quarter 2011 Results Conference Call. Available at http://www.aigcorporate.com/investors/May_2011/1Q11%20Earnings%20Release%2005-05-2011_Final.pdf

²⁸⁰⁷ Ovide, Shira. "AIG: We're Practically Tax Free!" The Wall Street Journal, May 6, 2011.

²⁸⁰⁸ "IRS Eased NOL Rules for Citigroup in Exchange for Repayment of TARP Funds." Taxprofblog. December 16, 2009. Available at: http://taxprof.typepad.com/taxprof_blog/2009/12/irs-eased-nol.html

²⁸⁰⁹ Buhayar, Noah. "AIG Joins Citigroup, GM in Deferred Tax Asset Hall of Fame." Bloomberg News. July 8, 2011.

²⁸¹⁰ Public Law 111-312.

²⁸¹¹ Website of the Joint Committee on Taxation, "Estimated Budget Effects of the 'Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010," December 10, 2010, http://jct.gov/publications.html?func=startdown&id=3715, accessed June 29, 2011.

²⁸¹² Website of Rail Resource, "Tax Credit Extension Gives Boost to Iowa Interstate Railroad's Capital Projects, January 31, 2011, http://www.railresource.com/content/?p=1148, accessed June 29, 2011.

²⁸¹³ Website of the American Short Line and Regional Railroad Association, "Section 45G," 2011 Edition, "http://www.aslrra.org/45Gsuccess.pdf, accessed June 29, 2011.

²⁸¹⁴ Website of the Senate Budget Committee, "Tax Expenditures: Compendium of Background Material on Individual Provisions" Congressional Research Service, December 31, 2010, http://budget.senate.gov/democratic/index.cfm/files/serve?File_id=8a03a030-3ba8-4835-a67b-9c4033c03ec4, accessed June 25, 2011.

²⁸¹⁵ Website of the Joint Committee on Taxation, "Estimated Budget Effects of the 'Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010," December 10, 2010, http://jct.gov/publications.html?func=startdown&id=3715, accessed June 29, 2011.

²⁸¹⁶ Morgan, Dan, "Engineering a Tax Break for Eskimo," Washington Post, July 25, 2009, http://juneauempire.com/stories/072599/Loc_taxbreak.html, accessed June 25, 2011

²⁸¹⁷ Morgan, Dan, "Engineering a Tax Break for Eskimo," Washington Post, July 25, 2009, http://juneauempire.com/stories/072599/Loc_taxbreak.html, accessed June 25, 2011

²⁸¹⁸ Congressional Research Service, Response to Office of Senator Coburn, "Deductibility of Certain Expenses and Exemption for Certain Gambling Winnings," July 11, 2011.

²⁸¹⁹ Website of Alaska Digest, "Sen. Murkowski Says Eskimo Whaling Captains Tax Credit Will Help Protect Historic Whaling, Subsistence In Alaska," October, 2004, http://www.alaska-sites.com/akdigestemailnews102004o.htm, accessed June 25, 2011.

²⁸²⁰ Website of Alaska Digest, "Sen. Murkowski Says Eskimo Whaling Captains Tax Credit Will Help Protect Historic Whaling, Subsistence In Alaska," October, 2004, http://www.alaska-sites.com/akdigestemailnews102004o.htm, accessed June 25, 2011.

²⁸²¹ Collins, Margaret, "Whaling or Hosting Exchange Student Lets U.S. Taxpayers Claim Deductions," Bloomberg News, April 18th, 2011, http://www.bloomberg.com/news/2011-04-18/whaling-or-hosting-exchange-student-lets-us-taxpayers-claim-deductions.html, accessed June 25, 2011.

²⁸²² Collins, Margaret, "Whaling or Hosting Exchange Student Lets U.S. Taxpayers Claim Deductions," Bloomberg News, April 18th, 2011, http://www.bloomberg.com/news/2011-04-18/whaling-or-hosting-exchange-student-lets-us-taxpayers-claim-deductions.html, accessed June 25, 2011.

²⁸²³ Website of the Joint Committee on Taxation, "Estimated Budget Effects of the Conference Agreement for H.R. 4520 The 'American Jobs Creation Act of 2004,' Fiscal Years 2005 -- 2014," October 7, 2004, http://jct.gov/publications.html?func=startdown&id=1618, accessed June 24, 2011.

²⁸²⁴ Brownfield Properties are include any property that is held for use in a trade or business and on which there has been an actual or threatened release or disposal of certain hazardous substances.

²⁸²⁵ Internal Revenue code Section 198.

²⁸²⁶ Consolidated Appropriations Act, 2001 (P.L. 106-170).

²⁸²⁷ E-mail from the Internal Revenue Service, June 30, 2011.

²⁸²⁸ Website of the Senate Budget Committee, "Tax Expenditures: Compendium of Background Material on Individual Provisions" Congressional Research Service, December 31, 2010, http://budget.senate.gov/democratic/index.cfm/files/serve?File_id=8a03a030-3ba8-4835-a67b-9c4033c03ec4, accessed June 25, 2011.

²⁸²⁹ Staff Estimate based on "Expiring Tax Provisions (xls)," available on website of the Congressional Research Service, The Budget and Economic Outlook: An Update, August 2010, http://www.cbo.gov/doc.cfm?index=11705.

²⁸³⁰ CRS RS22389, "An Introduction to the Design of the Low-Income Housing Tax Credit," Congressional Research Service, September 17, 2010, http://www.crs.gov/pages/Reports.aspx?PRODCODE=RL34591&Source=search#fn23.

²⁸³¹ Susan Montee, Missouri State Auditor, Report No. 2008-23, "Analysis of Low Income Housing Tax Credit Program," April 2008, http://www.auditor.mo.gov/press/2008-23.pdf.

²⁸³² Susan Montee, Missouri State Auditor, Report No. 2008-23, "Analysis of Low Income Housing Tax Credit Program," April 2008, http://www.auditor.mo.gov/press/2008-23.pdf.

²⁸³³ Joint Center for Housing Studies of Harvard University, "Long-Term Low Income Housing Tax Credit Policy Questions," November 2010, http://www.jchs.harvard.edu/publications/governmentprograms/long-term_low_income_housing_tax_credit_policy_questions.pdf.

²⁸³⁴ Congressional Research Service Staff Memorandum, "The Cost-Effectiveness of the Low-Income Housing Tax Credit Compared with Housing Vouchers," April 1992, http://www.cbo.gov/ftpdocs/62xx/doc6216/doc09b.pdf.

²⁸³⁵ Staff Estimate based on "Expiring Tax Provisions (xls)," available on website of the Congressional Research Service, The Budget and Economic Outlook: An Update, August 2010, http://www.cbo.gov/doc.cfm?index=11705.

²⁸³⁶ Fleenor, Patrick, "Tax Savings from Mortgage Interest Deduction Vary Significantly from State to State," Fiscal Facts, Tax Foundation, May 25, 2010, http://www.taxfoundation.org/publications/show/26341.html.

²⁸³⁷ Office of Management and Budget, FY 2012 Budget Submission, Supplemental Materials, Tax Expenditure Spreadsheet: Tables 17-1 to 17-4, accessed June 25, 2011, http://www.whitehouse.gov/omb/budget/Supplemental.

²⁸³⁸ Sullivan, Martin, TaxProf Blog, "The Rich Get 100 Times More Mortgage Subsidy Than the Poor," March 7, 2011, http://taxprof.typepad.com/files/130tn1110.pdf.

²⁸³⁹ Those with an adjusted gross income of over $1 million, as claimed on their tax return.

²⁸⁴⁰ IRS, Statistics of Income Division, April 2011.

²⁸⁴¹ Sullivan, Martin, TaxProf Blog, "The Rich Get 100 Times More Mortgage Subsidy Than the Poor," March 7, 2011, http://taxprof.typepad.com/files/130tn1110.pdf.

²⁸⁴² Website of the Internal Revenue Service, Publication 936, Part 1, accessed June 25, 2011, http://www.irs.gov/publications/p936/ar02.html.

²⁸⁴³ Nalder, Eric, "Declaring your boat a second home can bring big tax relief," The Seattle Post-Intelligencer, November 10, 2004, http://www.seattlepi.com/local/article/Declaring-your-boat-a-second-home-can-bring-big-1159212.php#ixzz1QJsx1UUY.

²⁸⁴⁴ National Commission on Fiscal Responsibility and Reform, "Moment of Truth, Report of the National Commission on Fiscal Responsibility and Reform," December 1, 2010, http://www.fiscalcommission.gov/news/moment-truth-report-national-commission-fiscal-responsibility-and-reform. The Commission plan included this recommendation as part of the illustrative comprehensive tax reform proposal detailed on page 31 of the report.

²⁸⁴⁵ Estimate provided by the Joint Committee on Taxation.

²⁸⁴⁶ "Improper Payments in the Administration of Refundable Tax Credits," Testimony of the Honorable J. Russell George Treasury Inspector General for Tax Administration before the Committee on Ways and Means Subcommittee on Oversight U.S. House of Representatives, May 25, 2011.

²⁸⁴⁷ "Redistribution and Tax Expenditures: The Earned Income Tax Credit," Eissa, Nada & Hoynes, Hilary, National Tax Journal, June 2011, http://www.econ.ucdavis.edu/faculty/hoynes/publications/Eissa-Hoynes-NTJ-2011.pdf.

²⁸⁴⁸ "Reduction Targets and Strategies Have Not Been Established to Reduce the Billions of Dollars in Improper Earned Income Tax Credit Payments Each Year," Treasury Inspector General for Tax Administration, February 7, 2011, http://www.treasury.gov/tigta/auditreports/2011reports/201140023fr.pdf.

²⁸⁴⁹ "Obamacare Tax Subsidies: Bigger Deficit, Few Taxpayers, Damaged Economy," The Heritage Foundation, Winfree, Paul, May 24, 2011, http://www.heritage.org/research/reports/2011/05/obamacare-tax-subsidies-bigger-deficit-fewer-taxpayers-damaged-economy.

²⁸⁵⁰ OMB Data Table 32-1: http://www.whitehouse.gov/omb/budget/Analytical_Perspectives.

²⁸⁵¹ "Federal Benefits and Services for People with Low Income: Programs, Policy, and Spending, FY2008-FY2009," Congressional Research Service, Spar, Karen, January 31, 2011, http://www.crs.gov/pages/Reports.aspx?PRODCODE=R41625&Source=search.

²⁸⁵² EITC Recipient Receipt of Selected Need-Tested Benefits, Congressional Research Service June 30, 2011.

²⁸⁵³ "Income Mobility and the Earned Income Tax Credit: Short-term Safety Net or Long-term Income Support," Dowd, Tim & Horowitiz, John, April 11, 2011, pg: 2 http://pfr.sagepub.com/content/early/2011/04/06/1091142111401008.

²⁸⁵⁴ "Reduction Targets and Strategies Have Not Been Established to Reduce the Billions of Dollars in Improper Earned Income Tax Credit Payments Each Year," Treasury Inspector General For Tax Administration, February 7, 2011, http://www.treasury.gov/tigta/auditreports/2011reports/201140023fr.pdf

²⁸⁵⁵ "Reduction Targets and Strategies Have Not Been Established to Reduce the Billions of Dollars in Improper Earned Income Tax Credit Payments Each Year," Treasury Inspector General For Tax Administration, February 7, 2011, http://www.treasury.gov/tigta/auditreports/2011reports/201140023fr.pdf

²⁸⁵⁶ "Improper Payments in the Administration of Refundable Tax Credits," written statement of Nina E. Olson, May 25, 2011, http://waysandmeans.house.gov/UploadedFiles/Olsen_Testimony.pdf

²⁸⁵⁷ Reduction Targets and Strategies Have Not Been Established to Reduce the Billions of Dollars in Improper Earned Income Tax Credit Payments Each Year," Treasury Inspector General For Tax Administration, February 7, 2011, http://www.treasury.gov/tigta/auditreports/2011reports/201140023fr.pdf

²⁸⁵⁸ "Tax Credits often benefit wrong people," Werner, Mary Jo, June 6, 2011, http://lacrossetribune.com/news/opinion/article_cd9657c0-8ec7-11e0-a5d7-001cc4c03286.html

²⁸⁵⁹ "Distinguishing Between Short-Term and Long-term Recipients of the Earned Income Tax Credit," Dowd, Timothy, National Tax Journal December 2005.

²⁸⁶⁰ Estimate by Staff of Senator Coburn.

²⁸⁶¹ Website of the Internal Revenue Service, "Ten Facts about the Child Tax Credit," http://www.irs.gov/newsroom/article/0,,id=106182,00.html, accessed June 14, 2011.

²⁸⁶² Treasury Inspector General for Tax Administration, "Testimony before the House Ways and Means Subcommittee on Oversight-Improper Payments in the Administration of Refundable Tax Credits," May 25, 2011, http://waysandmeans.house.gov/UploadedFiles/George_Testimony.pdf, accessed June 14, 2011.

²⁸⁶³ Changes made to the ACTC in the Stimulus bill are in place through 2012. It is unclear whether those loosened requirements will be extended into 2013. That would increase the total estimated cost above the staff estimate.

²⁸⁶⁴ Treasury Inspector General for Tax Administration, "Testimony before the House Ways and Means Subcommittee on Oversight-Improper Payments in the Administration of Refundable Tax Credits," May 25, 2011, http://waysandmeans.house.gov/UploadedFiles/George_Testimony.pdf, accessed June 14, 2011.

²⁸⁶⁵ Treasury Inspector General for Tax Administration, "Testimony before the House Ways and Means Subcommittee on Oversight-Improper Payments in the Administration of Refundable Tax Credits," May 25, 2011, http://waysandmeans.house.gov/UploadedFiles/George_Testimony.pdf, accessed June 14, 2011.

²⁸⁶⁶ Treasury Inspector General for Tax Administration, "Testimony before the House Ways and Means Subcommittee on Oversight-Improper Payments in the Administration of Refundable Tax Credits," May 25, 2011, http://waysandmeans.house.gov/UploadedFiles/George_Testimony.pdf, accessed June 14, 2011.

²⁸⁶⁷ Website of the Treasury Inspector General for Tax Administration, "Individual Taxpayer Identification Numbers Are Being Issued Without Sufficient Supporting Documentation" (Report No: 2010-40-005), December 8, 2009, http://www.treasury.gov/tigta/auditreports/2010reports/201040005fr.pdf, accessed June 14, 2011.

²⁸⁶⁸ Website of the Treasury Inspector General for Tax Administration, "Individual Taxpayer Identification Numbers Are Being Issued Without Sufficient Supporting Documentation" (Report No: 2010-40-005), December 8, 2009, http://www.treasury.gov/tigta/auditreports/2010reports/201040005fr.pdf, accessed June 14, 2011.

²⁸⁶⁹ Website of the Treasury Inspector General for Tax Administration, "Individual Taxpayer Identification Numbers Are Being Issued Without Sufficient Supporting Documentation" (Report No: 2010-40-005), December 8, 2009, http://www.treasury.gov/tigta/auditreports/2010reports/201040005fr.pdf, accessed June 14, 2011.

²⁸⁷⁰ Website of the National Immigration Law Center, "The IRS Individual Taxpayer Identification Number: An Operational Guide to the ITIN Program," 2004, http://www.nilc.org/immsemplymnt/ITINs/ITIN_Paper_2004-web.pdf, accessed July 5, 2011.

²⁸⁷¹ Website of the Treasury Inspector General for Tax Administration, "Semi-annual Report to Congress, October 1, 2008 -- March 30, 2009," http://www.treasury.gov/tigta/semiannual/semiannual_mar2009.pdf, accessed June 14, 2011.

²⁸⁷² Estimate made by the staff of Senator Coburn.

²⁸⁷³ Kaiser Family Foundation, "Family Health Premiums Rise 3 %" http://www.kff.org/insurance/090210nr.cfm, June 2010.

²⁸⁷⁴ House Ways and Means Committee Website, "Hearing Video", http://waysandmeans.house.gov/hearings.asp?formmode=view&id=7416, June 2010.

²⁸⁷⁵ CRS Report: RL 34767, "The Tax Exclusion for Employer-Provided Health Insurance: Issues for Congress", Congressional Research Service, January 4^th 2011, http://www.crs.gov/pages/Reports.aspx?PRODCODE=RL34767&Source=search.

²⁸⁷⁶ Senator Coburn Website, "What Experts Have Said About the Tax Treatment of Health Insurance," http://coburn.senate.gov/public/index.cfm/files/serve?File_id=2cedd12f-36dd-4c15-b63e-c6963654c55a, Page 1, June 2010.

²⁸⁷⁷ "Changes to the Tax Exclusion of Employer-Sponsored Health Insurance Premiums", Tax Policy Center, June 2010, http://www.taxpolicycenter.org/uploadedpdf/411916_tax_exclusion_insurance.pdf.

²⁸⁷⁸ Hoover Institute Stanford University, "How to Cure Health Care", http://www.hoover.org/publications/digest/3459466.html, June 2010.

²⁸⁷⁹ Senate Finance Committee Website, "Hearing Testimony", http://finance.senate.gov/hearings/testimony/2008test/073108jgtest.pdf, June 2010.

²⁸⁸⁰ "Growth in the Exclusion of Employer Health Premiums", Tax Policy Center, June 2005, http://www.taxpolicycenter.org/UploadedPDF/1000794_Tax_Fact_6-27-05.pdf.

²⁸⁸¹ Senate Finance Committee Website, "Hearing Video", http://finance.senate.gov/hearings/testimony/2008test/073108jgtest.pdf, June 2010.

²⁸⁸² "Health Politics: Continuing the Employer Tax Exclusion Debate", New America Foundation, June 2010, http://www.newamerica.net/blog/new-health-dialogue/2008/health-politics-getting-whole-story-employer-sponsored-insurance-6098/.

²⁸⁸³ "Tax Reform and Health Insurance", American Enterprise Institute, June 2005, http://www.aei.org/publications/filter.all,pubID.21921/pub_detail.asp.

²⁸⁸⁴ CRS Report: RL 34767, "The Tax Exclusion for Employer-Provided Health Insurance: Issues for Congress", Congressional Research Service, January 4^th 2011, http://www.crs.gov/pages/Reports.aspx?PRODCODE=RL34767&Source=search

²⁸⁸⁵ The National Commission on Fiscal Responsibility and Reform, The Moment of Truth, December 2010, page 31. http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf

²⁸⁸⁶ The National Commission on Fiscal Responsibility and Reform, The Moment of Truth, December 2010, page 36. http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf

²⁸⁸⁷ Staff estimate.

²⁸⁸⁸ Page 29, http://ehbs.kff.org/pdf/2010/8085.pdf

²⁸⁸⁹ Congressional Budget Office, "Budget Options 2007," Revenue Option 6, page 266, http://www.cbo.gov/ftpdocs/78xx/doc7821/02-23-BudgetOptions.pdf.

²⁸⁹⁰ Goldwein, Marc and Rosenberg, Adam, Moment of Truth Project, "Measuring Up: The Case for Chained CPI," May 11, 2011, http://crfb.org/sites/default/files/MeasuringUp5_11_2011.pdf.

²⁸⁹¹ Congressional Budget Office, Director's Blog, "Using a Different Measure of Inflation for Indexing Federal Programs and the Tax Code," accessed July 5, 2011, http://cboblog.cbo.gov/?p=477.

²⁸⁹² Congressional Budget Office, Director's Blog, "Using a Different Measure of Inflation for Indexing Federal Programs and the Tax Code," accessed July 5, 2011, http://cboblog.cbo.gov/?p=477.

²⁸⁹³ Congressional Budget Office, "Budget Options 2007," Revenue Option 6, page 266, http://www.cbo.gov/ftpdocs/78xx/doc7821/02-23-BudgetOptions.pdf.

²⁸⁹⁴ Editorial, "The Chained CPI, an easy way to save money," The Washington Post, May 26, 2011, http://www.washingtonpost.com/opinions/the-chained-cpi-an-easy-way-to-save-money/2011/05/23/AGaYsLCH_story.html.

²⁸⁹⁵ Estimate provided by the Joint Committee on Taxation.

²⁸⁹⁶ Internal Revenue Code ("Code") section 911(a)(1), (b)(2); The amount of the foreign earned income exclusion is adjusted annually for inflation. The 2011 inflation adjustment is provided in IRS Revenue Procedure 2010-40, 2010-2 C.B. 663.

²⁸⁹⁷ Code section 911(a)(2), (c). The amount of the housing-cost exclusion is based on the amount of the foreign earned income exclusion and therefore automatically adjusts for inflation.

²⁸⁹⁸ Website of the Senate Budget Committee, "Tax Expenditures: Compendium of Background Material on Individual Provisions" Congressional Research Service, December 31, 2010, http://budget.senate.gov/democratic/index.cfm/files/serve?File_id=8a03a030-3ba8-4835-a67b-9c4033c03ec4, accessed June 25, 2011.

²⁸⁹⁹ Website of the Congressional Budget Office, "CBO Budget Options, Vol 2," August, 2009, http://cbo.gov/ftpdocs/102xx/doc10294/08-06-BudgetOptions.pdf, June 25, 2011, 202.

²⁹⁰⁰ Website of the Senate Budget Committee, "Tax Expenditures: Compendium of Background Material on Individual Provisions" Congressional Research Service, December 31, 2010, http://budget.senate.gov/democratic/index.cfm/files/serve?File_id=8a03a030-3ba8-4835-a67b-9c4033c03ec4, accessed June 25, 2011.

²⁹⁰¹ Website of the IRS, "Publication 54: Tax Guide for U.S. Citizens and Resident Aliens Abroad," Department of the Treasury, http://www.irs.gov/pub/irs-pdf/p54.pdf.

²⁹⁰² Website of the Congressional Budget Office, "CBO Budget Options, Vol 2," August, 2009, http://cbo.gov/ftpdocs/102xx/doc10294/08-06-BudgetOptions.pdf, June 25, 2011, 202.

²⁹⁰³ IRS publication, 2010 Report to the Congress Health Coverage Tax Credit.

²⁹⁰⁴ Fernandez, Bernadette. The Health Coverage Tax Credit, Congressional Research Service, January 5, 2011 (RL32620). http://www.crs.gov/pages/Reports.aspx?PRODCODE=RL32620&Source=search

²⁹⁰⁵http://www.oig.dol.gov/public/reports/oa/2010/18-10-003-03-390.pdf

²⁹⁰⁶ Fernandez, Bernadette. The Health Coverage Tax Credit, Congressional Research Service, January 5, 2011 (RL32620). http://www.crs.gov/pages/Reports.aspx?PRODCODE=RL32620&Source=search

²⁹⁰⁷ "Health Care Coverage Tax Credit: Participation and Administrative Costs", Government Accountability Office, April 30 2010, http://www.gao.gov/new.items/d10521r.pdf

²⁹⁰⁸ IRS publication, 2010 Report to the Congress Health Coverage Tax Credit, page 7.

²⁹⁰⁹ U.S. Government Accountability Office, Trade Adjustment Assistance: Most Workers in Five Layoffs Received Services, but Better Outreach Needed on New Benefits, GAO-06-43, January 2006.

²⁹¹⁰ S. Dorn, "Administrative Costs for Advance Payment of Health Coverage Tax Credits: An Initial Analysis," The Urban Institute, March 2007, at http://www.cmwf.org/usr_doc/1017_Dorn_admin_costs_advance_payment_HCTC.pdf.

²⁹¹¹ Government Accountability Office, "Health Coverage Tax Credit: Participation and Administrative Costs," April 30, 2010, available at http://www.gao.gov/new.items/d10521r.pdf.

²⁹¹² IRS' 2010 report to the Congress, Health Coverage Tax Credit Survey, page 2.

²⁹¹³ Staff estimate based on Joint Committee on Taxation JCS-3-10, "Estimates Of Federal Tax Expenditures For Fiscal Years 2010-2014," http://www.jct.gov/publications.html?func=startdown&id=3718.

²⁹¹⁴ Senate Budget Committee, "Tax Expenditures: Compendium of Background Material on Individual Provisions," Prepared by the Congressional Research Service, December 2010, http://budget.senate.gov/democratic/index.cfm/files/serve?File_id=8a03a030-3ba8-4835-a67b-9c4033c03ec4.

²⁹¹⁵ S. 727, "Bipartisan Tax Fairness and Simplification Act of 2011," Introduced in the Senate on April 5, 2011.

²⁹¹⁶ Senate Budget Committee, "Tax Expenditures: Compendium of Background Material on Individual Provisions," Prepared by the Congressional Research Service, December 2010, http://budget.senate.gov/democratic/index.cfm/files/serve?File_id=8a03a030-3ba8-4835-a67b-9c4033c03ec4

²⁹¹⁷ Staff estimate based on Joint Committee on Taxation JCS-3-10, "Estimates Of Federal Tax Expenditures For Fiscal Years 2010-2014," http://www.jct.gov/publications.html?func=startdown&id=3718.

²⁹¹⁸ Website for the National Center for Transit Research, "Commuter Tax Benefits Summary Table," April 22, 2011, http://www.nctr.usf.edu/programs/clearinghouse/commutebenefits/, accessed June 29, 2011.

²⁹¹⁹ Website of the Senate Budget Committee, "Tax Expenditures: Compendium of Background Material on Individual Provisions" Congressional Research Service, December 31, 2010, http://budget.senate.gov/democratic/index.cfm/files/serve?File_id=8a03a030-3ba8-4835-a67b-9c4033c03ec4, accessed June 25, 2011. Total benefit is $25.9 billion over the next five years.

²⁹²⁰ Website of the Senate Budget Committee, "Tax Expenditures: Compendium of Background Material on Individual Provisions" Congressional Research Service, December 31, 2010, http://budget.senate.gov/democratic/index.cfm/files/serve?File_id=8a03a030-3ba8-4835-a67b-9c4033c03ec4, accessed June 25, 2011.

²⁹²¹ Personal Memo to Senator Tom Coburn, Congressional Research Service, June 14, 2011.

²⁹²² 5 U.S.C. § 7905.

²⁹²³ Executive Order 13150, dated April 21, 2000.

²⁹²⁴ Website for the Treasury Inspector General for Tax Administration, "The Administration of the Public Transportation Subsidy Can Be Improved," March 23, 2006, http://www.treasury.gov/tigta/auditreports/2006reports/200610062fr.html, accessed June 29, 2011.

²⁹²⁵ Fujimori, Leila, "Vanpool Seeks Federal Funds After Rate Hike," Star-Advertiser (Honolulu, HI), June 23, 2011, http://www.staradvertiser.com/news/hawaiinews/20110623__Vanpool_seeks_federal_funds_after_rate_hike.html, accessed June 29, 2011.

²⁹²⁶ Spodek, Yaffi, "In N.J., Tax Credit Sparks Development," Wall Street Journal, June 13, 2011, http://online.wsj.com/article/SB10001424052702303848104576382081750787932.html, accessed June 29, 2011.

²⁹²⁷ Whiten, Jon, "Gov. Christie Vetoes Transit Hub Tax Credit Bill, Saying it Requires Too Much Affordable Housing, Jersey City Independent, February 23, 2011, http://www.jerseycityindependent.com/2011/02/23/gov-christie-vetoes-transit-hub-tax-credit-bill-because-it-requires-too-much-affordable-housing/, accessed June 29, 2011.

²⁹²⁸ Website of the Comptroller of Maryland, "Commuter Tax Credit," http://business.marylandtaxes.com/taxinfo/taxcredit/commuter/default.asp, accessed June 29, 2011.

²⁹²⁹ Website of King County, Washington, "Washington State Tax Credit," http://www.kingcounty.gov/transportation/CommuteSolutions/EmployerTaxBenefits/StateTaxCredit.aspx, accessed June 29, 2011.

²⁹³⁰ Website of the Minnesota Department of Revenue, "Employer Transit Pass Credit," http://taxes.state.mn.us/individ/pages/other_supporting_content_transit_pass_credit.aspx, accessed June 29, 2011.

²⁹³¹ Staff estimate based on Joint Committee on Taxation JCS-3-10, "Estimates Of Federal Tax Expenditures For Fiscal Years 2010-2014," http://www.jct.gov/publications.html?func=startdown&id=3718.

²⁹³² Joint Tax Committee, Present Law Energy-Related Tax Provisions and Proposed Modifications Contained in the President's Fiscal Year 2011 Budget, April 14, 2010, http://www.jct.gov/publications.html?func=startdown&id=3678.

²⁹³³ Website of the Congressional Budget Office, "CBO Budget Options, Vol 2," August, 2009, http://cbo.gov/ftpdocs/102xx/doc10294/08-06-BudgetOptions.pdf, June 25, 2011, 223.

²⁹³⁴ DiSavino, Scott, "US gives tax credit to Illinois clean coal project," Reuters, July 28, 2010, http://www.reuters.com/article/2010/07/28/utilities-tenaska-taylorville-idUSN2821308620100728, accessed June 27, 2011.

²⁹³⁵ Finke, Doug and Landis, Tim, "Taylorville officials willing to wait a little longer on Tenaska," State Journal-Register (Springfield, IL), June 1, 2011, http://www.sj-r.com/state/x724665090/Taylorville-officials-willing-to-wait-a-little-longer-on-Tenaska, accessed June 27, 2011.

²⁹³⁶ Website of the Congressional Budget Office, "CBO Budget Options, Vol 2," August, 2009, http://cbo.gov/ftpdocs/102xx/doc10294/08-06-BudgetOptions.pdf, June 25, 2011, 223.

²⁹³⁷ Website of the Internal Revenue Service, Announcement 2010-56, September 27, 2010, accessed July 5, 2011, http://www.irs.gov/irb/2010-39_IRB/ar09.html.

²⁹³⁸ Website of U.S. Department of Energy, Energy Blog, 50 Years After the MoonShot Speech, Critical Advancements in Clean Energy Technology, G. Simmons, May 25, 2011, accessed June 29, 2011, http://blog.energy.gov/blog/2011/05/25/50-years-after-moonshot-speech-critical-advancements-clean-energy-technology; Website of CNN Politics, State of the Union Coverage, "Obama Touts Clean Energy a Day After State of the Union Speech, CNN Wire Staff, January 26, 2011, accessed June 29, 2011, http://www.cnn.com/2011/POLITICS/01/26/white.house.tour/index.html

²⁹³⁹ Website of RenewableEnergyWorld.com, "2010 Clean Energy Investment Hits a New Record," January 11, 2011 http://www.renewableenergyworld.com/rea/news/article/2011/01/2010-clean-energy-investment-hits-a-new-record, accessed June 28, 2011.

²⁹⁴⁰ Sissine, Fred, "Renewable Energy R&D Funding History: A Comparison with Funding for Nuclear Energy, Fossil Energy, and Energy Efficiency R&D," Congressional Research Service, January 26, 2011, http://www.crs.gov/Products/RS/PDF/RS22858.pdf, accessed June 28, 2011.

²⁹⁴¹ Weiss, Daniel J., "Clean Energy Progress Without Congress, Center for American Progress, January 20, 2011, http://www.americanprogress.org/issues/2011/01/energy_sotu.html, accessed June 28, 2011.

²⁹⁴² Website of RenewableEnergFocus.com, "2010: Clean energy investment up to US $243 billion," April 27, 2011, http://www.renewableenergyfocus.com/view/17600/2010-clean-energy-investment-up-to-us243-billion/, accessed June 28, 2011.

²⁹⁴³ Website of New Energy Technologies Inc., "Investing in renewable and alternative energy," http://www.newenergytechnologiesinc.com/investing_renewable, accessed June 28, 2011.

²⁹⁴⁴ Wald, Mathew L, "Energy Firms Aided by U.S. Find Backers," New York Times, February 2, 2011, http://www.nytimes.com/2011/02/03/business/energy-environment/03energy.html?_r=1, accessed June 2

²⁹⁴⁵ Podkul, Cezary, "Private Equity is Bullish on Clean Energy," New York Times, http://green.blogs.nytimes.com/2010/01/29/private-equity-is-bullish-on-clean-energy/, accessed June 28, 2011; Website of Pipeline Clean Energy, "Project financing stalls in 1Q11 while venture capital and private equity accelerate," April 19, 2011, http://cleanenergypipeline.com/Press.aspx?id=15, accessed June 28, 2011; and Website in LiveScience.com, "Investment in Green Energy Quadruples in 4 years," June 3, 2009, http://www.livescience.com/5497-investment-green-energy-quadruples-4-years.html, accessed June 28, 2011.

²⁹⁴⁶ Bloomberg New Energy Finance, BCSE Meeting, March 15, 2011, Slide 11; Website of Deloitte & Touche LLP in conjunction with The Cleantech Group, "Global Clean Technology Venture Investment Increases 65 Percent in 1H 2010 to March the Record 1H 2008," July 1, 2010, accessed June 29, 2011, http://www.deloitte.com/view/en_US/us/press/Press-Releases/83fef471f40f9210VgnVCM100000ba42f00aRCRD.htm

²⁹⁴⁷ Website of RenewableEnergyWorld.com, "2010 Clean Energy Investment Hits a New Record," January 11, 2011 http://www.renewableenergyworld.com/rea/news/article/2011/01/2010-clean-energy-investment-hits-a-new-record, accessed June 28, 2011.

²⁹⁴⁸ Website of the U.S. Department of Energy, "Richard Branson Pledges $3 Billion in Renewable Energy Technology Development," September 26, 2006, http://www1.eere.energy.gov/inventions/energytechnet/news_detail.html?news_id=10304, accessed June 28, 2011.

²⁹⁴⁹ Dodrill, Tara, "Warren Buffett Boosts Wind Power Financials," Yahoo News, March 2, 2011, http://news.yahoo.com/s/ac/20110302/tc_ac/7979838_warren_buffett_boosts_wind_power_financials, accessed June 28, 2011.

²⁹⁵⁰ LaMonica, Martin, "Bill Gates Invests in Algae Fuel," CNet News, September 17, 2008, http://news.cnet.com/8301-11128_3-10043996-54.html, accessed June 28, 2011.

²⁹⁵¹ Website of Renewable Energy World, "Bill Gates backs battery built for clean energy," May 23, 2011, http://www.renewableenergyworld.com/rea/partner/buy-battery/news/article/2011/05/bill-gates-backs-battery-built-for-clean-energy, accessed June 28, 2011.

²⁹⁵² LaMonica, Martin, "Bill Gates investing in Vinod Khosla green-tech fund," CNet News, January 25, 2010, http://news.cnet.com/8301-11128_3-10439785-54.html?tag=mncol;title, accessed June 28, 2011.

²⁹⁵³ Website of Environment and Energy Management News, "GE's Ecomagination Spent $1.8bn, Launched 22 Products in 2010,"June 21, 2011, http://www.environmentalleader.com/2011/06/21/ges-ecomagination-spent-1-8bn-launched-22-products-in-2010/, accessed June 28, 2011.

²⁹⁵⁴ Anderson, Eric, "GE hits milestone with thin-film solar, will build plant," Times-Union (Albany, NY), April 7, 2011. http://blog.timesunion.com/business/ge-hits-milestone-with-thin-film-solar-will-build-plant/23346/, accessed June 28, 2011.

²⁹⁵⁵ Website of Google Green, "Are there innovative ways to support innovation," http://www.google.com/green/collaborations/support-innovations.html, accessed June 28, 2011.

²⁹⁵⁶ The Official Google Blog website, "Helping homeowners harness the sun," June 16, 2011, http://googleblog.blogspot.com/2011/06/helping-homeowners-harness-sun.html, accessed June 28, 2011; Website of the Financial Times Tech Hug, "Google launches $280 million solar fund," June 15, 2011 http://blogs.ft.com/fttechhub/2011/06/google-launches-280-million-solar-fund/, accessed June 28, 2011.

²⁹⁵⁷ Website of BusinessWire, "Citi, Google to Invest in Additional Phase of Terra-Gen Power's Alta Wind Energy," June 22, 2011, http://www.businesswire.com/news/home/20110622006208/en/Citi-Google-Invest-Additional-Phase-Terra-Gen-Power%E2%80%99s, accessed June 29, 2011; Website of Austin Business Journal, by Silicon Valley/San Jose Business Journal, "Google puts another $102M in wind energy," June 22, 2011, http://www.bizjournals.com/austin/news/2011/06/22/google-puts-another-102m-into-mojave.html, accessed June 28, 2011.

²⁹⁵⁸ Website of Goldman Sachs, "Environmental Stewardship and Sustainability," http://www2.goldmansachs.com/citizenship/environment/business-initiatives.html, accessed June 28, 2011.

²⁹⁵⁹ Faiola, Anthony, "Spain's Answer to unemployment: Go Greener," Washington Post, September 24, 2009, http://www.washingtonpost.com/wp-dyn/content/article/2009/09/23/AR2009092302152.html, accessed June 28, 2011.

²⁹⁶⁰ Maykuth, Andrew, "Pennsylvania's solar-energy industry suffering from success," Philadelphia Inquirer (PA), May 24, 2011, http://articles.philly.com/2011-05-24/business/29578002_1_solar-projects-green-energy-capital-partners-solar-power, accessed June 28, 2011.

²⁹⁶¹ Small wind projects can receive the credit.

²⁹⁶² ADP News Renewable Energy Track, "US solar industry shines through in Q1 2011," June 27, 2011, http://www.forconstructionpros.com/article/article.jsp?siteSection=25&id=20696&pageNum=3, accessed June 29, 2011.

²⁹⁶³ ADP News Renewable Energy Track, US solar industry shines through in Q1 2011, June 27, 2011, http://www.forconstructionpros.com/article/article.jsp?siteSection=25&id=20696&pageNum=3, accessed June 29, 2011

²⁹⁶⁴ Sherlock, Molly, "Energy Related Tax Provisions," Congressional Research Service memo, May 11, 2011.

²⁹⁶⁵ Sullivan, Martin A. "Economic Analysis, Wind Credits and Clean Air," Tax Notes, October 30, 2006, 405-417.

²⁹⁶⁶ Website of the American Wind Energy Association, "2010 U.S. Wind Industry Market Update," http://www.awea.org/learnabout/publications/factsheets/upload/Market-Update-Factsheet-Final_April-2011.pdf, June 28, 2011.

²⁹⁶⁷ Sherlock, Molly, "Energy Related Tax Provisions," Congressional Research Service memo, May 11, 2011.

²⁹⁶⁸ Feldman, Stacy, "U.S. Solar Industry Fights to Save Controversial Clean Energy Grants" Reuters, November 16, 2010, http://www.reuters.com/article/idUS404294354320101116, accessed June 28, 2011.

²⁹⁶⁹ Website of the Financial Times, "US Energy Stimulus Dollars Go Overseas," October 29, 2009, http://www.ft.com/cms/s/0/b091007e-c4b3-11de-8d54-00144feab49a.html, accessed June 28, 2011.

²⁹⁷⁰ Feldman, Stacy, "U.S. Solar Industry Fights to Save Controversial Clean Energy Grants" Reuters, November 16, 2010, http://www.reuters.com/article/idUS404294354320101116, accessed June 28, 2011.

²⁹⁷¹ Website of the Investigative Reporting Workshop, "Overseas firms collecting most green energy money," October 29, 2009, http://investigativereportingworkshop.org/investigations/wind-energy-funds-going-overseas/story/overseas-firms-collecting-most-green-energy-money/, accessed June 28, 2011.

²⁹⁷² Website of the Joint Committee on Taxation, "Estimated Budget Effects Of The 'Tax Relief, Unemployment Insurance Reauthorization, And Job Creation Act Of 2010,'" December 10, 2010, http://www.jct.gov/publications.html?func=startdown&id=3715, accessed June 28, 2011.

²⁹⁷³ Website of the White House, "Office of the Press Secretary, Fact Sheet: $2.3 Billion in New Clean Energy Manufacturing Tax Credits," January 8, 2010, accessed June 29, 2011, http://www.whitehouse.gov/the-press-office/fact-sheet-23-billion-new-clean-energy-manufacturing-tax-credits

²⁹⁷⁴ Website of the Department of Energy, "President Obama Awards $2.3 Billion for New Clean-Tech Manufacturing Jobs,"http://www.energy.gov/recovery/48C.htm, accessed June 28, 2011.

²⁹⁷⁵ Cheyney, Tom, "For the record: Manufacturing investment tax credit typo pushes REC Solar to the top of the list," PV-Tech, January 13, 2010, http://www.pv-tech.org/chip_shots_blog/for_the_record_manufacturing_investment_tax_credit_typo_pushes_rec_solar_to, accessed June 28, 2011.

²⁹⁷⁶ Website of Renewable Energy Corporation, REC ASA -- REC Silicon to Receive US Federal Tax Credits for Job Creating Investments, January 12, 2010, accessed June 29, 2011, http://www.recgroup.com/view?feed=R/136555/PR/201001/1372439.xml

²⁹⁷⁷ Osborne, Mark, "Polysilicon producers top U.S. federal tax credits, PV-Tech, January 12, 2010, http://www.pv-tech.org/news/polysilicon_producers_top_u.s._federal_tax_credits, accessed June 28, 2011.

²⁹⁷⁸ Staff estimate.

²⁹⁷⁹ Sherlock, Molly, "Energy Related Tax Provisions," Congressional Research Service memo, May 11, 2011.

²⁹⁸⁰ Website of the U.S. Department of Energy, "Tax Breaks for Businesses, Utilities, and Governments," http://www.energy.gov/additionaltaxbreaks.htm, accessed June 28, 2011.

²⁹⁸¹ Cunningham, Lynn J. "Renewable Energy and Energy Efficiency Incentives: A Summary of Federal Programs," Congressional Research Service, R40913, March 22, 2009, http://www.crs.gov/pages/Reports.aspx?PRODCODE=R40913&Source=search, accessed June 28, 2011.

²⁹⁸² Website of the U.S. Treasury Inspector General for Tax Administration, "Individuals Received Millions of Dollars in Erroneous Plug-in Electric and Alternative Motor Vehicle Credits," January 21, 2011, http://www.treasury.gov/tigta/auditreports/2011reports/201141011fr.pdf, accessed June 28, 2011.

²⁹⁸³ Gallagher, Kelly Sims, and Muehlegger, Erich J, "Giving Green to Get Green: Incentives and Consumer Adoption of Hybrid Vehicle Technology." Harvard Kennedy School Faculty Research Working Paper Series RWP08-009, February 2008, http://web.hks.harvard.edu/publications/workingpapers/citation.aspx?PubId=5488, accessed June 28, 2011.

²⁹⁸⁴ Staff Estimate based on "Expiring Tax Provisions (xls)," available on website of the Congressional Research Service, The Budget and Economic Outlook: An Update, August 2010, http://www.cbo.gov/doc.cfm?index=11705.

²⁹⁸⁵ Schnepf, Randy. "Agriculture-Based Biofuels: Overview and Emerging Issues," Congressional Research Service, June 11, 2010

²⁹⁸⁶ Website of the Congressional Budget Office, Using Biofuel Tax Credits to Achieve Energy and Environmental Policy Goals, July 2010, http://www.cbo.gov/doc.cfm?index=11477, accessed June 28, 2011.

²⁹⁸⁷ Schepf, Randy, "Redundancy of ethanol blender's tax credit when coupled with usage mandate," Congressional Research Service Confidential memo, July 13, 2010.

²⁹⁸⁸ Website of the Joint Committee on Taxation, "Estimated Budget Effects Of The 'Tax Relief, Unemployment Insurance Reauthorization, And Job Creation Act Of 2010,'" December 10, 2010, http://www.jct.gov/publications.html?func=startdown&id=3715, accessed June 28, 2011.

²⁹⁸⁹ Shaffer. David, "Midwest towns caught in middle of ethanol-subsidy fight," Los Angeles Times, June 25, 2011, http://articles.latimes.com/2011/jun/25/business/la-fi-ethanol-subsidies-20110625, accessed June 28, 2011.

²⁹⁹⁰ Staff estimate.

²⁹⁹¹ Ausick, Paul, "Biodiesel Makers Will Struggle After Tax Credit Expires, January 5, 2010, http://www.investorplace.com/4732/biodiesel-makers-struggle-after-biodiesel-tax-credit-expires/, accessed June 28, 2011.

²⁹⁹² Schnepf, Randy, "Agriculture-Based Biofuels: Overview and Emerging Issues," Report: RN1282, Congressional Research Service, June 11, 2010, http://www.crs.gov/pages/Reports.aspx?PRODCODE=R41282&Source=search, accessed June 28, 2011.

²⁹⁹³ Sherlock, Molly, "Energy Related Tax Provisions," Congressional Research Service memo, May 11, 2011.

²⁹⁹⁴ Website of the Des Moines Register, EPA cuts non-corn ethanol targets," June 22, 2011, http://blogs.desmoinesregister.com/dmr/index.php/2011/06/22/epa-cuts-non-corn-ethanol-targets/, accessed June 28, 2011.

²⁹⁹⁵ Doggett, Tom, "US EPA proposes 2012 ethanol use at 13.2 bln gallons," Reuters, June 21, 2011, http://www.reuters.com/article/2011/06/21/usa-ethanol-epa-idUSWNA156820110621, accessed June 28, 2011.

²⁹⁹⁶ Mandel, Jenny, "Refiners Protest EPA's 'ridiculous' cellulosic targets," Greenwire, June 22, 2011, accessed June 29, 2011.

²⁹⁹⁷ Website of the Congressional Research Service, Cellulosic Biofuels: Analysis of Policy Issues for Congress, Kelsi Bracmort, Randy Schnepf, Megan Stuffs, Brent D. Yacobbuci, January 13, 2011, accessed on June 29, 2011, http://www.crs.gov/pages/Reports.aspx?PRODCODE=RL34738&Source=search

²⁹⁹⁸ Website of the Congressional Research Service, Renewable Fuel Standard (RFS): Overview and Issues, Randy Schnepf, Brent D. Yacobucci, February 1, 2011, accessed on June 29, 2011, http://www.crs.gov/pages/Reports.aspx?PRODCODE=R40155&Source=search#_Toc284409516

²⁹⁹⁹ Website of the Natural Resources Defense Council, "Efficient Appliances Save Energy -- and Money, January 13, 2010, http://www.nrdc.org/air/energy/fappl.asp, accessed June 30, 2011.

³⁰⁰⁰ Website of the U.S. Department of Energy, "Office of Energy Efficiency and Renewable Energy, Appliances & Commercial Equipment Standards," http://www1.eere.energy.gov/buildings/appliance_standards/, accessed June 30, 2011.

³⁰⁰¹ Website of the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, "Technical Report: Analysis of Amended Energy Conservation Standards for Residential Refrigerator-Freezers," October 2005. http://www1.eere.energy.gov/buildings/appliance_standards/pdfs/refrigerator_report_1.pdf, accessed June 30, 2011.

³⁰⁰² Website of the Tax Foundation, "Is the Distribution of Tax Burdens and Tax Benefits Equitable? (Testimony of Scott A. Hodge before the U.S. Senate Committee on Finance)," May 3, 2011, http://www.taxfoundation.org/publications/show/27254.html, accessed June 30, 2011.

³⁰⁰³ Website of the Clean Energy Coalition, "Stakeholders," http://cec-mi.org/about/stakeholders/, accessed June 30, 2011; Website of the Clean Energy Coalition, "Communities," http://cec-mi.org/communities/, accessed June 30, 2011.

³⁰⁰⁴ Gilmer, Ellen M., "The Art of Luring 'Poor' Cities Into Energy-Saving Projects," ClimateWire via New York Times, June 27, 2011, http://www.nytimes.com/cwire/2011/06/27/27climatewire-the-art-of-luring-poor-cities-into-energy-sa-63497.html?pagewanted=print, accessed June 30, 2011.

³⁰⁰⁵ Gilmer, Ellen M., "The Art of Luring 'Poor' Cities Into Energy-Saving Projects," ClimateWire via New York Times, June 27, 2011, http://www.nytimes.com/cwire/2011/06/27/27climatewire-the-art-of-luring-poor-cities-into-energy-sa-63497.html?pagewanted=print, accessed June 30, 2011.

³⁰⁰⁶ Sutherland, Ronald, "The High Cost of Federal Energy Efficiency Standards for Residential Appliances," CATO Institute, December 23, 2003, http://www.cato.org/pubs/pas/pa504.pdf, accessed June 30, 2011.

³⁰⁰⁷ Website for the American Council for an Energy-Efficient Economy, "Energy Efficiency Tax Incentives: Changes in Store for 2011," January 10, 2011, http://www.aceee.org/press/2011/01/energy-efficiency-tax-incentives-changes-store-2011, accessed June 30, 2011; and email correspondence with the Congressional Research Service.

³⁰⁰⁸ Website of the Climate and Energy Project, "U.S. drops to 3rd in clean-energy investment," March 30, 2011, U.S. drops to 3rd in clean-energy investment, accessed June 30, 2011.

³⁰⁰⁹ Harney, Kenneth R., "Treasury inspector general highlights problems at IRS with homeowner tax credits, Washington Post, May 27, 2011, http://www.washingtonpost.com/realestate/treasury-inspector-general-highlights-problems-at-irs-with-homeowner-tax-credits/2011/05/23/AGm9qmCH_story.html, accessed June 29, 2011.

³⁰¹⁰ Peterson, Kristina, "Treasury Audit Finds IRS Doesn't Adequately Track Energy Credits," Dow Jones Newswires, May 18, 2011, http://online.wsj.com/article/BT-CO-20110518-714482.html, accessed June 30, 2011.

³⁰¹¹ Peterson, Kristina, "Treasury Audit Finds IRS Doesn't Adequately Track Energy Credits," Dow Jones Newswires, May 18, 2011, http://online.wsj.com/article/BT-CO-20110518-714482.html, accessed June 30, 2011.

³⁰¹² Website of the Treasury Inspector General for Tax Administration, Processes Were Not Established to Verify Eligibility for Residential Energy Credits, 2011-41-038, April 19 2011, http://www.treasury.gov/tigta/auditreports/2011reports/201141038fr.pdf, accessed June 30, 2011.

³⁰¹³ Website of the Senate Budget Committee, "Tax Expenditures: Compendium of Background Material on Individual Provisions" Congressional Research Service, December 31, 2010, http://budget.senate.gov/democratic/index.cfm/files/serve?File_id=8a03a030-3ba8-4835-a67b-9c4033c03ec4, accessed June 25, 2011

³⁰¹⁴ Website of the Senate Budget Committee, "Tax Expenditures: Compendium of Background Material on Individual Provisions" Congressional Research Service, December 31, 2010, http://budget.senate.gov/democratic/index.cfm/files/serve?File_id=8a03a030-3ba8-4835-a67b-9c4033c03ec4, accessed June 25, 2011.

³⁰¹⁵ Website of the Joint Committee on Taxation, "Estimated Budget Effects Of The 'Tax Relief, Unemployment Insurance Reauthorization, And Job Creation Act Of 2010,'" December 10, 2010, http://www.jct.gov/publications.html?func=startdown&id=3715, accessed June 28, 2011

³⁰¹⁶ Staff of Senator Tom Coburn estimate.

³⁰¹⁷ Sherlock, Molly, "Energy Related Tax Provisions," Congressional Research Service memo, May 11, 2011

³⁰¹⁸ Cunningham, Lynn J. and Roberts, Beth A., "Renewable Energy and Energy Efficiency Incentives: A Summary of Federal Programs," Congressional Research Service, March 22, 2011, http://www.crs.gov/pages/Reports.aspx?PRODCODE=R40913&Source=search, accessed June 30, 2011.

³⁰¹⁹Website for the Database of State Incentives for Renewables and Efficiency, "Residential Energy Conservation Subsidy Exclusion (Personal), http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US03F&re=1&ee=1, accessed June 30, 2011.

³⁰²⁰ Website of the Joint Committee on Taxation, "Description Of Revenue Provisions Contained In The President's Fiscal Year 2012 Budget Proposal."JCS-3-11, June 14, 2011, http://www.jct.gov/publications.html?func=startdown&id=3796, accessed July 5, 2011, 336-337.

³⁰²¹ Website of the Congressional Research Service, "Energy Tax Policy: Historical Perspectives on and Current Status of Energy Tax Expenditures," May 2, 2011, http://www.crs.gov/pages/Reports.aspx?PRODCODE=R41227&Source=search#_Toc292174215, accessed July 5, 2011.

³⁰²² Website of the Independent Petroleum Association of America, "Marginal Well Tax Credit," April 2009, http://www.ipaa.org/issues/factsheets/tax_capital/2009-04-MarginalWellTaxCreditFactSheet.pdf, accessed July 5, 2011.

³⁰²³ Website of the State of Oklahoma, "Marginal Well Commission," http://www.ok.gov/marginalwells/About_MWC/Quick_Facts/index.html, accessed July, 5, 2011.

³⁰²⁴ Website of the Congressional Research Service, "Nuclear Energy Policy," RL33558, May 10, 2011, http://www.crs.gov/pages/Reports.aspx?PRODCODE=RL33558&Source=search#_Toc292897883, accessed July 5, 2011.

³⁰²⁵ Website of the Congressional Research Service, "Nuclear Energy Policy," RL33558, May 10, 2011, http://www.crs.gov/pages/Reports.aspx?PRODCODE=RL33558&Source=search#_Toc292897883, accessed July 5, 2011.

³⁰²⁶ Website of the Senate Budget Committee, "Tax Expenditures: Compendium of Background Material on Individual Provisions" Congressional Research Service, December 31, 2010, http://budget.senate.gov/democratic/index.cfm/files/serve?File_id=8a03a030-3ba8-4835-a67b-9c4033c03ec4, accessed June 25, 2011.

³⁰²⁷ Congressional Research Service, "Federal Land Ownership: Current Acquisition and Disposal Authorities," December 16, 2010, http://www.crs.gov/Products/RL/PDF/RL34273.pdf.

³⁰²⁸ Congressional Research Service, "Federal Land Ownership: Current Acquisition and Disposal Authorities," December 16, 2010, http://www.crs.gov/Products/RL/PDF/RL34273.pdf.

³⁰²⁹ Government Accountability Office, "Department of the Interior: Major Management Challenges," March 1, 2011, http://www.gao.gov/new.items/d11424t.pdf.

³⁰³⁰ Congressional Research Service, "Land and Water Conservation Fund: Overview, Funding History and Issues," August 13, 2010, http://www.crs.gov/Products/RL/PDF/RL33531.pdf. & Congressional Research Service, "Interior, Environment and Related Agencies: FY 2011 Appropriations," May 12, 2011, http://www.crs.gov/Products/R/PDF/R41258.pdf.

³⁰³¹ Becker, Bernie, The Hill: "GOP Lawmakers: Sell Some Public Lands to Narrow Deficit," March 18, 2011, http://thehill.com/blogs/on-the-money/budget/150683-gop-lawmakers-sell-some-public-lands-to-narrow-deficit.

³⁰³² Zients, Jeffrey, White House Blog, "Cutting Costs by Getting Rid of Government Buildings We Don't Need," March 2, 2011, http://www.whitehouse.gov/blog/2011/03/02/cutting-costs-getting-rid-government-buildings-we-dont-need.

³⁰³³ Government Accountability Office (GAO-11-370T), "Federal Real Property: The Government Faces Challenges to Dispose of Unneeded Buildings, February 10, 2011, See Executive Summary.

³⁰³⁴ U.S. General Service Administration, "2010 Guidance for Real Property Inventory Reporting," See page 9. For example, the guidance states that an office building with less than 75 percent occupation is considered underutilized. The percentage of utilization is different depending on the type of property.

³⁰³⁵ Government Accountability Office(GAO-03-119), "High-Risk Series: An Update", January 2003, See page 23

³⁰³⁶ Government Accountability Office, "High-Risk Series: An Update", February 2011, See page 58.

³⁰³⁷ U.S. General Services Administration, See page 5.

³⁰³⁸ 2010 data from OMB.

³⁰³⁹ Courtney Thompson, Federal News Radio, "Senators want progress report on real property disposal efforts", July 7, 2011, http://federalnewsradio.com/?nid=35&sid=2450478.

³⁰⁴⁰ Gregory Korte, USA Today "White House identifies unneeded government property", May 4, 2011, http://www.usatoday.com/news/washington/2011-05-03-government-identifies-surplus-buildings_n.htm

³⁰⁴¹ "$9.3 million in overdue taxes owed," Washington Post, Farnam, T.W., September 10, 2010, http://www.washingtonpost.com/wp-dyn/content/article/2010/09/09/AR2010090907023.html

³⁰⁴² "Smithsonian website, http://www.si.edu/giving/giv_faqs.html#faq10

³⁰⁴³ Staff estimate.

³⁰⁴⁴ "$200 Billion in Illustrative Savings, " Fiscal Commission website, http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/Illustrative_List_11.10.2010.pdf

³⁰⁴⁵ Staff estimate.

³⁰⁴⁶ Brad Heath, "Swindlers rarely pay huge, court-ordered fines," USA Today, March 7, 2011; http://www.usatoday.com/news/washington/2011-03-07-1Afines07_ST_N.htm.

³⁰⁴⁷ Brad Heath, "Swindlers rarely pay huge, court-ordered fines," USA Today, March 7, 2011; http://www.usatoday.com/news/washington/2011-03-07-1Afines07_ST_N.htm.

³⁰⁴⁸ Martha Mendoza and Christopher Sullivan, "Unpaid Federal Fines Soar to $35 Billion; An AP review finds that financial penalties are often reduced, waived or simply ignored," April 2, 2006; http://articles.latimes.com/2006/apr/02/news/adna-fines2

³⁰⁴⁹ Ben Poston and Mary Zahn, "Fines sometimes go unpaid by nursing homes," Milwaukee Journal Sentinel, July 28, 2008; http://www.jsonline.com/news/wisconsin/29557299.html.

³⁰⁵⁰ Martha Mendoza and Christopher Sullivan, "Unpaid Federal Fines Soar to $35 Billion; An AP review finds that financial penalties are often reduced, waived or simply ignored," April 2, 2006; http://articles.latimes.com/2006/apr/02/news/adna-fines2.

³⁰⁵¹ Martha Mendoza and Christopher Sullivan, "Unpaid Federal Fines Soar to $35 Billion; An AP review finds that financial penalties are often reduced, waived or simply ignored," April 2, 2006; http://articles.latimes.com/2006/apr/02/news/adna-fines2.

³⁰⁵² Martha Mendoza and Christopher Sullivan, "Unpaid Federal Fines Soar to $35 Billion; An AP review finds that financial penalties are often reduced, waived or simply ignored," April 2, 2006; http://articles.latimes.com/2006/apr/02/news/adna-fines2.

³⁰⁵³ Brad Heath, "Swindlers rarely pay huge, court-ordered fines," USA Today, March 7, 2011; http://www.usatoday.com/news/washington/2011-03-07-1Afines07_ST_N.htm.

³⁰⁵⁴ Neher, Juliann, "Warren Buffett Tells ABC Rich People Should Pay Higher Taxes," Bloomberg News, November 22, 2010, http://www.bloomberg.com/news/2010-11-21/warren-buffett-tells-abc-rich-people-should-pay-more-in-taxes.html

³⁰⁵⁵ Website of the Department of the Treasury, "Gifts to the United States Government," http://www.fms.treas.gov/faq/moretopics_gifts.html, accessed July 15, 2011.

³⁰⁵⁶ CATO, Downsizing the Federal Government, "Charitable Donations to the Government," accessed July 15, 2011, http://www.downsizinggovernment.org/charitable-donations-government.