Eliminate Community Development Block Grants (CDBGs)
1-Year Savings: $3.3 billion
5-Year Savings: $16.5 billion

In the 1970s, many American cities suffered from destitution and blight. In 1974, Congress created the CDBG program in an effort to revitalize low income areas in cities across the country. Three years later during the 1977 World Series, swathes of New York’s South Bronx burned to the ground as Howard Cosell narrated on national television.The CDBG program was intended for infrastructure investment, housing rehabilitation, job creation, and public services in metropolitan cities and urban counties. Use of the grants was intended to be flexible, but the more than $100 billion given away to local governments over the last 35 years has fallen short on both accountability and results. Buffalo, New York, has received more than $500 million in CDBGs over the last 30 years, with little to show for it. Los Angeles handed out $24 million to a dairy that went bust 18 months later.

The CDBG formula for eligibility does not take a community’s average income into account. As a result, several very wealthy cities with robust tax bases, like Greenwich, Connecticut, have received CDBG dollars. A September 2012 GAO report found that “some cities with higher unemployment rates received less funding per unemployed person than other cities with lower unemployment rates.”

Former President Obama routinely recommended reducing CDBG funding because “the demonstration of outcomes [is] difficult to measure and evaluate.” Former President Trump’s budgets between FYs 2018 and 2021 recommended eliminating the entire CDBG program. Despite its lengthy record of failing to achieve its objectives and wasting the taxpayer’s money, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law by then-President Trump on March 27, 2020, provided $2 billion for the CDBG program, which represents 60.6 percent of the $3.3 billion appropriated in FY 2023.

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President Joe Biden has unveiled his proposed budget for the 2025 fiscal year, set to begin on Oct. 1, and in it, he is calling for $12 billion in spending to forgive student loans.

The proposed $12 billion is set to go to a new federal program called Reducing the Costs of College Fund that would support federal strategies to improve college graduation rates and make costs more affordable for students. (Related: Biden DID NOT wipe away debt via student loan forgiveness program – he only redistributed it to other taxpayers.)

Along with funding ways the executive can lower college costs and improve graduation rates, the $12 billion will go toward increasing the maximum that Pell Grant – federal subsidies for college attendees – awardees receive to $8,145.

The proposed budget will also allow the federal government to offer tuition-free rides through community college and eliminate origination fees, or fees charged by lenders for processing a borrower’s loans.

Finally, the $12 billion proposal will fund other student debt cancellation measures into a $3.7 billion state and local safety proposal.

In addition to the $12 billion specifically set aside for the Reducing the Costs of College Fund, Biden is also asking for the Department of Education’s budget to be increased to $82 billion, a $3.1 billion increase from the 2023 level. The White House claims the funding boost would address a range of early and higher education priorities.

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The publication of the research by Citizens Against Government Waste is a valuable body of research with surprising information. TaxConnections will post the information from this organization in a series to gain public attention to where your tax dollars are spent. We encourage you to reach out to Congress with your thoughts and/or make your commentary below and we will compile your thoughts and deliver this to them.

INTRODUCTION
The United States is on a path to fiscal insolvency. The national debt has surpassed $33 trillion for the first time and is set to grow at a record pace over the next decade. A February 15, 2023, Congressional Budget Office (CBO) report forecast an average annual deficit of $2 trillion between fiscal years (FY) 2024 and 2033. The annual deficits during this period will add $20.3 trillion to the national debt, bringing it to $53.3 trillion by FY 2033. According to the CBO, the deficit in 2033 will reach 6.9 percent of gross domestic product, “a level exceeded only five times since 1946.”

Rising interest rates will make payments for interest on the debt a fast growing share of federal expenditures. If Congress does not reduce spending, more money will have to borrowed to fund federal programs, which will mean more interest payments. Each one percentage point increase in interest rates means $330 billion more in annual interest payments on a debt of $33 trillion. That amount is more than the combined annual budgets for the Departments of Commerce, Energy, Interior, and Justice. The fiscal morass has been caused by several massive spending packages,
including bills signed into law in response to COVID-19 starting in the Trump administration, but mostly due to the bills passed during the Biden administration. They added $6 trillion in pandemic-related spending, much of which had nothing to do with the pandemic. The American Rescue Plan Act, which cost $1.9 trillion and was passed on a partisan basis by a Democratic majority in Congress and signed into law by President Biden, added as much as 3 percentage points to inflation. This excessive stimulus resulted in higher inflation in the U.S. than the average in 10 Organization for Economic Development countries.

Other legislation has not improved the picture. The Infrastructure Investment and Jobs Act of 2021 (IIJA), signed by President Biden on November 15, 2021, came with a price tag of $1 trillion. Then, on August 16, 2022, President Biden signed the Inflation Reduction Act, a deceptively labeled bill that included $369 billion in climate change/Green New Deal spending, $80 billion to hire 87,000 new Internal Revenue Service agents, and the establishment of drug cost negotiations that will result in price caps for drugs purchased by Medicare, crippling innovation by biopharmaceutical companies. Even President Biden admitted the bill was misnamed, saying on August 11, 2023, that “it has nothing to do with inflation: it has to do with $368 billion, the single largest investment in climate change anywhere in the world …” To help mitigate the fiscal tsunami, Citizens Against Government Waste
(CAGW) is releasing Prime Cuts 2023, which has been published since 1993. The 2023 version contains 543 recommendations that would save taxpayers $402.3 billion in the first year and $4 trillion over five years.

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The California Manufacturing Exemption allows certain manufacturing and biotech companies to exempt manufacturing and research and development (R&D) equipment purchases from sales and use tax.

• Purchased equipment or machinery must be used 50 percent or more during the manufacturing process.
• Equipment and machinery purchased and used for R&D qualifies.
• In any given calendar year, the combined amount of purchase must not exceed $200 million dollars.
  Any purchases beyond the $200 million threshold will not qualify.
• Only part of the state tax portion of the sales tax is exempt. The exemption currently amounts to 3.9375 percent of the purchase price of qualified property. Since the exemption is partial, recordkeeping will be key!

Companies benefitting from the California Manufacturing Exemption are those whose line of business falls into a qualifying NAICS code (3111 to 3399, 541711, or 541712), plus after January 1, 2018, those businesses engaged in business in NAICS codes 22111-221118 inclusive, and 221122.

The NAICS codes indicate the line of business the qualified company is primarily engaged in.

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