Federal FY2022 Budget Proposal Calls for Large Spending Increases on State, Local Government Priorities

The President’s Budget for Fiscal Year 2022 comes with a total price tag of $6 trillion. If approved, much of the money would actually be spent over the following decade on projects long prioritized by state, local and tribal governments. FY22-Biden-Budget

The federal budget blueprint incorporates the American Jobs Plan and the American Families Plan. The former calls for hundreds of billions in direct spending and guaranteed borrowing to build and repair traditional infrastructure such as roads, bridges, airports and rail systems. Money would also be allocated to ensure clean drinking water supplies, especially in localities that still rely on lead pipes to supply homes.

The American Families Plan combines expansions of the child tax credit, the earned income tax credit and the child and dependent care tax credit with mandates for paid family and bereavement leave to qualified employees. Adjustments made to personal income taxes by earlier pandemic relief legislation such as the American Rescue Plan Act are set to expire by 2025. The new family leave program would phase in through 2031.

Other big-ticket items in the proposed budget are

  • Upgrading and securing the electric power grid,
  • Ensuring all U.S. residents have access to high-speed broadband,
  • Creating a public option health insurance plan for the ACA Marketplace,
  • Boosting spending on Title I schools, and
  • Fully funding the Indian Health Service and programs administered by tribal governments.

Paying the Tab

Totals reported in the full budget proposal document indicate that implementing Biden’s budget as proposed would require outlays of $756 billion for defense programs next year and $932 billion for discretionary spending—essentially everything else that is not Social Security or Medicare.

The Biden administration intends to pay the tab by revamping the capital gains and corporate tax systems. Complete details appear in a 114-page report titled General Explanations of Administration’s Fiscal Year 2022 Revenue Proposal.

The short version is large corporations and wealthy investors would be asked to pay higher taxes while most working people would see their income tax rates hold steady. Also, the IRS, which has seen its staff and operating budgets steadily reduced over the past two decades, would be rebuilt.

The Biden administration initially proposed raising corporate taxes on profits to 28 percent. For capital gains and qualified dividends exceeding $1 million, the tax rate would increase to 37 percent.

A section of the General Explanation report titled “Provide Subsidized State and Local Bonds for Infrastructure” merits a close read by some IPMA-HR members. It discusses new ways for state and local governments to pay for capital projects.

Passing the FY2022 federal budget could create qualified School Infrastructure Bonds to improve digital learning. It could also expand the use of bonds allocated by the secretary of transportation to add public transit, passenger rail and infrastructure for zero emissions vehicles.

Federal Hiring on the Horizon

The budget calls for adding some 50,000 new U.S. government jobs. Each cabinet-level agency except Homeland Security would see its workforce grow, with the highest percentage increases occurring at the Department of Labor, HUD, EPA and the National Science Foundation.

That hiring would come in conjunction with an across-the-board annual raise of 2.7 percent for military personnel and civil servants. Locality adjustments are not spelled out in the budget proposal.

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