The 537 PACT applied to Calender Year 2012

The 537 were incredibly dysfunctional in 2012. The House passed a budget; the Senate did not. There was the debt ceiling crisis, no budget enacted, the debt ceiling crisis, bond downgrade, and fiscal cliff. Let's see how the 537 PACT would have affected the various Members, had it been in place. 

To examine how the 537 Accountability PACT would affect Members, let’s look at a Member’s 2012 tax rate, assuming that the PACT had been in effect.  None of the key events-budget enactment, tax rates set, or debt ceiling increase passed-were enacted before the end of the CY 2012-an example of our government’s dysfunction and incompetence. Based on FY 2012 actuals and the FY 2013 budget process, Member base tax rates for 2012 would range from 35.4% to 46.8%, with their effective rates being higher, depending on the maximum marginal rate any citizen is subject to.

The calculation is outlined below:

The base tax rate applies to all Members and is equal to FY 2012 federal spending (direct and mandated but not funded) as a percent of GDP. This base rate would be 22.7% plus unfunded mandates (amount unknown).

A marginal rate equal to the highest marginal rate any citizen faced in 2012 applies to 20% of all Members’ income. This rate has not been determined. The calculations below assume that this highest marginal tax rate is 80%.

The deficit surcharge, equal to half of the deficit as a percent of GDP, applies to all members as well. This deficit surcharge equals 3.5%.

For those Members voting for an out of balance budget or a deficit ceiling increase or an out of balance budget would also be 3.4%. This would be the majority of the Members.

The next step is to add the FME penalties to the base rates. These FME penalties are based largely on the FY 2013 budget process, which is outlined below:

The President submitted his Budget Request on February 13^th (one week late)

The House passed a Budget Resolution on March 29 (on time-note that the House woudl get a small bonus in pay for this.)

The Senate did not pass a Budget Resolution

None of the three required elements for FY 2013-budget enacted, tax rates set, or debt ceiling increase for FY2013- were enacted by the end of the calendar year.

The amount of the tax penalty depends on whether one is the Minority or Majority party and where one serves. Thus there are five cases, as outlined below:

Case	FME tax penalty prior to Oct 1, 2012	FME tax penalty after Oct 1, 2012	Total FME tax penalty
Executive Members	4.25%	9.2%	13.45%
Majority Member of House	0	9.2%	9.2%
Minority Member of House	0	9.2%	9.2%
Majority Member of Senate	8%	9.2%	17.2%
Minority Member of Senate	5.9%	9.2%	15.1%

When all of these items are combined, there are a total of nine cases. The tax rate for the President and Vice President are shown in the table below:

Case	Tax Rate	Deficit Surtax	FME Surtax	Total tax rate
Base Tax Rate (80% of income)	22.7%	6.9%	13.45%	43.05%
Marginal Tax Rate (20% of income)	80%	6.9%	13.45%	100.35%
Combined effective rate				54.51%

A similar calculation can be made for each of the Congressional Members based on their Party, Chamber and if they voted for a debt ceiling increase (DCI) or an out of balance budget (OOBB):

Case	Base Rate with Penalties	Marginal Rate with Penalties	Combined, effective rate
Majority Member of House-voted for OOBB or DCI	38.8%	96.1%	50.3%
Minority Member of House-voted for OOBB or DCI	38.8%	96.1%	50.3%
Majority Member of Senate-voted for OOBB or DCI	46.8%	104.1%	58.3%
Minority Member of Senate-voted for OOBB or DCI	44.7%	102%	56.2%
Majority Member of House-did not vote for OOBB or DCI	35.4%	122.7%	46.9%
Minority Member of House- did not vote for OOBB or DCI	35.4%	122.7%	46.9%
Majority Member of Senate- did not vote for OOBB or DCI	45.4%	130.7%	56.5%
Minority Member of Senate- did not vote for OOBB or DCI	41.3%	128.6%	52.8%

These tables demonstrate the effectiveness of the 537 Accountability PACT. The House passed a budget on time, as required by law, and had the lowest tax rate. The Senate never did pass a budget, and its majority members have the highest effective tax rate-over 58%. The President and Vice President are in between the two groups.

Other items to note:

• The debt ceiling limit for FY2013 has not been raised, so a daily surtax would continue.
• The above calculations do not include any surtaxes rolled over for previous deficits.
• The tax rates for the President and Vice President would be higher, since they failed to meet the legally mandated deadline for the Regulatory Agenda (and maybe other items, as well.).

Simply put, America cannot afford incompetence in the 537. The 537 Accountability PACT ensures that the 537 cannot afford their own incompetence either.