Tuesday, February 7, 2012
Fund for “Gifts to the United States for Reduction of the Public Debt”: Current Law and Proposed Legislation
James M. Bickley
Specialist in Public Finance
The reduction of the federal public debt is regarded as an important goal by many taxpayers. The Congressional Budget Office (CBO) presents the long-term budget outlook under two scenarios.1 First, the extended-baseline scenario adheres closely to current law and assumes that “many adjustments that law-makers have routinely made in the past—such as changes to the AMT [alternative minimum tax] and to the Medicare program’s payments to physicians—will be made again.”2 Under this extended-baseline scenario, federal debt held by the public would rise from 69% of GDP (gross domestic product) in FY2011 to 84% of GDP in FY2035.3 Second, the “alternative fiscal scenario embodies several changes to current law that would continue certain tax and spending policies that people have grown accustomed to.”4 Under this scenario, federal debt held by the public would rise from 69% of GDP in FY2011, to more than 100% of GDP in FY2021, and nearly 190% of GDP in FY2035.5
Under current law, an individual may make a contribution to reduce the national debt either online or by check payable to the Bureau of the Public Debt.6 Contributions may be taken as a charitable contribution deduction by taxpayers who itemize. These contributions are deposited in a Treasury fund titled “Gifts to the United States for Reduction of the Public Debt,” subsequently referred to in this report as the “Public Debt Reduction Fund.”7
Five bills have been introduced in the 112th Congress to add another method of making a contribution to reduce the national debt. These bills would permit taxpayers to designate a donation on their tax returns or their Form W-4. An employee completes Form W-4 in order for the employer to withhold the correct federal income tax from the employee’s pay.
In order to evaluate these bills, this report describes current law for the Public Debt Reduction Fund and discusses proposed legislation. The amounts of contributions by fiscal year to the Public Debt Reduction Fund are listed in an Appendix.
Date of Report: January 23, 2012
Number of Pages: 7
Order Number: R42088
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