Budget Overview
On Monday, March 11, the Biden administration released its fiscal year (FY) 2025 budget request (“Budget”) and several accompanying documents, listed at the end of this alert.
The $7.3 trillion Budget is the largest in U.S. history, including $1.6 trillion in base discretionary spending through the 12 FY 2025 appropriations bills. Defense discretionary spending is about $895.2 billion and non-defense discretionary spending is about $733.9 billion. The statutory spending limits established by the Fiscal Responsibility Act (P.L. 118-5) limit the expansion of both defense and non-defense spending in the President’s FY 2025 Budget.
The Budget also includes several proposals to raise revenue such as raising the 15% Corporate Alternative Minimum Tax enacted as part of the Inflation Reduction Act (IRA) to 21%; an increase in the current corporate income tax rate from 21% to 28%; and a Billionaire’s Tax that would impose a 25% minimum tax on all realized and unrealized gains of taxpayers with wealth that exceeds a certain threshold. The Budget includes several other revenue raisers that would cut the deficit by over $3 trillion, according to a White House statement. Click here for a brief overview of the tax proposals in the Budget.
The requested and enacted funding levels for the 15 Cabinet agencies are outlined below. Only some agencies have received full-year FY 2024 funding as of the FY 2025 Budget’s release. For agencies that have not, the FY 2023 enacted funding level is used below for comparison.
Note: figures are in billions.
Note: figures are in billions.
Outlook
The Budget provides insight into the president’s top policy priorities and information on how these priorities will impact federal deficits, economic growth and more. It is nonbinding and is largely a messaging tool for the administration, providing congressional appropriators with a record of President Biden’s funding priorities. President Biden highlighted many of the FY 2025 Budget priorities in his 2024 State of the Union speech the previous week. This is the fourth annual Budget produced by the Biden administration, and it aligns with many of the issues the president will raise on the campaign trail in the coming months. Some agencies received full-year funding as part of a FY 2024 appropriations package enacted on March 8. Funding for the remaining agencies for FY 2024 will expire on March 22, absent congressional action.
The FY 2025 process cannot begin in earnest until the FY 2024 funding process is completed, but committees are already scheduling hearings with agency heads on the president’s FY 2025 budget. Many offices are also accepting funding requests for FY 2025. Last week, Republicans on the House Budget Committee unveiled their own high-level budget resolution for FY 2025 intended to serve as a contrast to the Biden administration’s budget proposal. The resolution proposes to reduce the deficit by $14 trillion over the next decade through cuts to discretionary spending and repeals of provisions like the IRA energy credits. On March 7, the resolution was reported favorably by the Budget Committee following a party-line vote. With Democrats controlling the Senate, it is unlikely that an FY 2025 budget resolution will be passed that can be reconciled with the House resolution. Congress will have until Sept. 30 to pass the 12 FY 2025 appropriations bills, but lawmakers will likely turn to one or more continuing resolutions (CR) to fund the government through the November elections. As long as there is a divided government, these proposals are solely markers of the president’s position.
LINKS TO BUDGET DOCUMENTS
