May 9, 2014
Letter to the Honorable Robert P. Casey Jr.
As you requested, CBO and the staff of the Joint Committee on Taxation (JCT) have analyzed S. 313, the Achieving a Better Life Experience (ABLE) Act of 2013, as introduced in the Senate on February 13, 2013. CBO estimates that enacting S. 313 would increase direct spending by $17.5 billion over the 2015-2024 period. Additionally, JCT estimates that enacting S. 313 would decrease revenues by $1.7 billion over the 2015-2024 period. In total, CBO and JCT estimate that enacting the bill would increase deficits by $19.2 billion over the next 10 years. Components of that estimate are shown in the enclosed table and discussed below.
The ABLE Act would amend section 529 of the Internal Revenue Code to permit individuals to establish “ABLE accounts” for disabled beneficiaries that resemble the qualified tuition programs—often called “529 accounts”—that have been established under that section since 1996. Earnings on an ABLE account would not count as taxable income of the contributor to the account or the eligible beneficiary; because earnings on assets in other accounts would generally be taxed under current law, the legislation would reduce tax revenues. Moreover, assets in an ABLE account and distributions from the account for qualified disability expenses would be disregarded when determining the qualified beneficiary’s eligibility for most federal means-tested benefits. Thus, the legislation would increase the number of beneficiaries of federal means-tested programs and therefore federal spending.
However, the magnitude of those budgetary effects is highly uncertain. A significant number of people could potentially qualify for and benefit from establishing an ABLE account. But the decision about whether to establish such an account would depend on a variety of factors, including awareness of ABLE accounts, family status, financial situation, and health. Compounding those uncertainties, the legislation leaves many critical decisions to the federal and state agencies that would implement it. Because the behavioral changes and budgetary effects that would result from enacting the legislation are so uncertain, this estimate should be viewed as falling in the middle of a wide range of possible outcomes.