The EU Seeks to Destroy Business Competitiveness

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Posted by Anthony McAuliffe on Friday, December 9th, 2016, 5:05 PM PERMALINK


After its decision in August to force Ireland to collect over $14 billion in “unpaid” taxes from Apple, the EU continues its attack on international businesses throughout the continent. The European Commission has vowed to introduce the Common Consolidated Corporate Tax Base (CCCTB), claiming it wants to create a “growth-friendly and fair corporate tax system.”

The problem with this proposal is that it will actually hurt growth in many countries that are part of the EU, which is an inherently unfair system. One of the countries that stands to lose the most from the CCCTB is Ireland, which is targeted primarily due to its low and competitive corporate tax rate of 12.5%.

Ireland’s pro-growth economy is funded in large part due to corporate tax revenue received from international businesses. Under the CCCTB, portions of that tax revenue would go to other countries, even if the business headquarters is stationed in Ireland. According to estimates from the Economic and Social Research Institute, this change in revenue could reduce Ireland’s projected economic growth from 3% to 1.5%. This would be a drastic hit to an economy that has been labeled as one of Europe’s most impressive pro-growth models.

Besides drastically hurting growth in countries like Ireland, the CCCTB is also an overreach of EU powers in regards to taxation. Even though each country will technically still be able to decide its own corporate tax rate, the amount of revenue that can be taxed under that rate will be limited. The EU is essentially seeking to manage taxation in an indirect way, which should be an issue of national sovereignty for each individual country. Furthermore, it seeks to impose its idea of what constitutes a “fair” amount of taxation, which again should be decided by individual countries.

Why should this matter? Lower corporate tax rates encourage competitiveness and investment in a country, bringing greater economic growth. Greater growth leads to more jobs, higher incomes, and overall more economic opportunity. Imposing regulations and higher tax rates will only stifle business competitiveness and reduce growth. The CCCTB is definitely not growth friendly.

Businesses outside of Apple are also being hurt by the EU’s decision to go after companies who seek competitive tax rates. Companies like Zara, a clothing retailer, are being targeted by the EU for “tax evasion” just like Apple. This is despite the fact that Zara works to ensure that its tax policies comply with international standards.

McDonald’s is also being targeted by the EU, but taking into account the issues with Apple, Zara, and others, is taking proactive measures to avoid strict and unfair EU regulations. The fast-food giant announced it will move its non-U.S. tax base to the UK, knowing that the country will soon leave the EU due to Brexit. Many other companies may see this example and begin moving their businesses to the UK as well under the threat of the EU’s CCCTB.

While the CCCTB may help the countries that have refused to engage in competitive and pro-growth business practices, those that have taken the step to do so will be hit hard. It is an unfair and anti-growth tax policy that will ultimately lead to lower levels of investment throughout EU member states. 

Photo Credit: 
Tax Credits

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Toomey Targets Dodd-Frank with Reconciliation

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Posted by Justin Sykes on Friday, December 9th, 2016, 3:22 PM PERMALINK


This week Senator Pat Toomey (R-Penn.) called on the Senate to begin reforming the Dodd-Frank Act through a legislative procedure known as reconciliation. Senator Toomey’s call to rein in Dodd-Frank through reconciliation is a positive step toward protecting taxpayers, consumers, and U.S. businesses from the crushing and burdensome tangle of regulations that is Dodd-Frank.

Speaking on the Senate floor, Senator Toomey stated:

“For too long now we’ve been putting up with a Dodd-Frank bill that is costing us a lot of economic growth and opportunity. I am hoping our Democratic colleagues will work with us so that we can begin to make the constructive changes that we need. But if not, I think we should use all tools available to get this job done.”

One of tools available that Senator Toomey suggested is a process known as reconciliation. By using the reconciliation process, lawmakers could make legislative changes to the Dodd-Frank Act with a simple majority in the Senate. Since Senate Republicans will occupy 52 seats in the Upper Chamber next year, this would allow them to make changes to the law and prevent Senate Democrats from filibustering those efforts.

Senator Toomey has also made it clear one of the first targets of reform will be the Consumer Financial Protection Bureau (CFPB), an independent agency created by the Dodd-Frank Act. Created less than six years ago, the CFPB has developed into a regulatory monster issuing nearly 50 rules at a rate 3.5 times faster than any other government agency.

The CFPB is currently not subject to the Congressional appropriations process, and “their funding makes them completely unaccountable to anyone other than themselves,” Senator Toomey said.

His fellow Republican colleagues in the Senate echoed the sentiments expressed by Toomey this week regarding Dodd-Frank reforms. Chairman of the Senate Baking Committee Richard Shelby (R-Alaska) stated Wednesday, “I’d like to repeal the whole thing, period.”

Dodd-Frank reforms are also receiving increased attention on the House side as well. House Financial Services Committee Chairman Jeb Hensarling (R-Texas) this year introduced the Financial CHOICE Act to overhaul Dodd-Frank, an effort that will see a reenergized push in 2017 with Republicans controlling both the legislative and executive branches.  

Photo credit: Gage Skidmore

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Government Continues its Path of Wasteful Spending

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Posted by Marc Dupont on Friday, December 9th, 2016, 10:59 AM PERMALINK


As 2016 finally comes to a close, it’s time to review how the Federal government continues to squander taxpayer dollars on various initiatives and programs. Unfortunately for the average American, the list of government waste is long and packed with numerous examples of needless spending projects.  

Let’s look at one glaring example. 

As Senator James Lankford (R-OK) demonstrates in his annual report “Federal Fumbles,” the NEH, NEA, and the Institute of Museum and Library Services came together to spend an irresponsible $495,000 on an exhibit titled, “A Sense of Beauty: Medieval Art and the Five Senses” earlier this year. This showcase was planned to include “130 works of art focusing on the senses created from the 12th to 16th centuries”, as it sought to provide attendees with a unique sensory glimpse into the medieval era. 

Not only has this exhibit failed to open promptly (it was planned for fall of this year), there exists an entirely separate 85-day exhibition relating to the same topic that will feature before 2016 is over.

This is a perfect example of wasteful spending for a number of reasons.

To start, Congress has a huge overspending problem to focus on and taxpayer dollars should not be funding such a frivolous project that will have a minimal impact on their daily lives. Secondly, generating private donations to pay for it shouldn’t be a difficult feat to accomplish if there’s enough public interest. Lastly, even if this kind of spending could be justified, having three different agencies splashing taxpayer dollars on the exhibit would be extraordinarily wasteful; especially when one agency doing so would suffice.

Funding the arts may be an important element of the American tradition; but, when faced with an impending budgetary crisis that endangers the wellbeing of future Americans, funding an exhibit that highlights the smells of a historical period hundreds of years in the past should most certainly not be a priority of the Federal government. Although the cost of the program only totals to $495,000, this is just one of many different spending projects that will cumulatively seek to waste millions (or billions) of hard-working Americans’ tax dollars. 

President-Elect Donald Trump claimed on the campaign trail that he seeks to curtail the “…tremendous waste, fraud, and abuse” that is present within government. Given the ever-increasing list of wasteful government programs that are enacted each year, this is hopefully not an empty promise. 

Photo Credit: 
Purple Slog

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A 2-2 FCC is a Loss for the Trump Administration and Republicans

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Posted by Katie McAuliffe on Thursday, December 8th, 2016, 2:47 PM PERMALINK


Our previous article pointed out Wheeler's bad behavior and his likelihood of staying on the FCC, but the primary point is that a Rosenworcel re-nomination deadlocks the FCC and delays forward progress. 

Without Rosenworcel's re-nomination there is still hope for a 1-2 FCC.

Chairman Wheeler does not get to negotiate with Majority Leader Mitch McConnell over who will be on the FCC.  Playing into Wheeler's game where  he will step down "if it helps Rosenworcel get renominated" means Wheeler is still deciding the outcome. 

If commissioner Jessica Rosenworcel is re-nominated and confirmed before president-elect Trump takes office the FCC will definitely sit at a 2-2 dead lock.  This split slows down the ability of the new Commission to pursue its deregulatory vision.

This is a real midnight move to control the Internet.  If Rosenworcel is re-nominated, the best Trump and the Republicans can hope for is a 2-2 FCC. The worst is a 3-2 democrat controlled FCC.

A Republican majority FCC is still possible sooner rather than later as long as Rosenworcel is not re-nominated.

If Rosenworcel returns to the Commission now, the next most likely scenario is that the new Republican nominated to the FCC will be held up until July when Commissioner MignonClyburn’s term ends.

If Republicans don’t nominate their new pick as a pair, it will be easy for the “clicktivist” left to turn the nomination into a circus.  The next nominee will be framed as the decider of the future of the Internet.

Majority Leader Mitch McConnell cannot let this go through.  This is no time to be negotiating with Harry Reid and Obama as they walk out the door.

No midnight nominations. 

President Trump should have both a Democrat and a Republican spot open for nominations when he takes office.


ATR Praises Nomination of Okla. Attorney General Scott Pruitt to Lead EPA

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Posted by ATR on Thursday, December 8th, 2016, 11:09 AM PERMALINK


ATR President Grover Norquist issued the following statement today in praise of President-elect Donald Trump's nomination of Oklahoma Attorney General Scott Pruitt to lead the Environmental Protection Agency (EPA):

"Americans for Tax Reform supports Donald Trump's nomination of Oklahoma Attorney General Scott Pruitt to lead the EPA. Pruitt will ensure American taxpayers and businesses are no longer subject to abusive EPA overreach and unconstitutional regulatory diktats.”

"Under President Obama the EPA is a political agency which uses arbitrary permitting delays, litigation, and red tape as a federal road block to economic investment and job creation. Since 2009 the EPA has published nearly 4,000 new rules and regulations that threaten millions of American's livelihoods and the prosperity of our country.

"As Attorney General of Oklahoma, Mr. Pruitt has been a champion of the rule of law, the free market, and limited government. He has worked to protect American taxpayers and businesses from an out-of-control EPA and an ever increasing regulatory burden.

"I know Mr. Pruitt will continue this great work as head of the EPA, and ATR looks forward to working with him and President-elect Trump to begin undoing the economic damage of the EPA under President Obama."

Photo Credit: Gage Skidmore 

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Uber Drivers Earn Significantly More Than Classic Taxi Drivers

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Posted by Laurens ten Cate on Wednesday, December 7th, 2016, 2:23 PM PERMALINK


Economists Jonathan V. Hall and Alan B. Krueger recently released an updated version of their 2015 paper, An Analysis of the Labor Market for Uber’s Driver-Partners in the United States. They updated the work with additional data obtained in 2015.

Especially interesting is the renewed finding that even though the cost of using Uber as a consumer has gone down, the hourly earnings of Uber drivers have stayed the same.

The paper analyzes various driver characteristics such as hours worked, demographics, reasons for partnering with the Uber platform, and hourly earnings.

For instance, in Boston the average hourly earnings are $20.86, in New York $23.69 and in San Francisco $23.87.

Some luminaries on the Left have aggressively criticized independent contractors and the sharing economy. Hillary Clinton said she: “will crack down on bosses that exploit employees by misclassifying them as contractors or even steal their wages.” Sen. Bernie Sanders (I-Vt.) said: "I am not a great fan of Uber—you can quote me on that."

Meanwhile, the Bureau of Labor Statistics reports that taxi drivers only earn on average $13.00 an hour working for classic taxi companies.

Enemies of the sharing economy will say that this $7.00 an hour difference doesn’t matter because some taxi drivers don’t have to pay for gasoline, vehicle maintenance and depreciation. However, they conveniently forget the fact that ridesharing drivers are independent contractors who submit 1040s and Schedule Cs to the IRS, on which they can deduct expenses made during business operations. Such as, you guessed it, expenses for gasoline, vehicle maintenance and depreciation.

Hall and Krueger use figures calculated annually by the AAA to estimate per hour driver expenses. For a full time driver with insurance and registration in a sedan this averages to $4.29, all deductible of course.

In the short summary of the paper, Hall and Krueger shy away from mentioning that expenses incurred when driving on a ridesharing platform are deductible. In the full report they do mention this, saying: “Note also that drivers may partially offset their costs by deducting work-related expenses from their income for tax purposes, including depreciation or leasing fees, gasoline, maintenance, insurance, mobile device and data fees, and license and registration fees.”

Another huge reason for people to partner with ridesharing platforms is flexibility, the ability to set your own hour’s week-to-week. This is again confirmed by the report: “In any given week, well more than half (65 percent) of driver-partners drive 25 percent more, or 25 percent less, than the amount they drove in the previous week.”

The report also notes that 53 percent of the people that are uberX Driver-Partners only work 1 to 15 hours a week and another 30 percent only 16 to 34 hours a week. Of the remaining 17 percent, 12 percent works 35 to 49 hours and 5 percent works 50 hours or more.

Just because politicians beholden to entrenched interests prefer people to punch a clock every day and cough up union dues (which end up as campaign donations) should not mean that the hardworking people of the America are worse off.

The research shows it again and again: the sharing economy makes everyone better off. Let’s stop this absurd movement back to the 1930s. 

Photo Credit: 
Nick Harris, http://bit.ly/2h6QqJH

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Sarah Crocker

easy to make more money in an unsafe environment with very little regualtions and less expense! so maybe we should go back to the 1930's


Meddling FCC Doesn’t Want You to Have Free Mobile Data

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Posted by Andreas Hellmann on Wednesday, December 7th, 2016, 10:19 AM PERMALINK


In an op-ed from December 6th, 2016 Katie McAuliffe, Executive Director of Digital Liberty & Federal Affairs Manager at Americans for Tax Reform, states that a meddling FCC doesn’t want you to have free mobile data.

“The FCC is more concerned with protecting its own limited worldview than with what is good for consumers.

Competition means that if a new idea rises to the surface and is better than the previous thought, minds can change, business models can adjust, and products can adapt – that is innovation.  But protecting specific competitors and a specific view of the future locks us into where we are now – that is stagnation.

If the FCC were really concerned with consumers, then they would allow the market to test ideas and business models.  Not attack plans to give consumers free data.   Free data plans are also called zero-rated plans because customers don’t have to pay out of their data bucket for the month. Therefore customers pay zero dollars and zero data, hence zero rates.”


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Nine Dodd-Frank Regulations Congress can Repeal under CRA in 2017

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Posted by Johnathan Sargent on Wednesday, December 7th, 2016, 9:32 AM PERMALINK


With less than 50 days left, the Obama administration is pushing through as many regulations as possible. Fortunately, President-elect Trump and a unified Republican Congress have a powerful tool to repeal many of these last minute regulations. This tool, known as the Congressional Review Act (CRA), empowers Congress to review newly issued regulations and repeal them through the passage of a joint resolution.

The issuing of numerous, burdensome regulations is a cornerstone of the Obama administration. This year alone, the administration has issued an average of 2.2 rules per day. These regulations have led to billions of dollars in costs for Americans and small businesses.

Congress cannot repeal a majority of the Obama administration’s regulations under CRA, but it can undo the most recent ones. Under the CRA, Congress has 60 legislative days to disapprove the regulation, meaning that once the 115th Congress takes office in January certain last minute regulations enacted by the Obama administration can be undone.

What about two of the biggest parts of President Obama’s regulatory legacy, Dodd-Frank and Obamacare? While most of these regulations have already been implemented and must be repealed through Congressional legislation, certain Dodd-Frank regulations have been issued that fall under the 60-day window for CRA. A recent study published by the American Action Forum (AAF), highlights nine costly Dodd-Frank regulations that fall within this 60-day window.

Here are the nine regulations that could be repealed under CRA:

Rule

 

Cost (in millions)

Paperwork Hours

Disclosure of Payments by Extraction Issuers

 

$1,290

 

217,408

Standards for Clearing Agencies

 

$233

4,337

Data from Swap Data Repositories

 

$105

35,900

Dissemination of Swap Information

 

$64

840,455

Recordkeeping for Orderly Liquidation

 

$37

11,205

Verification of Swap Transactions

 

$11.9

26,420

Amendments to Swap Data Recordkeeping

 

$0.1

 

Margin Requirements for Uncleared Swaps

 

$0.6

170

Capital Requirements for Swap Entities

 

 

107,964

Totals

$1.7 billion in costs

1,243,859

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Photo Credit: 
Benjamin Chan (https://www.flickr.com/photos/benchan/)

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Large Conservative Groups to Congress: No Lame Duck Internet Sales Tax

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Posted by Andreas Hellmann on Tuesday, December 6th, 2016, 4:15 PM PERMALINK


 

In a letter from December 6th to all Members of Congress large conservative groups including Americans for Tax Reform, Americans for Prosperity, Heritage Action for America and FreedomWorks ask members of Congress to not address the issue of collecting internet sales taxes during this current lame duck session.  “The issue is contentious, and previous attempts to do so have raised important questions that have yet to be resolved.  Pushing through a bill in the lame duck would allow little time for debate or discussion of these complicated issues and we respectfully request that you refrain from doing so.”

 

Currently, the Supreme Court’s 1992 Quill decision establishes the framework for collecting such taxes.  Fundamentally, it requires nexus, or the seller’s physical presence within a state, before that state may collect a sales tax from the seller.  Yet, as e-commerce and internet sales have expanded, brick and mortar stores have been pressuring Congress to establish a new framework for collecting sales taxes from online out-of-state sellers.  Unfortunately, previous attempts to do so generated serious Constitutional questions about the scope and reach of state tax authorities, as well as concerns about the administrative burdens created by the new tax collection schemes.

 

Read the letter here

 

Photo Credit: 
 
Flickr: Misha Popovikj

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Marie Rodriguez

This proposal, plus the MFA, and others are terrible for small business:

1) In 2004, 82% of all ecommerce was Big Box + Amazon. Now it is **88%** and growing. Amazon is collecting sales tax in 32 states due to its distribution centers. So this tax — the compliance of which will be overwhelming — is focused on the remaining and dwindling 12% of ecommerce, which are small businesses who have innovated hybrid (ecommerce plus physical) business models to survive. Big Box + Amazon would love to squeeze a few more % points out of small business.

2) The National Retail Federation, its lobbyists, and sales tax states like our state (who cannot manage their finances) have convinced a GOP Congress that an even higher tax burden put on the middle and working class will somehow benefit them. Again, just 12% of ecommerce is left to tax. Thus the states’ estimates of how this will be a financial boon to states' finances are vastly overestimated.

3) As with other taxes and more government regulation, this will put innovative small businesses out of business, and create a new vast governmental compliance infrastructure (accountants, lawyers, and the snake-oil tax software lobby) that is currently salivating at the prospect. Only the largest companies -- the 88% -- will be able to comply to it.

4) Further, and something Congress has ***completely missed***, it is a *gift* to **Canadian and Mexican companies** who will not have to comply and collect sales taxes for 9,600 juridictions.. They can just ship to the US under NAFTA. No sales tax collection, no compliance, no problem. So why not create a subsidiary in Canada?


Like-kind Exchanges Should Be Preserved as Part of Any Tax Reform Plan

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Posted by Alexander Hendrie on Tuesday, December 6th, 2016, 2:00 PM PERMALINK


Next year, tax reform will be on the agenda and Congress must consider whether to repeal, preserve, or expand many sections of the tax code. One provision that should be preserved or expanded is section 1031 “like-kind exchanges.” This section of the code compliments the goals of tax reform by allowing taxpayers important investment flexibility that encourages stronger economic growth.

Like-kind exchanges allow taxpayers to defer paying taxes on certain types of assets when they use those earnings to invest in another, similar asset. This can be done again and again, provided the transaction involves a similar type of property. It has existed in the tax code for more than 100 years and is used on assets such as real estate, machinery for farming and mining, and equipment such as trucks and cars. Because an investor doesn’t have to pay tax until they cash out, section 1031 eliminates a potential barrier to investment, which in turn promotes the more efficient allocation of capital resources.

Rather than face repeal, like-kind exchanges should serve as a model for the taxation of all investments and should be retained in any overhaul of the tax code as a complementary provision to full business expensing. The provision has no place being categorized as a “pay-for” to buy lower rates and repeal would move the code toward higher taxes on investment, which in turn hurts economic growth and reduces income.

Like-Kind Exchanges Compliment the Goals of Pro-Growth Tax Reform: The tax code should encourage the efficient allocation of resources by taxing at the point of consumption. Under this system, investment would be treated neutrally (and efficiently) so that decisions would be made based on economic benefit. When measured against this goal, section 1031 is a necessary and complimentary part of a pro-growth tax system.

The House GOP “Better Way” tax reform blueprint takes many steps in moving the code toward this goal. For instance, the blueprint replaces the convoluted system of depreciation with immediate, full business expensing of all tangible assets (such as equipment) and intangible assets (such as intellectual property), but not land. This allows business owners to make decisions based on the merits of the transaction, not because of government induced tax barriers. In turn, this means a more efficient allocation of resources.

A move toward full expensing of assets will streamline business activity by allowing the efficient purchase of new assets and Section 1031 should be considered complimentary to this goal. 1031 allows less productive assets to be replaced with more productive assets, and therefore eliminates any lock-in effect that would otherwise discourage business activity. This is especially important for land assets that are excluded by the blueprint, which in many cases represents a significant portion of many properties. Because of the exclusion of land, repeal of like-kind exchanges – even with full expensing – may have the effect of impeding otherwise productive transactions.

Repealing Section 1031 is Economically Destructive: One key part of pro-growth tax reform is repealing preferential, distortive business credits and deductions – or “loopholes” as the left refers to them – in exchange for lowering marginal rates on corporations and small businesses as part of a net tax cut. The rationale is that it broadens the base of taxpayers, allows lower rates across the board than would otherwise be possible, and ensures the most efficient allocation of capital possible through the neutral treatment of businesses.

While this principle should be part of any tax plan, like-kind exchanges have no place in this conversation. 1031 grants important flexibility for a taxpayer to make the most economically efficient investment decisions in a way that benefits – not hinder economic growth and efficiency. If Section 1031 were to be repealed it would create a lock in effect that would discourage certain types of otherwise productive transactions. Conversely, this would result in less productive deployment of capital in the economy which would hurt economic growth and capital while raising little revenue.  

Because of this lock-in effect, repeal could cost the U.S. economy as much as $13.1 billion in lost GDP year after year, according to a study conducted by Ernst and Young. This GDP loss would also result in investment falling by $7 billion every year and would reduce income by an estimated $1.4 billion.

Like-Kind Exchanges should be a Model for All Capital Gains:  Ideally, all income derived as a “capital gain” should be exempt from taxation.  This tax hits income that has already been subjected to income taxes and has been reinvested to help create jobs, grow wages, and increase economic growth. Naturally, this double taxation impedes the ability to invest and foster stronger economic growth.

Capital gains taxes should be reduced – or better yet, repealed – and preserving and expanding section 1031 should be part of this effort.

Under like-kind exchange rules, you only have a gain when you decide to cash out.  The gain is the difference between the final sale amount and the original purchase, and is embedded over the years in the business. In effect, it becomes due when the business activity effectively ends.

There’s no reason this cannot work for other capital gains. If you buy a stock for $100 and sell it for $150, you should be able to plow that $150 into new stock purchases without having to pay tax along the way. 

This would also have the added effects of promoting tax simplicity and economic efficiency. Investors would no longer have to report each and every stock and mutual fund transaction on their taxes every year, simplifying tax filing for millions of Americans. It also would make all capital markets--for everything--more efficient.

Every time the government takes money out of the pool of capital investment, capital grows more slowly and we're all poorer than we otherwise would be. The key to wealth creation is to leave capital--untouched by government--free to grow for as long as possible.

Some have proposed repealing or limiting section 1031 as a way to make incremental progress towards taxing all capital gains as ordinary income. Instead of moving in this direction, we should be expanding the scope of like-kind exchanges as part of ending double taxation, promoting tax simplicity, and encouraging investment.

 

Photo Credit: 
Ken Teegardin

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