ATR Urges Texas Lawmakers to Support Paycheck Protection Legislation

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Posted by Patrick Gleason on Monday, April 24th, 2017, 11:16 AM PERMALINK

Texas is widely seen as a bastion of conservative and free market policies and governance. However, while Texas is a Right to Work state, it does not have a Paycheck Protection law on the books. As a result, state agencies and municipalities across the Lone Star State relieve government worker union bosses of dues collection responsibilities and take care of that for them using taxpayer resources. 

Money the state automatically takes from worker paychecks and hands to union bosses is then used to support anti-business, anti-taxpayer policies and candidates. Today ATR president Grover Norquist sent the following letter to Texas state representatives, urging them to vote Yes on legislation already approved by the state senate that would put an end to this misuses of scarce taxpayer resources:

 

To: Members of the Texas House of Representatives

From: Americans for Tax Reform

Re: Paycheck Protection Legislation

Dear Representative,

On behalf of Americans for Tax Reform (ATR) and our supporters across Texas, I urge you to support and vote Yes on Senate Bill 13, legislation approved by the Senate, and House Bill 510, legislation introduced by Rep. Sarah Davis. This pro-worker legislation, if enacted, would end automatic government deduction of union dues from public employee paychecks.

It is a completely inappropriate use of taxpayer resources to have state agencies and municipalities serving as the money bagmen for unions, but that is the current practice in the Lone Star State, a fact whose revelation surprises many who otherwise view Texas as a bastion of pro-business policies. The question comes down to whether lawmakers think the state should be in the business of using taxpayer resources to collect political money for government unions. Lawmakers who think that is an improper function of government and use of taxpayer resources can put a stop to it by voting Yes on SB 13/HB 510.

Despite what opponents of this legislation have incorrectly alleged, SB 13/HB 510 would not affect the right to organize and join a union; the legislation would simply require union bosses to collect their dues from workers voluntarily, as opposed to the current practice of having state agencies and municipalities collect it for them. If unions are providing a valuable service to workers, then they will have no problem convincing workers that they should join and pay dues voluntarily without automatic state confiscation. However, research indicates that without proper safeguards, many workers are forced to give up hard earned wages against their will.

A study by the Heritage Foundation found states that passed paycheck protection laws like SB 13 & HB 510 saw union spending on political campaigns and activities fall by an average by 50% after such laws were enacted. In Washington State, the Washington Education Association saw the number of members donating to the political activity fund drop from 82% to 11% following the implementation of Washington’s paycheck protection law in 1992. This underscores the fact that often the goals of the union leadership do not reflect the priorities of workers.

One of the more egregious aspects of automatic confiscation of union dues from government worker paychecks in Texas is fact that money the state collects for union bosses is in turn funneled to candidates and lobbyists who advance and advocate anti-business, anti-taxpayer policies. Enactment of SB 13 or HB 510 would put an end to this racket. As such, ATR urges you to vote Yes on SB 13 and HB 510. ATR will be educating your constituents and all Texas taxpayers as to how lawmakers in Austin vote on this and other important fiscal and economic matters throughout the legislative session.   

 

Sincerely,

Grover G. Norquist

President

Americans for Tax Reform

Photo Credit: 
Stuart Seeger

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ATR Supports H.J. Res. 73 and S.J. Res. 19 Repealing CFPB’s Prepaid Card Rules

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Posted by Daniel Uzi Frydman on Monday, April 24th, 2017, 9:50 AM PERMALINK

Americans for Tax Reform (ATR) President Grover Norquist this week sent a letter to Congressional lawmakers urging support for Representative Roger Williams' H.J. Res. 73 and Senator David Perdue's S.J. Res. 19.

Both resolutions would use the Congressional Review Act to block the Consumer Financial Protection Bureau’s (CFPB) rules on prepaid debit cards, put forth at the end of 2016 and set to go into effect April of 2018. The CFPB’s prepaid card rule would deprive American financial consumers of access to banking services and perpetuate the regressive impacts of Dodd-Frank.

Below is the text of the letter to Congress, which can also be found here.

April 24, 2017

The Honorable Paul Ryan
Speaker
U.S. House of Representatives
Washington, DC 20515

The Honorable Mitch McConnell
Majority Leader
U.S. Senate
Washington, DC 20510

Dear Speaker Ryan and Majority Leader McConnell:

On behalf of Americans for Tax Reform (ATR) I write to express ATR’s strong support for using the Congressional Review Act to repeal the Consumer Financial Protection Bureau’s (CFPB) rule on prepaid debit cards.

Issued in the fall of 2016 and set to go into effect April of 2018, the CFPB’s rule on prepaid debit cards would actually harm the same financial consumers the Bureau sought to protect in issuing the rule. Millions of American consumers use and rely on prepaid cards, yet if the CFPB’s rule is allowed to proceed those millions of consumers will be deprived of access to needed banking services.

As a result of the Dodd-Frank Act, many banks no longer offer free checking accounts or have alternatively either increased fees or required higher minimum balances for maintaining free checking accounts. This has had the effect of pushing many financial consumers out of the traditional banking system and led to millions of Americans becoming “unbanked.” The CFPB’s rule would only increase this regressive trend, impacting primarily low-income consumers.

A report from the Pew Charitable Trusts found that of an estimated 23 million consumers using prepaid cards, a quarter of those were low-income Americans, with a third having annual income below $15,000. Prepaid cards have increased in popularity in recent years, with the amount placed on prepaid cards growing from $1 billion in 2003 to a projected $112 billion for 2018.

This is due in part to the fact that for consumers that can no longer afford traditional banking services, prepaid cards are a more affordable option than traditional debit cards linked to checking accounts. The CFPB’s rule will in turn have a disparate impact on low-income financial consumers and as a result further increase the number of unbanked Americans.   

Thankfully, Representative Roger Williams and Senator David Perdue have introduced joint resolutions of disapproval of the CFPB’s rule under the Congressional Review Act. H.J. Res. 73 in the House and S.J. Res. 19 in the Senate would repeal the CFPB’s costly and regressive prepaid debit card rule.

I urge you and your colleagues in Congress to support both H.J. Res. 73 and S.J. Res. 19 and use the authority granted under the Congressional Review Act to protect American consumers and preserve choice in financial products by repealing the CFPB’s rule on prepaid debit cards.

Sincerely,

Grover G. Norquist
President
Americans for Tax Reform​

Photo Credit: Phil Roeder


CFPB Prepaid Card Rules Will Harm Consumers and Should be Repealed

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Posted by Justin Sykes on Friday, April 21st, 2017, 2:38 PM PERMALINK

In the fall of 2016 the Consumer Financial Protection Bureau (CFPB) issued final rules on prepaid debit cards, now set to go into effect April 1st of 2018. As is the case with most CFPB rule makings, the rule on prepaid debit cards will actually harm the same consumers it was originally designed to “protect.” Over 23 million Americans use and rely on prepaid cards, yet if the CFPB’s rule goes into effect, those same consumers will be pushed out of the market, depriving them of access to basic banking services.   

Since enactment of the Dodd-Frank Act, and resulting myriad of regulations, many banks have found it no longer advantageous or feasible to offer free checking accounts, and have alternatively increased fees and required higher minimum balances in order to maintain free checking accounts. This in turn pushed many financial consumers, which tend to be low-income, out of the traditional banking system.

Many of the consumers that lost their free checking accounts or were no longer able to afford them turned to alterative financial products, such as prepaid debit cards, which serve a similar function as traditional bank accounts. Prepaid cardholders can have their paychecks directly deposited onto the cards in much the same manner as standard debit card and checking account arrangements.

In recent years prepaid cards have grown in popularity because they are often cheaper than traditional account linked debit cards, which is why they are often preferred by low-income users. In fact, the amounts placed on prepaid cards have grown from $1 billion in 2003 to a projected $112 billion for 2018.

According to a 2014 report from The Pew Charitable Trusts, of an estimated 23 million consumers using prepaid cards, a quarter of those were low-income Americans, with a third having annual income below $15,000. Obviously these numbers reflect that if the CFPB prepaid card rule moves forward, low-income Americans will bear the brunt of the impact. This will likely increase the amount of “unbanked” Americans, which already number in the millions.

Additionally, as pointed out in a recent piece from the American Action Forum (AAF), according to the CFPB’s own estimates the prepaid rules will result in 137,642 one-time burden hours for prepaid card companies forced to comply, and another 19,494 ongoing burden hours.

AAF estimates that the rules will costs prepaid card companies $5,257,935 just to get into compliance with the rule, in addition to another $744,697 annually just to maintain compliance. Such costs will inevitably be passed onto consumers, depriving even more of needed banking services.

Thankfully, this year the House and Senate introduced joint resolutions of disapproval of the CFPB’s prepaid card rule pursuant to the Congressional Review Act. H.J. Res. 73 was introduced in the House by Representative Roger Williams (R-Texas) and S.J. Res. 19 was similarly introduced in the Senate by Senator David Perdue (R-Ga.). 

Lawmakers on Capitol Hill should support these common sense measures that will protect American consumers, especially those of limited means, that rely on and prefer prepaid debit cards. This will not only increase choice for consumers but will ensure that those who have been pushed away from traditional banking products and services will have access to alternative financial services such as prepaid cards.  

 

Photo credit: Paul Istoan

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ATR Statement Supporting Chairman Hensarling's Financial CHOICE Act

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Posted by Justin Sykes on Thursday, April 20th, 2017, 11:04 AM PERMALINK

ATR President Grover Norquist issued the following statement today in support of House Financial Services Committee Chairman Jeb Hensarling’s release of the Financial CHOICE Act:

“Americans for Tax Reform supports Chairman Hensarling’s efforts to reform the costly and burdensome Dodd-Frank Act with his release of the Financial CHOICE Act this week. Chairman Hensarling has consistently been a champion for financial consumers and reforming Dodd-Frank. The Financial CHOICE Act looks to deliver reforms that will replace the misguided regulatory burdens imposed on America’s financial consumers and small financial institutions by the Obama Administration. 

“Under President Obama Americans saw the role of government in the market increase exponentially with the Dodd-Frank Act. While Dodd-Frank was supposed to target Wall Street, impacts of the law have instead fallen heaviest on Main Street, reducing small business lending, shuttering credit unions and community banks, and growing the number of unbanked Americans.

“Chairman Hensarling’s Financial CHOICE Act will increase accountability from financial regulators and protect American consumers while also fostering economic growth. The Financial CHOICE Act seeks to rein in ‘regulatory taxes’ imposed by Dodd-Frank that have served only to burden consumers with increased fees and reduced products and services. 

“The Financial CHOICE Act also gives much needed relief to America’s credit unions and community banks, which have been crushed by compliance costs in recent years, with an average of one institution being shuttered daily. The Act also repeals the failed Durbin Amendment and the Department of Labor’s Fiduciary Rule, both of which will benefit financial consumers. 

“I look forward to working with Chairman Hensarling on this pro-consumer, pro-growth legislation, that ensures American consumers and taxpayers are protected, while also fostering a regulatory climate that allows business to grow and prosper.” 

 

Photo credit: Gage Skidmore 


ATR Urges Support for Nebraska Tax Reform Measures

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Posted by Marc Dupont on Tuesday, April 18th, 2017, 5:25 PM PERMALINK

 

Nebraska has the opportunity to become the next state to carry the torch of tax reform as the state’s legislature gears up to debate a bill this Friday that, if enacted, would provide needed relief to taxpayers and improvements to Nebraska’s tax code.

LB 461, which recently passed out of committee, would lower the top personal and corporate income tax rates from 6.84% and 7.81%, respectively, to as low as 5.99% by 2029, so long as certain revenue triggers are met.

Across the country, recent years have proven to be a golden age for pro-growth tax reform. States like Texas, Tennessee, Arizona, Arkansas, Wisconsin, and especially North Carolina have all enacted policies that have resulted in lower taxes, allowing residents to keep more of their hard-earned income. States that fail to improve their codes and provide relief to taxpayers are being left behind in the competition for investment, employers, jobs, and people. By enacting LB 461, Nebraska legislators can ensure the Cornhusker State will not be left behind.

According to ALEC’s 2016 economic outlook index, Nebraska is dismally ranked 32nd in the nation. In fact, all of its neighboring states, from Wyoming (4) to Iowa (29), are ranked as more economically competitive. Passage of LB 461 will help Nebraska close this competitiveness gap. Today, Americans for Tax Reform sent the following letter Nebraska lawmakers calling on them to enact rate reducing tax reform by voting Yes on LB 461:

            Dear Members of the Nebraska Legislature,

On behalf of Americans for Tax Reform (ATR) and our supporters across Nebraska, I urge you to support LB 461. Nebraska currently has a top personal income tax rate of 6.84% and 7.81%. LB 461, if enacted, would reduce those rates by 12.4% and 23.3%, respectively, taking both rates down to as low as 5.99 percent by 2028, so long as revenue triggers are met.

There is ample evidence that lower tax rates make states more competitive, and more conducive economic growth. John Hood, chairman of the John Locke Foundation, a non-partisan think tank, analyzed 681 peer-reviewed academic journal articles dating back to 1990. Most of the studies found that lower levels of taxation and spending correlate with stronger economic performance. When Tax Foundation chief economist William McBride reviewed academic literature going back three decades, he found “the results consistently point to significant negative effects of taxes on economic growth, even after controlling for various other factors such as government spending, business cycle conditions and monetary policy.”

As the Platte Institute has reported, Nebraskans face a higher burden than taxpayers in competing states:

“On average, taxpayers in Nebraska pay 52 percent more personal income tax per person, and 36 percent more corporate income tax. That’s $1,125 per person per year in Nebraska versus $541 in the five rival states [Texas, Florida, Arizona, Colorado, and Iowa] for personal income taxes.”

If that weren’t bad enough, your constituents have been hit with 20 federal Obamacare tax increases over the last eight years. As such, individuals, families, and employers across Nebraska are greatly in need of the sort of income tax relief that enactment of LB 461 would provide.

A reduction in the personal income tax would allow taxpayers to keep more of their hard-earned income, while increasing the job-creating capacity of small businesses that file under the individual income tax system. Meanwhile, a corporate rate reduction would make Nebraska more attractive to employers, job creation, and investment. Corporate tax relief will benefit the broader populace, as the burden of corporate taxation is borne by people in the form of lower wagers, fewer job opportunities, and reduced returns on savings and investment. Enactment of the type of rate-reducing tax reform found in LB 461 would help Nebraska compete with the likes of Texas, Oklahoma, Colorado, North Carolina, Florida, Arizona and other competitor states that already boast lower tax burdens and more hospitable business tax climates than Nebraska.

North Carolina provides a great example of how much progress can be made in a short period of time, and should inspire those seeking to provide relief to Nebraska taxpayers while improving the state tax code. Just four years ago, North Carolina had the highest personal and corporate income tax rates in the Southeast. Thanks to tax reform measures enacted in 2013 and 2015, North Carolina now has a flat personal income tax rate that is the lowest in its region, with the exception of Florida and Tennessee, which do not levy an income tax. North Carolina’s present corporate tax rate, at 3%, is now less than half of what it was just four years ago, and the personal income tax rate has been reduced by nearly 30%.

In addition to having the lowest personal income tax rate in the region, North Carolina now has the lowest corporate rate in the nation among states that levy such a tax. Going into 2013, North Carolina had the 44th ranked business tax climate in the country on the non-partisan Tax Foundation's business tax climate index. Thanks to the reforms enacted since 2013, North Carolina now has the nation’s 11th best business tax climate. This remarkable improvement in North Carolina’s tax code was achieved with the same sort of revenue triggers that LB 461 uses to provide tax relief for Nebraskans in a fiscally responsible fashion.

Americans for Tax Reform urges you to vote YES on LB 461. ATR will be educating your constituents and all Nebraskan taxpayers as to how lawmakers in Lincoln vote on LB 461 and other important fiscal and economic matters throughout the legislative session. Please look to ATR to as a resource on tax, budget, and other policy matters pending before you. If you have any questions, please contact Patrick Gleason, ATR’s director of state affairs, at (202) 785-0266 or pgleason@atr.org

          Sincerely,

            Grover G. Norquist

            President

            Americans for Tax Reform

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Ali Eminov

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Louisiana Must Act to Improve Public Safety

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Posted by Sarah Caplin on Monday, April 17th, 2017, 5:50 PM PERMALINK

With an incarceration rate that has increased by 35 percent over the past 20 years, resulting in annual costs to taxpayers as high as $700 million Louisiana jails people at a rate nearly double the national average. This upcoming legislative session, Louisiana lawmakers have an opportunity to turn a corner and implement conservative, data-driven policies that will improve public safety while lowering the rate of incarceration.

After referencing the best research in the field and a year long period of extensive stakeholder discussion, The Louisiana Justice Reinvestment Task force developed 26 policy recommendations aimed at protecting citizens while getting a better return on public safety dollars. The goal of these smart data driven recommendations is to address the state drivers of high prison admissions and lengthy stays that have created a bloated system that is complicated, often inaccessible to victims, and creates barriers for both those convicted of crimes and those in administering the sentencing system.

Recidivism in Louisiana is extremely high where 1 in three people return to prison within just three years. The Task Force also found that Louisiana sends people to prison for nonviolent, drug and property crimes at twice the rate of neighboring South Carolina and three times the rate of Florida. These states notably have identical crime rates to Louisiana.

House Speaker Tyler Barras has said “A lot of our low-level drug and property crime is driven by addiction...We can save millions and also have less crime by focusing prison beds on those who pose a more serious public safety threat and making smart investments in probation and drug treatment for nonviolent crimes.”

Recommendations from the task force chart a data driven course for comprehensive reform and address high admissions for probation failures and nonviolent crimes and growth in those prisoners serving longest terms. They allow greater discretion for judges and parole boards and the reforms similar to the task force recommendations have reduced crime and imprisonment in other states. These reforms ensure clarity and consistency in sentencing, focus prison beds on those who pose a serious public safety threat and strengthen community supervision and paths to successful reentry.

States such as Texas, Georgia and Alabama have adopted similar practices to make their justice systems more effective and sustainable and Louisiana is in good company in following their lead.

"Our criminal justice system needs major reformation," said Department of Public Safety and Corrections Secretary Jimmy LeBlanc, chairman of the blue ribbon panel. "It's costing taxpayers a ton of money and not getting outcomes. I've never seen such bipartisan support and call for reform”

There is no defense for maintaining the status quo with that same bipartisan, business, and public support for spending fewer taxpayer dollars on ineffective prisons and dedicating those funds to alternatives that have a proven track record of results. We are encouraged by this progress and hope to see Louisiana shed the dubious honor of the incarceration capital of the world.

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Antrell Williams

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ATR Recognizes Georgia's 6th Congressional District Pledge Signers in Tuesday's Special Election Primary

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Posted by Liam Gorman on Monday, April 17th, 2017, 5:21 PM PERMALINK

Eighteen candidates, eleven Republicans, and seven Democrats will face off in a jungle primary on April 18th to determine who will be the next person to represent Georgia’s 6th Congressional District in the United States House of Representatives. This election is to replace Secretary Tom Price who was nominated by President Trump to lead the Department of Health and Human Services. A potential runoff will take place on June 20th, if no candidate reaches at least 50% of the vote. Cook Political Report rates the race as a toss-up.

Americans for Tax Reform recognizes the Georgia candidates who have taken the Taxpayer Protection Pledge to the American people ahead of Tuesday's special election primary. The Taxpayer Protection Pledge is a written commitment to the voters and the American public to oppose tax hikes.

Candidates

 

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ATR Supports Federal Budget Accountability Act

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Posted by Natalie De Vincenzi on Monday, April 17th, 2017, 1:53 PM PERMALINK

Representative Ken Buck (R-Colo.) recently introduced H.R. 1999, the Federal Budget Accountability Act. This legislation requires an annual report to Congress to track whether federal revenue collected as offsets materialize as intended.

For decades, the U.S. has been headed down a path of fiscal unsustainability, spending money that the government doesn’t have. Currently, whenever Congress enacts a pay-for to offset new spending, there is no system in place to ensure that the pay-for works. This bill would help reverse this trend through two ways.

First, H.R. 1999 would call for the Director of Office of Management and Budget to create a system to track any revenue collected. This would also entail tracking the accuracy of such provisions and how effective they are, so that ones that are not working can be re-evaluated.

Secondly, this bill would require the Director of OMB to submit a report to Congress every year on the effect of the offsets and pay-fors enacted. Any provision that increases revenue, reduces the deficit, or reduces spending is to be included in the report and analyzed for 10 years.

The Federal Budget Accountability Act will help ensure that any offsets proposed by lawmakers work as intended when they are implemented in the real world. Doing so will help put the federal government back on a path of fiscal sustainability. ATR supports this bill and urges all members of Congress to support and co-sponsor this important legislation.

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House GOP Tax Blueprint Gives Families Tax Cuts, Higher Wages, and Simplicity

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Posted by Alexander Hendrie on Monday, April 17th, 2017, 8:00 AM PERMALINK

Opponents of the House Republican “Better Way” Tax Reform blueprint have falsely claimed the plan will increase costs for American families.

The critics say the border adjustability component of the cash-flow business tax will cost the average family $1,700 per year. But that is without acknowledging all the good the blueprint does.  It’s a scare tactic. They are only looking at the border adjustment part of the plan in isolation without accounting for positive effects in the plan. Even then, it is not clear that they are accurately analyzing the impact of the border adjustable cash-flow tax. 

Taken as a whole, the blueprint is a drastic net tax cut and implements numerous pro-growth policies. The plan cuts taxes for individuals across the board and implements reforms that will result in higher wages and more jobs due to stronger economic growth. The plan also drastically simplifies the enormously complex code.

Tax Cuts for Individuals
The blueprint reduces tax rates for American families across the board. It folds the existing seven tax brackets (10%, 15%, 25%, 28%, 33%, 35%, and 39.6%) into three brackets (12%, 25%, 33%). 

It also doubles the standard deduction from $6,000 to $12,000 ($12,000 to $24,000 for families). This larger standard deduction means that individuals who go from the existing 10 percent bracket to the new 12 percent bracket will see a net tax increase. These changes mean lower taxes for ALL Americans.

Higher Wages for Families 
The blueprint contains numerous pro-growth policies that increase wages for families. The plan drastically reduces taxes on businesses (42 percent for both small businesses and corporations) and replaces the confusing and arbitrary depreciation schedules with immediate, full business expensing for investments.

According to research by the Tax Foundation, the blueprint will increase after-tax income by nearly 9 percent, or close to $5,000 for the average family. The plan will also increase economic growth by 9.1 percent over the long-term and create an additional 1.7 million new jobs.

Drastic Simplification of the Code 
Currently, the tax code is too complex for families to understand. The code is around 75,000 pages long, forcing taxpayers to waste more than 8.9 billion hours and $400 billion in annual compliance costs. Half of all individual taxpayers rely on a paid professional to file their taxes.

The blueprint will make it so easy to file taxes that it can be done on a postcard. Numerous changes are made to the code, including repeal of the Alternative Minimum Tax and the Death Tax, and the consolidation of existing family tax credits will reduce the need to itemize deductions for the majority of Americans and the need to devote time and resources to tax filing.

Border Adjustability Does not Increase Costs
It is not even clear that border adjustability will increase costs to the extent that critics claimEconomists on both the Left and the Right agree that the reforms in the plan will offset any increase in costs. The cash-flow business tax that replaces the existing corporate income tax incentivizes foreign and domestic investment in the U.S. because of its low rate and consumption base. In turn, this drives up demand for the dollar, which causes the currency to appreciate. A stronger U.S. dollar means more purchasing power for consumers buying foreign goods.

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New Study Shows Durbin Amendment is a Failure

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Posted by Justin Sykes on Friday, April 14th, 2017, 11:46 AM PERMALINK

Passed as part of the Dodd-Frank Act in 2010, the Durbin Amendment was touted as a measure to benefit America’s retail consumers. The goal of the Durbin Amendment was to reduce the costs of interchange fees that retail merchants pay for debit card transactions with the hope that those costs savings would be passed onto consumers. Roughly six years later however studies show consumer costs have not been reduced and also that retail merchants are less concerned with reduced fees and more with receiving benefits and flexibility in interchange transactions.

Most American consumers are likely not aware of the process that goes into debit card transactions with their local retail stores. In fact, most consumers likely are not aware of the Durbin Amendment and the interchange fees it sought to cap. Yet the process and costs of using debit cards is something that effects millions of Americans on a daily basis as well as the merchants with whom they are transacting.

To put it simply, interchange fees are the fees paid by retail merchants to financial institutions for the privilege of accepting debit card payments in their stores. As mentioned, Durbin set a cap on the interchange fees financial institutions were allowed to charge merchants for the privilege of processing debit transactions.

In passing Durbin, proponents claimed that not only would consumers see reduced prices in stores but that merchants’ themselves would prefer and benefit from reduced interchange fees. The problem with such claims by Durbin proponents though is neither has proven to be true since enactment.

According to a study by the Federal Reserve Bank of Richmond in conjunction with Javelin Strategy & Research, since enactment of the Durbin Amendment 75 percent of the merchants surveyed in the study reported no price reduction as a result of the regulation. In fact, of the merchants surveyed 23 percent had actually increased prices on consumers since Durbin passed.

As to the second claim, that merchants’ primary concern was on reducing interchange fees, new findings show the majority of small merchants are actually more concerned with preserving the benefits they receive from increased flexibility and choice in the partnerships they hold with financial institutions. This stems from the fact that the agreements merchants reach with financial institutions for debit card processing often provide the merchants with benefits that outweigh any reduction in fees they pay.

A new study released in April of this year by Javelin Strategy & Research found that for America’s small merchants, “value is a more significant factor than price when it comes to satisfaction with debit interchange fees and partnerships” with financial institutions.

That is to say merchants want more flexibility and options stemming from the benefits they receive from partnerships with financial institutions for processing, and when fees are capped under Durbin the benefits offered to merchants from such partnership agreements are diminished.

The April study surveyed 500 small merchants, those with annual sales between $250,000 and $10 million, and concluded that “small merchants want choice and flexibility more than low prices” on interchange fees paid. In fact, more than four in five merchants surveyed were satisfied with the transparency and value they get from their debit card payment processors and of the merchants who were not satisfied just one-quarter believe interchange fees hurt their profitability.

Even more revealing is that the study found over sixty percent of small merchants were unfamiliar with the details surrounding federal efforts to cap debit interchange fees under Durbin. Clearly the narrative from Durbin supporters that capping interchange fees would be a benefit and preference for merchants is mischaracterized and for the most part wholly misleading. 

Thus over six years since enactment of the Durbin Amendment, the two driving justifications for enactment of price caps on interchange fees are proving false.

Small merchants not only prefer choice and flexibility in their partnerships with financial institutions, which are increased when prices are not capped, but prefer such benefits over reduced prices. Furthermore, the price savings consumers were supposedly guaranteed under Durbin have not come to fruition, and even worse a number of merchants have increased prices despite the Durbin price caps.  

Lawmakers in the 115th Congress should keep in mind these two failed outcomes when considering Durbin Amendment repeal, and know that the benefits to consumers and merchants promised under Durbin have been an overwhelming failure. 

 

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