ATR in conjunction with Digital Liberty Urge House Representitives to Co-Sponsor PITFA
Today, Grover Norquist in conjunction with Katie McAuliffe, Executive Director of Digital Liberty, sent out a letter to House Representatives to co-sponsor the Permanent Internet Tax Freedom Act (PITFA) H.R.3086 in order to protect their constituents from government taxation.
The Internet Tax Freedom Act passed in 1998 restricts the taxation of Internet access by local and federal governments and has three times been reinstated. PITFA takes a step further and makes these restrictions permanent, giving consumers and businesses protection from burdensome government taxation.
You can read the letter: Here
Vote Yes on New Jersey Public Question 2
Americans for Tax Reform Urges New Jersey Taxpayers to Vote Yes on Public Question 2
Americans for Tax Reform, a non-profit taxpayer advocacy organization founded in 1985 at the request of Ronald Reagan, announced today it is urging New Jersey voters to support Public Question 2, a ballot measure whose fate will be determined on November 8.
Public Question 2, if approved by voters, would dedicate all state gas tax revenue to the New Jersey Transportation Trust Fund. Under current law only 10.5 cents of the 13.5 cent per gallon gas tax is dedicated to the transportation fund.
Diversion of gas tax revenue to non-transportation purposes is a problem in many states. Approval of Question 2 by New Jersey voters will implement a taxpayer safeguard ensuring that gas tax revenue goes toward building and maintaining roads, as opposed to being diverted to non-transportation purposes. Approval of Question 2 would also alleviate pressure to raise gas taxes in the future. Similar transportation funding safeguards are in place in both Maryland and Wisconsin.
“The legislation that abolished the state death tax, cuts the state sales tax and reduces income taxes on retired New Jersey voters as well as increasing the gas tax is overall a net tax cut over the next ten years. That is a victory for taxpayers,” said Grover Norquist, president of Americans for Tax Reform.
“But another victory is that finally New Jersey taxpayers will be protected from politicians stealing from gas tax revenues and spending them on politics as usual. If New Jersey passed Public Question 2 that protects our gas tax monies from politicians looking to fund special interests. Limiting gas taxes to building roads and transportation projects is giant step in reducing corruption in New Jersey,” said Norquist.
How the Clintons Cheated on Their “Used Underwear” Tax Return
Hillary and Bill Clinton’s decades-long pattern of dishonesty shows up in their tax returns
A new review of Hillary and Bill Clinton’s previous tax returns show the Clintons blatantly overvalued their non-cash donations and illegally reduced their tax burden. They didn’t pay the taxes they owed.
Hillary and Bill Clinton famously donated Bill’s used underwear and took a $2 per-pair tax deduction on their 1986 tax return. In Bill’s own handwriting, here is the line from the 1986 Clinton tax return, claiming a $6 deduction for “3 pr. underwear”:
Most press reports have focused on the strangeness of the used underwear donation and tax deduction. But the new examination of handwritten notes reveals the Clintons cheated on their taxes by significantly overstating the value of their donated clothing. These are not simple rounding errors of a few percentage points: The Clintons overstated the value of their used clothing by a factor of several hundred percent.
And not just the underwear, but many items of clothing including suits, pants, and sports coats.
When the Washington Post investigated the matter in 1993, they hit a brick wall when trying to get an explanation. The White House “over the course of a week didn’t respond to repeated phone calls seeking answers.”
To this day, the Clintons have not answered questions about their overvaluing of non-cash donations, and Hillary Clinton’s campaign website does not make available her tax returns for the years in question.
Let’s review the case against the Clintons, starting with the judgement question of donating used underwear (likely briefs) and having the gall to take a tax deduction for it. As noted by the Washington Post:
“Several experts were consulted about Clinton's tax-deductible donations, especially of underwear. Paul Offenbacher, a longtime Washington-area tax accountant, said it is highly unusual to take an itemized deduction on donated underwear; indeed, he had never heard of such a thing.”
The Washington Post also talked to one of the recipient organizations:
"We don't get too much underwear here; I don't think people want that too much," said Joe Cheslow, a senior resident at the Union Rescue Mission, a haven for homeless people in Little Rock, Ark., that has been a frequent beneficiary of the Clintons' tax-deductible largess.
This author obtained handwritten notes of the Clinton’s donation lists to the Salvation Army and Goodwill Industries. Over the years the Clintons consistently overvalued donated items, by as much as 10 times the IRS standard.
The IRS allows deductions for non-cash donations to charity, but taxpayers must value the items truthfully. For tax year 1986, that meant using the “Thrift Shop Value” of items (the same basic standard applies to this day) as noted in IRS instructions.
The Clinton’s 1986 tax returns include a handwritten list showing they declared the value of a “gabardine suit – ripped pants” at $75, the "Brown Sports coat" at $100 and the “Salmon Sports coat” at $75. And of course the famous "3pr. underwear" at $6.
Pictured below: Bill Clinton’s handwritten list of non-cash donations to the Salvation Army for tax year 1986.
Using any calculation method, the Clintons were dishonest:
-Goodwill Industries and Salvation Army both publish guides for valuing used clothing donations. In 2016 dollars, Goodwill Industries values men's suits at $10 - $30, and sports coats at $6 - $12. There is no listing for men’s used underwear.
-The Salvation Army values suits at $15 - $60. There is no listing for men’s used underwear.
-The TurboTax “ItsDeductible” calculator values items based on a combination of eBay and thrift store prices. Men’s suits are valued at $29, sports coats at $18. Underwear is listed, but at just $1.
Basically what the Clintons did is akin to walking into a Goodwill store today, donating a sports coat and deducting $220 dollar from your taxes for it. Or donating a pair of used underwear and deducting $4.40.
Below are ten of the worst valuations found on multiple handwritten notes from the Clinton’s tax return for a single tax year, 1986:
Just this selection of 10 overvaluations adds up to $1,375 - $1,518 in 2016 dollars.
“Hillary and Bill Clinton clearly overstated the fair market value of the clothing donated,” said Ryan Ellis, an IRS Enrolled Agent and noted tax policy expert.
What are the consequences to a normal American of grossly overvaluing donations in the manner of the Clintons?
“If a taxpayer overstates a deduction like this, they could be held liable under audit by the IRS for back taxes, interest, and a failure-to-pay penalty,” said Ellis.
Hillary Clinton has been preaching for ‘fairness’ and ‘paying what you owe’ on the campaign trail. Her own estate is specifically designed to shield herself from the Death Tax.
The embarrassing incident of the used underwear tax deduction seems to have masked the more serious issue of blatant overvaluation that happened on a consistent basis. Perhaps this is why the Clintons refuse to answer questions about their dishonesty on these tax returns.
“Hillary and Bill Clinton didn’t pay the taxes they owed. The press has focused only on the giggle factor of the underwear, but fail to mention the Clintons broke the law,” said Grover Norquist, president of Americans for Tax Reform. “Meanwhile, Hillary has pushed a national gun tax, a soda tax, a payroll tax hike on middle income households, a Death Tax hike, a capital gains tax hike and several other tax hikes totaling $1.4 trillion over a decade.”
Americans for Tax Reform is tracking the complete Clinton tax record at www.HighTaxHillary.com
Congress Should Not Use the Tax Code to Pick Winners and Losers in the Reinsurance Industry
Congressman Richard Neal (D-MA) and Senator Mark Warner (D-VA) recently introduced legislation (H.R. 6270 and S. 3424 respectively) that needlessly picks winners and losers in the reinsurance industry by distorting the tax code in an economically destructive way. While supporters of the legislation claim it would close a “loophole” in the tax code, it would do no such thing and would instead make the code more complex, while decreasing choice and increasing prices in the reinsurance industry.
Property and casualty insurers commonly purchase reinsurance as a way to spread risk so that no single insurer is overly exposed in the face of disaster. Under federal law, insurers are permitted to deduct from taxable income any premiums paid to a reinsurance provider. This makes perfect sense because it is a necessary business expense indistinguishable from any other.
The proposed legislation removes this business deduction only for foreign reinsurers based on the argument that foreign firms are using the deduction to shift profit outside the U.S.
But this is argument misses the mark -- profit shifting concerns are not justified here. Reinsurance transactions are already heavily regulated to ensure the rules aren’t abused. Even if this were the case, the solution should not be to treat identical business purchases differently under the tax code based on the location of the reinsurer.
Not only is this proposal protectionist, but it would make the code more complex, would arbitrarily picks winners and losers, and hurts the economy and consumers. Given it raises a miniscule amount of revenue, it is not a serious pay-for especially after accounting for the economic damage it causes.
Doesn’t Fix the Problem that Supporters Claim: Supporters of this proposal argue that reinsurance profits ending up outside the U.S. means that insurers are shifting profit to minimize taxes. This is not the case. By its nature, reinsurance is an industry that spreads risk across the globe, therefore profit (and loss) will naturally spread outside U.S. borders. In addition, reinsurance transactions are already subject to heavy scrutiny by IRS auditors to ensure they do not abuse discrepancies in international tax law to shift profit outside the country.
Makes the Tax Code More Complex: Tax policy should treat all economic decisions neutrally by minimizing the number of distorting credits and deductions in the code so that decisions are made based on economic growth. Current law over reinsurance premiums already treats business decisions equally, so H.R. 6270/S. 3424 would create more complexity in the code and encourage insurers to arbitrarily treat purchases differently based on the country of purchase.
Reduces Consumer Choice and Increases Reinsurance Prices: Changing the tax code in this way will distort the reinsurance market by giving domestic reinsurers an artificial advantage. This will narrow the choices available to insurance companies and consumers leading to decreased competition and higher prices. According to research by the Brattle Group, this proposal could reduce the supply of reinsurance by as much as 20 percent, and increase costs to American consumers by $11 to $13 billion due to higher prices.
Hurts Economic Growth: According to research by the Tax Foundation, this change would reduce GDP by $1.35 billion over the long term, due to increases in the cost of capital. As noted by the study, every additional dollar in revenue would come at the cost of more than four dollars to the economy. Equal treatment of foreign and domestic reinsurance allows consumers to spread the risk in an economically efficient way, but the proposed change creates unneeded market distortions.
Raises a Miniscule Amount of Revenue: Congress is continually on the hunt for “pay-fors” as a way to offset tax reform proposals. Because this proposal is so damaging to economic growth, it would raise a miniscule amount of revenue and is essentially useless as a tax reform pay-for. After accounting for negative economic feedback, the proposal would raise just $4.4 billion over a ten-year period. Over that same period, federal revenues will total $41.7 trillion according to the Congressional Budget Office. The damage this proposal will cause to the economy and to property and casualty insurers far outweighs any benefit it may have as a tax reform pay-for.
CMMI Tests Undermine Congressional Authority and Threaten Access to Healthcare
Obamacare created the Centers for Medicare and Medicaid Innovation (CMMI), an agency tasked with conducting demonstrations over new health care delivery and payment models in Medicare, Medicaid, and the Children’s Health Insurance Program with the intent of reducing healthcare costs. While the goals of this agency are laudable, CMMI is using its broad authority to marginalize the constitutional role of Congress in order to push bad healthcare policy.
CMMI tests are supposed to increase the efficiency of healthcare programs by either improving quality without increasing spending or reducing spending without decreasing quality. However, the agency has pushed tests with little evidence they will result in savings, while strong-arming providers into participating.
The last eight years have seen the executive branch repeatedly push unilaterally actions that ignore the will of Congress and the American people. The actions of CMMI to unilaterally propose changes in law represents a new avenue for unelected bureaucrats to push their liberal agenda even in the face of opposition from doctors, patients, and Congress.
Lawmakers must assert their constitutional authority over this wayward agency. The fact is, it is the job of Congress to make these changes to law.
CMMI Not Subject to Congressional Oversight: Federal agencies are typically funded through the annual appropriations process, which gives Congress control over funds each year and the opportunity to conduct oversight over the actions of an agency.
CMMI is not subject to this process – the agency has been obligated $10 billion this decade and $10 billion every decade in perpetuity. As a result, the agency has free rein to do what it wants with these funds and Congress is limited as to the oversight it can conduct over the agency.
To date, CMMI has spent more than $6 billion with no savings to show for it. In the real world, the agency’s poor performance would see its funds reduced. Instead, CMMI continues to receive funds automatically.
CBO Methodology Hampers CMMI Oversight: The Congressional Budget Office is the scorekeeper for Congress on all fiscal issues. It provides cost estimates on all legislation and is therefore an integral part of the budget making process. In measuring the fiscal cost/benefit of CMMI demonstrations, CBO is adjusting the trillion dollar federal baseline even though it is unclear whether there will be any savings at all.
The agency assumes that tests are recouping billions in savings as if they are successful even though these tests are in their early stages, and little, if any evidence has been compiled. Conversely, CBO is scoring any attempt to block or correct demos as costing the government money. This binds the hands of lawmakers by them to consider offsetting spending cuts whenever they wish to exert proper oversight over .
Not only does this decision distort the federal baseline with misleading estimates, it makes it much harder for Congress to do its job by giving CMMI tests supremacy over the work done by lawmakers.
CMMI is Promoting Bad Healthcare Policy: Because of its broad authority over mandatory spending, CMMI has been able to propose sweeping policy changes with little evidence of future savings. The latest CMMI test proposes a new, lower payment model for physician-administered prescription drugs under Part B of Medicare.
Because CMMI has decided it can mandate participation in its tests, the rule rewrites existing payment models for as much as 75 percent of the country forcing thousands of doctors and patients across the country to participate. Because the rule drastically reduces reimbursement rates to doctors, it is likely that these tests will hurt access to care for seniors across the country.
This massive test should be subject to careful scrutiny, especially as there are concerns that the demonstration will not save the money that CMMI claims. However, Congress is hamstrung in its ability to conduct meaningful oversight because of CBO methodology.
Norquist: Pennsylvania House Needs to Pass Asset Forfeiture Reform This Year
On Friday, Americans for Tax Reform President Grover Norquist co-authored an opinion editorial for PennLive with Faith and Freedom Coalition Executive Director Timothy Head and Freedom Works CEO and President Adam Brandon on why Pennsylvania needs civil asset forfeiture reform in 2016.
The article emphasizes PA Senate’s recent vote to pass asset forfeiture reform in its house to “improve property rights across the state.” Now, it is up to the House Judiciary Committee to get the bill through the legislature before this session ends in November.
Civil asset forfeiture, the process where law enforcement officials can seize property from citizens who have not been criminally convicted, has been significantly abused in Pennsylvania. Recently, the state’s Attorney General, Kathleen Kane, admitted to seizing $1.77 million in cash using civil asset forfeiture laws to profit off the seizures. On this issue, the article states:
“The money is very good in the forfeiture business – if you happen to work for the government. So good, in fact, that it becomes easy to lose track of it.
A current case in point involves now-disgraced Pennsylvania Attorney General Kathleen Kane, who only recently admitted to seizing $1.77 million in cash using civil asset forfeiture laws.
As questions grew louder, the circumstances involving the cash – that had been sitting in boxes in her office for nearly two years – came to light.”
Millions of dollars sat in Kane’s office for two years, and there was no significant mechanism to check this seizure.
In the Institute for Justice’s Policing for Profit report released last November, Pennsylvania received a D- for its poor protections of innocent property owners, low bar for police to seize property, lack of conviction required to take property, and harmful use of profit with 100% of forfeiture proceeds going to law enforcement.
Pennsylvanians deserve to be treated better by law enforcement officials. That is why Americans for Tax Reform supports the current civil asset forfeiture reform bill in the state’s House of Representatives that passed the State Senate 43-7.
Please read and share Norquist’s article (found here) on these necessary measures to restore Pennsylvanian property rights before the 2016 legislative session ends.
30 Years Is Too Long Since Tax Reform
Thirty years ago today, President Ronald Reagan signed into law the Tax Reform Act of 1986– which became the largest simplification of the U.S. Tax code in history. Prior to 1986, the federal tax code was a complex mess of brackets, deductions, and credits totaling over 26,300 pages.
Some of the laws major achievements were:
- The reduction of the top marginal individual income tax rate from 50 percent to 28 percent
- A reduction of the corporate income tax rate from 46 percent to 34 percent
- Reducing the total number of income brackets from 14 to 2
While Reagan achieved a significant victory with his reforms, they did not far outlive his presidency. Starting with President H.W. Bush, the top marginal tax rate was raised from 28 percent to 31 percent. President Clinton took it a step further raising the top rate to 39.6 percent. After a brief stint at 35 percent under President George W. Bush, President Obama returned the rate to 39.6 percent.
It has been thirty years too long. Our tax code desperately needs reform.
The Tax Code is Too Complex
Since 1955, the federal tax code has increased six-fold, from 409,000 words to 2.4 million words. Countless regulations have increased the tax burden on Americans and it’s time that time and money are spent doing what you want to do, not working to comply with the government. According to the Tax Foundation, Americans will spend 8.9 billion hours and $409 billion complying with IRS tax filing requirements this year. U.S. businesses and individual income tax returns make up the majority of the hours spent complying, clocking in at 2.8 billion hours and 2.6 billion hours respectively. It’s too complex and it’s too long.
The Tax Code is Uncompetitive
The tax code is the worst in the world. The U.S corporate tax rate is 39 percent, whereas the global average is 25 percent. The tax rate has barely changed since 1986 and since then, other countries have cut their rates aggressively. The U.S. rate is two to three times higher than its direct competitors, like Canada (26.3 percent), the U.K. (20 percent), and Ireland (12.5 percent).
Additionally, the U.S. is only one of six OECD countries that still utilizes a worldwide system of taxation. American businesses overseas are required to pay taxes in the country it earned the income in and then pay U.S. taxes on the remaining income, essentially double-taxing American businesses. This system of double taxation puts American businesses at an immense disadvantage, as they are competing with businesses who utilize the more modern territorial system of taxation. Ultimately, the costs of the worldwide system of taxation are passed onto employees, as much as 75 percent of the costs can be passed onto workers.
Congress Must Again Pass Pro-Growth Tax Reform
Pro-growth tax reform that cuts rates for all need not be viewed as costing the government money. As noted by the Congressional Budget Office, every 0.1 percent of higher economic growth equates to $286 billion in extra federal revenue, meaning an increase from 2 percent average growth to 3 percent growth would have economic benefits and would help resolve the government’s overspending problem.
House Republicans in their “Better Way” blueprint have introduced ways to simplify the puzzling tax code and fix our competitiveness problem. To simplify the code, House Republicans have proposed a way so that taxpayers can file their taxes on as little as a postcard. To fix, House Republicans suggest reducing the U.S. corporate rate to 20 percent, which is lower than the global average, and creating a territorial system of taxation. A 20 percent rate, like the blueprint calls for would create more than 600,000 full time jobs and increase GDP by more than 3 percent over the long term. If passed into law, these solutions will make American’s lives easier and ensure that our businesses can again compete in the global economy.
Tim Kaine Wants to Increase Dodd-Frank Burden on Main Street America
In a recent interview Democratic Vice Presidential Candidate Tim Kaine admitted that a Hillary Clinton White House would look to increase the burden of Dodd-Frank regulations in a misguided effort to help “Main Street”. The irony of Kaine’s plan is that small businesses on America’s Main Streets are already being crushed by Dodd-Frank regulations, and increasing such regulations will only serve to worsen the problem.
Speaking on CNBC’s “Closing Bell” Kaine made it clear his goals are aligned with the far left liberal branch of the Democratic Party. Kaine praised Sen. Bernie Sanders (I-Vt.) and Sen. Elizabeth Warren (D- Mass.) saying both, “have really important ideas that they’ve put on the table.” Clearly Kaine and the Clinton campaign are grossly out of touch.
Kaine went on to say that “we’ve got to keep regulation…on Wall Street, so that Wall Street doesn’t tank Main Street again” and that, “we put Dodd-Frank in place for a reason, and we want to strengthen it.” However the fact is Dodd-Frank has done nothing to improve the economic health of small businesses and has instead reduced access to the credit and capital many on Main Street need to survive and grow.
It is no secret that new and small businesses play an outsized role in creating jobs and opportunities in the U.S. economy. Yet new reports show a massive decrease in new business growth in recent years, and that slow down has been a product of reduced borrowing opportunities for new and small businesses.
For example, in 1980 firms in their first year accounted for 13 percent of all companies, but since 2010 that rate has fallen to around 8 percent. Similarly, in the 1990's the average new business hired over 7 workers, while in 2011 the average new business hired roughly 4 workers. Tim Kaine would clearly attribute this reduction to Hillary’s narrative of “Wall Street is crushing the little guy”, but such an argument is misplaced and simply political rhetoric.
The fact is two of the most disastrous results from Dodd-Frank that have impacted growth in small businesses are reduced access to credit due to community bank closures and consolidation, and an economically crushing regulatory burden.
Community banks (those with less than $10 billion in assets) serve as a primary source of credit for many new and small businesses. According to a 2015 Small Business Credit Survey, small business loan applicants were successful 76 percent of the time at small banks, versus 58 percent of the time at large banks.
Yet since the passage of Dodd-Frank, such sources of credit for many on Main Street looking to start or grow small businesses have dried up. In fact, since Dodd-Frank was enacted, the number of community banks has shrunk by 14 percent. Thus it should come as no surprise that since 2008 small businesses have seen a 15 percent decrease in lending.
Thus the issue is why Tim Kaine and Hillary Clinton would want to “strengthen” Dodd-Frank in order to “help” Main Street. Clearly the resulting regulatory burden of Dodd-Frank has done nothing to help small businesses and instead has limited access to credit and inhibited economic growth on Main Streets across America.
Photo credit: Emily
Dodd-Frank was INVENTED to destroy MAIN STREET ! !
Ask any Communist ORGANIZER.
Norquist Letter Calls Out New York State Senators For Vote Against Property Rights
(UPDATE: The bill in question was unfortunately signed into law by Gov. Cuomo (D) today)
Today ATR President Grover Norquist sent a letter to Edward F. Cox, Chairman of the New York State Republican Party, and Michael R. Long, Chairman of the Conservative Party of New York, calling attention to a upstate Republicans and Conservatives who voted to restrict property rights.
The full text of the letter is below:
Oct. 21, 2016
Edward F. Cox
Chairman, New York State Republican Party
Michael R. Long
Chairman, Conservative Party of New York State
Dear Chairman Cox and Chairman Long,
I write to you today to call out Republican and Conservative state senators who unfortunately voted for S6340A, the downstate, heavy-handed, union-boss driven property rights restriction which recently arrived on Gov. Cuomo’s desk for his consideration by Oct. 29:
Sen. Terrence Murphy – District 40
Sen. Sue Serino – District 41
Sen. Joseph A. Griffo – District 47
Sen. Patty Ritchie – District 48
Sen. John A. DeFrancisco – District 50
Sen. Fred Akshar – District 52
Sen. Rich Funke – District 55
Sen. Joseph E. Robach – District 56
Sen. Catharine Young – District 57
Sen. Thomas F. O’Mara – District 58
Sen. Patrick M. Gallivan – District 59
Sen. Robert G. Ortt – District 62
This bill is an attack on the property rights and livelihood of all New Yorkers. It reeks of protectionism. I am bewildered as to why any Republican or Conservative would vote against the interests of their own constituents in order to please New York City Democrat leaders and downstate union bosses. Upstate Republicans and Conservatives were elected to protect their constituents from precisely such looting.
In a tough economy home sharing has provided a lifeline for people to pay their bills and make ends meet. It is especially beneficial to lower and middle income families and households. I would encourage the senators to spend some time with home sharing hosts and guests and learn this first hand. As NYU’s own Arun Sundararajan has written: “Peer-to-peer rental marketplaces have a disproportionately positive effect on lower-income consumers across almost every measure.”
This bill is also a case of the political class working against the interests of the people. Voters of all political persuasions want a light regulatory touch when it comes to the sharing economy, as shown by a recent Pew Research Center survey which found that even Democrats and liberals want politicians to leave them alone in this area of their lives. The authors note: “The clear preference for a light regulatory approach among partisans in all camps is striking.”
A vote in support of the bill is something one would expect from the likes of Elizabeth Warren or Hillary Clinton. Clinton has threatened to “crack down” – her words – on the sharing economy if elected.
I would like to take this opportunity to commend the Republican and Conservative senators who stood their ground and voted against this special interest monstrosity:
Sen. George A. Amedore, Jr. – District 46
Sen. Kathleen A. Marchione – District 43
Sen. Michael H. Ranzenhofer – District 61
Sen. Hugh T. Farley – District 49
Sen. James L. Seward – District 51
Instead of passing hostile and economically destructive new laws that would drive home sharing underground, I encourage Republicans and Conservatives to consider the country’s best free market framework for short term rentals – Arizona’s SB 1350 – passed by the Republican-led legislature and signed into law by Gov. Doug Ducey (R). There is a clear movement in many other states toward the Arizona approach.
The State of New York has a choice: It can either be a leader in the emerging sharing economy or it can make itself a mausoleum dedicated to the political structures of the past.
Grover G. Norquist
President, Americans for Tax Reform
Dodd-Frank is Crushing Small Businesses and Startups in America
After 6 years, Dodd-Frank’s legacy is hindering American innovation. Since its passage, the Dodd-Frank Act has unleashed an onslaught of large and complex regulations. Because of these regulations the growth of American small businesses and startups has hit an all-time low. In a report by Third Way, these regulations are examined as a primary factor for this phenomenon.
The Third Way report found that while new businesses have played a historically large role in U.S. job creation, trends show that in recent years there has been a growing gap in borrowing opportunities for small businesses and startups. Contrast this with the fact that lending to large businesses has surged in recent years. Such trends can be tied to the fact that small banks are being forced to either consolidate or shutter their operations as a result of Dodd-Frank regulations.
The impact of Dodd-Frank regulations on small businesses and startups begins with their effect on small banks, such as community banks. Dodd-Frank regulations have led to higher compliance costs, which are economically disastrous for smaller banks because they lack the vast resources that their larger competitors possess. According to a study by the Mercatus Center, 90 percent of banks stated that compliance costs have increased since 2010. The report by Third Way highlights that such community and small banks “bear a disproportionate regulatory burden.”
Because of these increased compliance costs, small banks are reducing the number of services that they provide. It is also the case that as community banks close due to skyrocketing compliance costs and other regulatory factors, sources of credit for small businesses are simply no longer available. This has led to a decrease in small business lending in the U.S.
For instance, since 2008 lending to small businesses has decreased by 15%, while lending to big businesses has increased by 35%. According to a 2015 Small Business Credit Survey, small business applicants were successful 76% of the time at small banks, versus 58% of the time at large banks. Thus as community banks close or consolidate, small business lending dries up.
Small businesses are then left with no other option than to seek loans from lager banks, which cannot provide the same level of personalized service and competitive rates that community and small banks can provide. Ironically, as a result of Dodd-Frank, many large banks have also been forced to eliminate loans that after the financial crisis would be seen as too “risky”. For the most part, this means eliminating loans to businesses with less than $2 million in revenue, or alternatively eliminating loans less than $100,000 altogether.
This lack of access to credit has led to a reduction in the amount of startup firms in the U.S. In 1980, firms in their first year accounted for 13% of all companies, yet since 2010 that rate has dropped to roughly 8%. According to a 2015 survey by Federal Reserve banks, small businesses and startups are finding it increasingly difficult to obtain needed credit. The survey found that 63% of microbusinesses (firms with annual revenue under $100,000) and 58% of startups (firms less than two years old) were unable to realize their funding needs.
It is apparent that the onerous regulations imposed by Dodd-Frank have contributed to the decrease in startups and reduced access to credit for small businesses. This phenomenon not only hinders economic growth in the U.S., but impacts consumers as small businesses and startups are often leaders in product innovation. For those supporting Dodd-Frank, this should be a wake up call that it is time to look to much needed reforms that will encourage small business growth and innovation, instead of deterring innovation and competition in the market.
Photo Credit: Ian Lamont
DODD-FRANK was meant to force Banks
to make illegal risky loans. Community
Organizers (you-know-who) used it to
enforce the practice. These "LOANS"
were packaged into bundles and sold
to the sucker bankers of the world. When
these "LOANS" defaulted, economies
everywhere collapsed. Destroying small
businesses is only a BONUS by-product.
IT IS ONE OF S0R0S' OPEN SOCIETY'S
FINEST CON JOBS TO DATE ! !