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Chris Prandoni

The Paycheck Fairness Act Compounds Businesses' Problems


Posted by Chris Prandoni on Tuesday, November 16th, 2010, 4:06 PM PERMALINK


Couched in the vernacular of equity and transparency, the Obama administration has enacted or proposed policies that divert small businesses’ energy and resources from job creation to bureaucratic compliance. The effect of these policies is to hamstring America’s small businesses through onerous reporting requirements, punitive penalties, and higher taxes. Often touted as the anchor of America’s economy, small businesses have generated 65 percent of the net new jobs created over the past seventeen years.

Globalization has transformed the American economy from an industrial one to an idea-based one. America’s success is now tied to entrepreneurs’ ability to innovate. Given this reality, the Obama administration has done a poor job of fostering job growth, instead choosing to regulate and tax America’s small businesses.

First there was the now infamous 1099 reporting mandate in the health care bill. Under this law, businesses will be forced to issue paper-filed 1099 IRS information reporting forms to any person or company from which they purchase at least $600 in services or goods. This provision requires small business owners to collect tax information from and issue tax forms to the restaurants where they have business meetings, local office supply stores, airlines, rental car companies, and so on. This is the equivalent of raising taxes on small businesses by $17 billion over the next decade.

Equally disconcerting is the impending tax increase on small businesses if Congress does not extend the current rates. Unlike corporations, small businesses usually don’t pay their own taxes; rather, a small business’ profits are included on its owner’s income tax form. In 2008, $457 billion of small businesses’ $631 billion in total profits faced taxation in households that are in the top two income brackets. Thus, a majority of small business profits will face a tax hike if the current tax rates aren’t extended. These small businesses employ a majority of everyone who works for a small business and are responsible for much of the nation’s job growth. Raising taxes on these most successful small businesses will further delay our economic recovery.

The latest piece of legislation set to weigh down small businesses is the House-passed Paycheck Fairness Act, scheduled for a vote in the Senate on Wednesday. The bill looks to close the gap between the amount of money men and women earn by facilitating litigation and burdening small businesses with new paperwork.

Proponents of this legislation have created a false problem by over-exaggerating the pay disparity between men and women. When hours of work, overtime, education, and experience are accounted for, the difference between men and women’s wages is about five cents on the dollar.

This innocuous-sounding bill would require employers to submit data on sex, race, national origin, and earnings to the Equal Employment Opportunity Commission (EEOC). If this database is made public, trial lawyers will be able to comb through every employer’s books searching for instances of pay disparity.

Further stacking the deck against employers accused of gender discrimination, small businesses would be able to justify pay differences between male and female employees exclusively on the grounds of education, training, and experience. While these are important metrics for measuring a worker’s earnings, they do not take into account productivity, drive, and other intangible attributes which undoubtedly play a roll in employee compensation.

Inevitably, small businesses will hire lawyers to ensure compliance with new paperwork and to defend themselves against unwarranted lawsuits. Both of these unintended but very real consequences will starve small businesses of capital when they need it most.

These reporting requirements, tax increases, and new regulations will stop small businesses dead in their tracks. Unable to tell what tomorrow will bring, small businesses will have no choice but to sit on their hands. Reducing potential profits and increasing paperwork will do little to stimulate new businesses, whose success America’s economy depends on.

Pro-growth senators should first oppose the Paycheck Fairness Act and look to solidify the current tax rates — and then rollback unnecessary regulations. Providing certainty to businesses would be the best use of Congress’ time this winter.

Christopher Prandoni is the Executive Director of the Alliance for Worker Freedom, an affiliate of Americans for Tax Reform.

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Simpson-Bowles Gas Tax Neither Warranted Nor Necessary


Posted by Chris Prandoni on Thursday, November 11th, 2010, 4:25 PM PERMALINK


ATR’s warnings, that the Obama Deficit commission is a plan to raise taxes cloaked in the veil of bipartisanship (more on that here), were validated yesterday when the co-chairs of Obama’s deficit commission released their preliminary plan. The Simpson-Bowles plan includes billions in spending cuts—many of which were not actual reductions in spending—and raises taxes by a very real $100 billion a year.

Seemingly taking cues from the retiring Senator George Voinovich (R-Ohio)
, Simpson and Bowles included in their plan one of the most unpopular taxes in the country—a 15-cent increase of the federal gasoline tax. Proponents of this tax argue that it has not been raised since 1993 (heaven forbid!) and that the revenue would be spent on our nation’s infrastructure.

One school of thought is fearful that the highway trust fund will go belly-up. They accurately claim that the trust fund will be insolvent unless it continues to receive infusions of cash from the general fund or is the beneficiary of additional revenue. This is a red herring. The federal government will keep funneling money to the inefficient highway trust fund thereby preserving the status quo and effectively preventing reform or the implementation of cost saving measures.

People interested in saving the trust fund should first look to make it more efficient. One measure that would save taxpayers hundreds of millions of dollars would be to repeal the Davis-Bacon law. This holdover from the New Deal mandates that federal projects pay workers the “prevailing wage” in a region. When actually implemented, Davis-Bacon ends up inflating usually unionized workers wages, thus, raising the price tag on federal projects.

Repealing this law would bring down construction costs and give the federal government more bang for its buck. Furthermore, to focus on the $36 billion the CBO predicts the highway trust fund will need over the next six years misses the point—our government is currently spending a trillion dollars more than it takes in so nearly every program is technically insolvent.

Instead of lobbying for higher taxes, Simpson, Bowles, and Senator Voinovich should first look for ways to build America’s highways at lower costs. Once new projects are sufficiently scrutinized and deemed necessary, sponsors should look to cut spending from our current three trillion dollar budget and allocate new reductions towards necessary projects.

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Democrats Decry the Business Community After Enjoying Contribution Advantage in 2008


Posted by Chris Prandoni on Monday, November 1st, 2010, 10:37 AM PERMALINK


Looking to discredit potentially huge Republican gains tomorrow, Democrats have manufactured the narrative that Republicans and their supposed Wall Street/corporate puppet masters have united to steal the election and disenfranchise the American people. While decrying amorphous businessmen and non-profit’s independent expenditures makes for good campaign rhetoric, Democrats surely must blush when they look in the mirror.

It was only two years ago, during the 2008 election cycle, that Obama benefited from $65 million in independent expenditures from organizations which, by and large, do not disclose their donors. They also must have forgotten that it was the finance, insurance, and real estate industry which donated $39 million to Obama, $10 million more than the same industry gave to McCain. Or perhaps it was the $19 million Obama received from the healthcare industry—whose product we will be required to purchase by law, mind you— that Democrats forgot to mention during the health care debate (McCain received $7.5 million from the healthcare industry). While busy demonizing the Chamber, Democrats must have accidentally omitted that the business community gave the President $37 million and McCain a measly $16 million.

It would appear that the Democratic Party was the party of Big Business, Big Pharma, Wall Street, and those evil insurance health insurance companies that want nothing more than to cut your coverage when you need it most. The straw men Democrats have erected this cycle were close allies two years ago. It is only since the business community has become disenchanted with the current Administration that Democrats have begun to attack it.

These disingenuous attacks on the Chamber of Commerce make Democrats look like fickle opportunists at best and whiny toddlers at worst. The woe-is-us narrative makes even less sense when one compares Party expenditures in competitive races. David Brooks writes that “in the most competitive House races, Democrats have raised an average of 47 percent more than Republicans, According to the Center for Comparative Politics. Similarly, Democrats have spent 66 percent more, and have about 53 percent more in their war chests. According to the Wesleyan Media Project, between Sept. 1 and Oct. 7, Democrats running for the House and the Senate spent $1.50 on advertising for every $1 spent by Republicans.”

Interest groups, the business community, and individual citizens should be free to donate to and advocate for whomever the like—that’s what the oft cited First Amendment is all about. The persistent, suffused attacks by Democrats in office on those they disagree with is a disconcerting and inappropriate use of power. Americans would do well to reprimand them tomorrow.

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Wind and Solar Energy: A Bad Deal for Taxpayers


Posted by Chris Prandoni on Tuesday, October 26th, 2010, 4:01 PM PERMALINK


[PDF Document]

The wind and solar industry, politicians, and environmentalists have spent the past decade perpetuating the belief that these sources of energy are cost-free and investment in this sector would result in job growth. Contrary to this narrative, wind and solar are less efficient, more expensive sources of energy whose implementation is predicated on government mandates and subsidies.

Energy costs

Wind and solar, at this point in time, are significantly less efficient than coal—the most common source of energy in the US:

Cost per megawatt hour

  • Coal power—$78.10
  • Onshore wind power—$149.30
  • Offshore wind power—$218.00
  • Thermal solar power—$256.50
  • Photovoltaic solar power—$396.10

Tax Credits

The federal government facilitates wind production by providing a $0.022 production tax credit for each kilowatt-hour of electricity produced by wind. Similarly, individuals may employ a 30 percent individual tax credit to alleviate installation costs. These tax credits should be repealed and replaced in a revenue neutral way as this is bad energy policy.

State Mandated Renewable Portfolio Standard (RPS)

Twenty-seven states have implemented Renewable Portfolio Standards which require a percentage of a state’s energy to be derived from wind or solar. An RPS effectively forces consumers to buy wind and solar power artificially raising the cost of their energy bills. There have been ample proposals to create a national RPS, usually referred to as a Renewable Electricity Standard (RES).

Effects of a national RES

If states are forced to use more expensive sources of energy for production, transportation, and everyday consumption, American families will see their energy bills rise and their disposable income fall. The Heritage Foundation found that a 35 percent federal RES would:

  • Raise electricity prices by 36 percent for households and 60 percent for industry;
  • Reduce the income for a family of four by $2,400 per year
  • Reduce Gross Domestic product by $5.2 trillion between 2012 and 2035
  • Reduce employment by more than 1,000,000 jobs

Conclusion

State governments create artificial demand for solar and wind energy that is then subsidized by the federal government. Tax credits should be repealed and replaced in a revenue neutral way and RPSs eliminated. Doing so would alleviate taxpayers from the burden of unnecessarily inflated energy bills.

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East Coast Wind Farm's Success Predicated on Government Mandates


Posted by Chris Prandoni on Tuesday, October 12th, 2010, 2:26 PM PERMALINK


An above-the-fold New York Times article, Offshore Wind Power Line Wins Praise, and Backing, has reinvigorated the debate over renewable sources of energy, in this case, offshore wind. The article outlines plans for a wind farm off the Atlantic Seaboard which would provide energy to a handful of East Coast states. With projected costs around $5 billion, Google and a New York financial firm have agreed to take a 37.5 percent equity share in the project in hopes of encouraging additional investors.

After laying out the finances for the plan, the Times article interviews a slew of environmentalists or Administration officials who, unsurprisingly, are jumping head over heels for the proposed wind farm. “These kinds of audacious ideas might just be what we need to break through the wretched logjam,” said Melinda Pierce, the deputy director for national campaigns at the Sierra Club.

But it’s not all and sunshine and rainbows for taxpayers. “Generating electricity from offshore wind is far more expensive than relying on coal, natural gas or even onshore wind. But energy experts anticipate a growing demand for the offshore turbines to meet state requirements for greater reliance on local renewable energy as a clean alternative to fossil fuels,” the Times reminds us.

To extrapolate, offshore wind costs $218 per megawatt hour compared to coal which costs $78 per megawatt hour. As such, wind companies, investment firms, and environmentalists lobby state and federal legislatures to increase the price of coal or subsidize the price of wind, a practice called corporatism. When Wall Street banks lobbied Congress for TARP funds they were decreed parasites; yet, environmentalists employ the same rent seeking practices and are given a free pass—the inconsistencies from the Left are laughable.

On the East Coast, the artificial demand for wind turbines is brought about by the Regional Greenhouse Gas Initiative (RGGI), or more commonly know as a Renewable Electricity Standard (RES). RGGI is a plan by ten states to reduce their CO2 emissions from the utilities sector by ten percent by 2018. Forcing residents to consume expensive energy, the impetus behind an RES, inevitably leads to higher costs for consumers: In states where a RES is enforced, residents saw the cost of electricity rise by 39 percent.

Furthermore, the federal government facilitates inefficient wind farms providing a $0.022 tax credit for each kilowatt-hour of electricity produced by wind. This is bad tax policy. These tax credits should be repealed and replaced in a revenue neutral way.

Essentially, the government subsidizes wind production and then forces taxpayers to buy the expensive, already subsidized energy. Who wouldn’t want to invest in a market where the government pays you to make something and forces other people to buy it? Sounds like easy work if you can get it.

This gargantuan wind farm’s success is predicated on government skewing the energy market in favor of renewable sources. So while investment firms cash huge checks and liberal politicians appease their base, taxpayers get stuck paying higher energy costs.

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Tenet of Democrats' Health Care Bill Proved False


Posted by Chris Prandoni on Monday, October 11th, 2010, 5:11 PM PERMALINK


Of all the pithy phrases conjured up by Democrats during the health care debate, this had to have been one of the most effective: “If you like your health care plan, you will be able to keep it.” This phrase was beaten into the public with such regularity no one can blame Americans for beginning to believe it. Unfortunately, like so many of the Administrations proposals, the rhetoric doesn’t match the reality. Health insurance companies have dropped coverage for children as the new law makes it incredibly difficult for insurance companies to make a buck. So now children don’t have insurance and businesses aren’t profiting, nobody wins.

The most recent refutation of the “you can keep your insurance if you want it” myth comes from none other than Kathleen Sebelius, Secretary of Health and Human Services. Last week Sebelius granted waivers to companies or labor unions who couldn’t comply with the new coverage mandates included within the health care legislation. One would think that the army of economists employed by the Obama Administration could have told Democrats that if you force companies to increase benefits, costs will rise. When costs rise you get less of something, in this case health insurance. Retreating from the theoretical, the health care law raised costs on employers so much that they were going to stop providing health care for their employees, they could no longer afford to.

In order to prevent hundreds of thousands of worker from losing their insurance a month out from the elections, Sebelius waived the new insurance mandate for some coverage providers. The largest benefactor was United Federation of Teachers Welfare Fund, a New York union providing coverage for over 350,000 city teachers. In 2008 alone, the same union and New York State United Teachers spent $6.6 million on political activities, presumably advocating for Democrats. While it is encouraging that thousands of teachers will not lost their health insurance, waivers should not be granted exclusively to Democratic donors—the provision should be abolished in its entirety. Given the length, the bill was over 2,000 pages, and the haste at which the health care law was rushed through Congress, there inevitably were errors. This is clearly one of them, responsible Democrats should suck it up and repeal it.

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After DC lost Michelle Rhee, Waiting for Superman is a Welcomed Pick-Me-Up


Posted by Chris Prandoni on Friday, October 8th, 2010, 3:38 PM PERMALINK


Having spent most of my life living in or around DC, I’ve been socialized to know that DC public schools, well, they suck. At age eleven, with tears in my eyes, I asked my parents why were moving from DC to a nearby Maryland suburb. They consoled me coolly explaining that, “the schools are much better. I know it’s tough, but in the long run, you’ll thank us.” Wandering around my parent’s dinner parties, I’d overhear adults tell each other how they would fix DC’s broken public schools. I’d listen to local newscasters rattle off statistics that condemn DC’s youth. I’d catch a glimpse of my dad’s newspaper which chastised the amorphous DC establishment.

Residents of DC, unknowingly, have come to accept its unacceptable schools. Just like the sun will rise, DC will have bad schools.  We’ve become desensitized by politicians that make promises they never keep and set goals they never reach. But who can blame us, we don’t know anything different. I suspect lifelong residents of most major cities have similar tacit beliefs about the public school system.  

After years of frustration induced apathy, Mayor Fenty and Michelle Rhee burst onto the scene. An irreverent School Chancellor Rhee invigorated a city that had been lulled to sleep. People loved her, and people hated her. She immediately became the most divisive figure in DC firing objectively bad teachers and the principals that protected them. She closed down failing schools. In doing so, she stirred up the hornets nest; she affronted the teachers’ union. Rhee was cleaning house so that children could get the education they deserved.

Teachers’ unions exist to protect their dues paying members; the quality of education children receive is not of their concern. It is important to differentiate between the union, which inhibits reform at every turn, and teachers who are part of the union. Teachers are incredible public servants who, for the most part, care deeply about the children they feel compelled to educate. Conversely, unions refuse to make any meaningful concessions lest they lose clout. Rhee picked a fight with the neighborhood bully.   

After only three years in office, Rhee’s reforms were working; DC’s test scores were rising faster than test scores of any other large metropolitan area. Rhee knew that the reforms she implemented would be her downfall, that the unions would run her out of town. And they did. Union-backed Mayoral candidate Vincent Gray trounced Adrian Fenty, and subsequently Michelle Rhee, in the Democratic primary this year. It seemed the establishment had won, that unions controlled the system.

Back to the status quo, the sun will rise and DC will have bad schools. But maybe, the night is darkest before the dawn, a sentiment believed by Davis Guggenheim. Guggenheim, who directed Al Gore’s an Inconvenient Truth, set his sights upon America’s public schools in his new film, Waiting for Superman. Not only does he walk the audience through the problems inherent in our school system, but he personalizes abstract dropout statistics. The film follows a handful of academically engaged, adorable children who are on track to attend America’s “drop-out factories,” schools where nearly every student is destined to fail.

Waiting for Superman puts faces to the millions of dropouts every year. It is enraging to think that children who attend these schools never really have a chance. Guggenheim’s refrain is that everyone in America is supposed to have a shot; if you work hard enough you’ll succeed. Unfortunately, this comforting axiom could not be farther from the truth—children who are unlucky enough to be born in areas with bad schools will be crippled for life.

Waiting for Superman has the possibility to change the current debate, and it is already succeeding. Everyone and their mother is publishing op-eds about school reform. My lefty friends are beginning to rethink teachers unions and their role in propping up a failing system. After Michelle Rhee’s departure, everyone engaged in the education debate pick-me-up. Thank heaven for Waiting for Superman.

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Proposed Energy Taxes Would Result in the Loss of 150,000 Jobs


Posted by Chris Prandoni on Tuesday, September 21st, 2010, 4:37 PM PERMALINK


A new study warns that President Obama’s proposed energy taxes would impel job loss, reduce economic activity, and deprive states of much needed tax revenue. Examining the economic impact a repeal of Section 199 and a rewriting of dual-capacity tax law for oil and natural gas producers would have on the economy, Dr. Joseph R. Mason reveals how imprudent these proposals are.  

Published by the American Energy Alliance, Dr. Mason finds that repealing these tax deductions—which are enjoyed by every domestic company—only for energy producers would result in:

  • The loss of over 150,000 jobs across the country by the end of 2011
  • The loss of 56,000 jobs, and $24 billion in wages, to the Gulf community
  • A loss of $68 billion dollars in wages nationwide
  • The loss of $18 billion in local government revenue
  • The loss of $65 billion in federal revenue
  • $341 billion dollars in reduced U.S. economic activity between 2011 and 2020

It is important to note that these tax hikes—and subsequent economic repercussions—have been proposed in the Presidential FY 2011 Budget and used as “pay-fors” by Democrats in numerous pieces of legislation.

Click here to read the full press release.

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1099 Skirmishes Indicative of Party Ideologies


Posted by Chris Prandoni on Friday, September 17th, 2010, 4:30 PM PERMALINK


Upon returning from recess, the Senate was captivated by two amendments to the small business lending bill. Passions flared not only because of the punitive impact each amendment would have, but because the legislation each side advocated for exemplified the ideological differences between Republicans and Democrats.

This proxy war was fought over the 1099 reporting requirements for small businesses that the Patient Protection and Affordability Care Act radically increases. While both Democrats and Republicans agree that 1099 reporting for all small businesses are unnecessary and burdensome, they have offered different remedies.

Representing the Democratic camp, Sen. Bill Nelson (D-Fla.) proposed a tax hike on America’s five largest oil and natural gas producers. Sen. Nelson would use the newly garnered revenue to exempt some small businesses from 1099 reporting.

In the GOP corner, Sen. Mike Johanns (R-Neb.) offered an amendment that eliminates the reporting requirements for all small businesses. To plug the fiscal hole created by exempting small businesses from onerous 1099 reporting, Sen. Johanns wants to cut $15 billion in government spending.

While neither amendment received enough support to pass, they are indicative of the ongoing debate between Republicans and Democrats. A rejuvenated Republican Party has pledged to cut spending and reduce the size and scope of government. The Democratic Party, seemingly incapable of trimming America’s $3.7 trillion annual budget, looks to tax America’s most productive businesses to pay for its policies.

Click here to read the full article.

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Senator Bill Nelson Proposes Job Killing Energy Tax Hike


Posted by Chris Prandoni on Monday, September 13th, 2010, 5:46 PM PERMALINK


[PDF Document]

Senator Bill Nelson (D-Fla.) introduced amendment SA. 4595 to the Small Business Lending Act which would raise taxes on America’s energy companies and result in extensive job loss and reduced economic activity.

Sen. Nelson introduced SA 4595 to remedy the burdensome 1099 reporting requirements imposed on small businesses by the Patient Protection and Affordability Care Act. To fund exemptions for some small businesses, Sen. Nelson’s amendment repeals the Section 199 manufacturing deduction for the nation’s leading oil and natural gas companies. Enacted in 2004 to foster domestic job creation and economic growth, Section 199 allows all American companies to deduct a portion of their income derived from domestic production and manufacturing activities.

Repealing this job creating tax rule for just oil and natural gas producers is an effective tax increase on an industry that indirectly or directly employs over 9 million workers and adds over a trillion dollars to the American economy.

“The last thing our economy needs is a punitive tax upon its energy infrastructure and its nation’s largest employers. The Nelson amendment will only exacerbate our economic woes by hamstringing growth and slowing job creation,” said Grover Norquist, President of Americans for Tax Reform.

Also looking to address the onerous 1099 reporting requirement, Sen. Mike Johanns (R-Neb.) has introduced amendment SA 4596 which would exempt every small business from the health care bill’s 1099 mandate. Differentiating itself from Sen. Nelson’s amendment, Sen. Johanns’ proposal funds the 1099 exemption through reductions in future spending rather than taxing energy producers.

“The Senate has every reason to exempt the nation’s small business from unnecessary federal regulations, but there’s no reason we should have to rob Peter to pay Paul. Senator Nelson’s proposal simply shifts economic damages from small businesses to America’s oil and natural gas producers,” said Norquist.

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