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Kelly William Cobb

The Ramifications of Congress's Internet Sales Tax


Posted by Kelly William Cobb on Wednesday, August 1st, 2012, 2:52 PM PERMALINK


Today the Senate Commerce Committee is holding a hearing to push for an Internet sales tax. This follows a similar effort by the House Judiciary Committee late last month. And while the Wall Street Journal ran a cover story recently claiming (somewhat misleadingly) that GOP governors are throwing in the low-tax towel and signing off on online sales taxes, Sen. Jim DeMint (R-S.C.) has an op-ed in the same pages today telling fiscal conservatives why they should do the opposite. So, what’s all this Internet tax talk about?

The Senate’s Marketplace Fairness Act and House’s Marketplace Equity Act – currently the leading contenders amongst federal online tax bills – would raise state-level taxes on Internet and out-of-state purchases while upending critical taxpayer protections built into the tax code to protect Americans from the tax laws of other states. From a taxpayer perspective, any bill that touches Internet sales taxes must preserve the physical presence standard and protect consumers from a higher tax burden. Unfortunately for taxpayers, the federal online sales tax bills miss the mark widely on both fronts.

Under the U.S. Supreme Court’s ruling in Quill v. North Dakota, it is a violation of the Commerce Clause for a state to require an online or remote retailer without a physical presence in that state to collect and remit the sales tax. The Senate’s Marketplace Fairness Act, sponsored by Sens. Dick Durbin (D-Ill.) and Mike Enzi (R-Wyo.), would permit overzealous state tax collectors to reach well outside their borders and force online and other out-of-state retailers to collect their state’s sales tax.

Today, ATR submitted written testimony against the Senate bill. Here’s the long and short of it for taxpayers:

State-level Tax Burden Will Increase: In support of his bill, Sen. Enzi stated recently that “the Marketplace Fairness Act is not about new taxes.” The legislation even included a purely rhetorical section called “No New Taxes.” Yet, proponents are also quick to point out that it could raise as much as $23 billion in tax revenue from consumers at the state level. And while consumers do owe “use tax” on products they purchase online and out-of-state, this measure shifts the tax collection burden to out-of-state retailers, which is certainly a new form of taxation. At the least, businesses that do not pass sales tax liability onto consumers at the register will see new out-of-state sales taxes come out of their bottom line.

Dissolving Physical Nexus Weakens a Fundamental Taxpayer Protection: The physical nexus standard is a staple of our tax code, preventing states from reaching across their borders to force out-of-state businesses and individuals from complying with their tax codes. The Marketplace Fairness Act will dissolve the physical nexus requirement for collecting sales taxes.

To put it simply, measures to dissolve the physical presence standard have the potential to usher in the second coming of taxation without representation in America.

Outsources State Tax Rules to an Unelected Body: Under the Marketplace Fairness Act, twenty-four states operating under the Streamlined Sales and Use Tax Agreement (SSUTA) would be able to tax remote sales almost automatically. Remaining states would have to comply with a number of requirements or choose to join the Streamlined Sales Tax Project (SSTP).

Reliance on SSUTA allows a handful of tax administrators and state lawmakers on the Streamlined Sales Tax Governing Board – which has long advocated for tearing down the physical nexus standard for sales taxes – to control remote sales tax decisions for states and incents the states that are not part of SSUTA to join. Non-SSUTA states will watch helplessly as the “streamline states” hassle their resident businesses to collect more tax revenue.

Increases Tax Code Complexity: The bill will force online, catalogue, TV and other retailers to comply with over 9,600 sales tax jurisdictions across the country, while brick-and-mortar stores must comply with only the one where they are located.

Here’s the bottom: The effects on taxpayers of the Marketplace Fairness Act and similar legislation would be dramatic. From a taxpayer perspective, any bill that touches remote sales taxes must preserve the physical presence standard and protect consumers from a higher net tax burden. Unfortunately, the federal online sales tax bills miss the mark widely on both fronts.

For a more indepth look, check out ATR's written testimony

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Reform, Don't Rush the Farm Bill


Posted by Kelly William Cobb on Tuesday, July 24th, 2012, 10:16 AM PERMALINK


With growing pressure from agri-businesses demanding the U.S. House of Representatives pass a 2012 Farm Bill has come equally strong opposition from free-market and pro-taxpayer groups. Today, twelve organizations sent a letter to Speaker John Boehner (R-Ohio) urging him not to rush to pass the farm bill, a nearly $1 trillion taxpayer-funded welfare program for large agri-businesses and food stamps. Signers included Americans for Tax Reform, Taxpayers for Common Sense, National Taxpayers Union, Council for Citizens Against Government Waste, Americans for Prosperity, and Heritage Action for America.

Most recently, farmers have used this year's drought as a justification for passing the bill. But current farm policies already subsidize insurance for lost crops - to the tune of $11 billion last year even as net farmer income doubled over the last decade to $98 billion. Moreover, almost 80 percent of the House's farm bill goes toward food subsidies, not farm subsidies.

Instead of rushing through a farm bill that spends 60 percent more than the last one, the House should work on free-market solutions to agriculture issues that don't prop up farmers at the expense of taxpayers and consumers. Click here or see below for a copy of the letter.

July 24, 2012

Dear Speaker Boehner,

We write urging you to resist special interest calls to use the current drought to lock taxpayers into a trillion dollars worth of bad agriculture policy. As you accurately noted recently, passing a new Farm Bill filled with special interest entitlements is not needed to address the drought facing many of our nation’s farmers.

The challenging, yet predictable, drought conditions across much of the country must not be misused to expand an overly-generous federal role in agriculture. Agriculture already has a more than adequate safety net in the gold-plated federal crop insurance program in which taxpayers pick up, on average, 62% of the premium costs for crop insurance. These policies allow businesses to guarantee up to 85% of their expected revenue. Crop insurance cost taxpayers more than $11 billion last year. With more than half of the country in moderate to severe drought, taxpayer costs for this generous program will easily be double, triple, or more in 2012.

Agriculture is an inherently risky business, and as you said in your July 19th press conference, most producers already have subsidized federal crop insurance policies. Those that do not enroll in the highly subsidized program have a multitude of private sector options available for managing risk, including hedging, forwarding, diversification, contracting, and many other unsubsidized options. Taxpayers cannot afford to bail out producers who chose not to purchase subsidized crop insurance or to avail themselves of the many private sector options for managing their normal business risk. Taxpayers simply cannot afford to bear all the risks for any business sector, including agriculture.

The Federal Agriculture Reform and Risk Management Act (FARRM) passed by the House Agriculture Committee is not needed to address the current drought conditions. In fact, nearly 80% of the bill’s $957 billion price tag is not even directed at producers, but on social welfare spending programs such as the Supplemental Nutrition Assistance Program. Regardless of whether a Farm Bill is passed, crop insurance will continue to quickly compensate producers for the bulk of their losses. The bill should have been used as an opportunity to save taxpayers billions while reducing the manipulative role of the federal government in the business decisions of a vital sector of the American economy. Instead, the Committee bill obligates nearly 60% more than the last Farm Bill, creates three new taxpayer-paid “shallow loss” programs, and does nothing to rein in, and in fact expands, taxpayer-subsidized crop insurance.

Farm businesses are riding on several years of record farm income unlike other sectors in the economy. Net farm income is at $98 billion, nearly doubling between 2001 and 2011. Like all business cycles, farm incomes rise and fall as favorable growing years are periodically followed by poor years. Most farm businesses will not only be compensated by crop insurance for losses caused by the drought, but can also dip into savings wisely built up over years of record income. With concerns about tight commodity supplies, crop prices, especially for corn and soybeans, have risen to record highs and it is with these record prices that crop insurance losses will be calculated. In fact, some producers may see record profits when crop insurance indemnities are calculated.

Even with the drought, America’s agricultural economy remains strong. This strength and the glaring weakness of the federal budget – $15 trillion in debt and trillion dollar deficits for the next decade – make it even more essential that Washington’s role in agricultural policy be reduced. Now is the time to roll back wasteful and market distorting taxpayer subsidies. FARRM does the exact opposite.

Using the current drought as a pretext to bail out yet another sector of the U.S. economy while expanding the federal government’s role in the business decisions of agricultural enterprises is something taxpayers and our free-market economy cannot afford

Again, we urge you to resist special interest calls to misuse the current drought to lock taxpayers into a trillion dollars worth of bad agriculture policy.

Sincerely,
American Commitment
Americans for Prosperity
Americans for Tax Reform
Competitive Enterprise Institute
Cost of Government Center
Council for Citizens Against Government Waste
FreedomWorks
Heritage Action for America
National Taxpayers Union
R Street
Taxpayers for Common Sense
Taxpayers Protection Alliance

Cc: Majority Leader Cantor

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Taxpayer Groups Applaud Michigan Ballot Measure to Limit Tax Hikes


Posted by Kelly William Cobb on Tuesday, July 17th, 2012, 12:56 PM PERMALINK


Last week, over 600,000 Michiganders submitted their signatures to put a two-thirds supermajority requirement to raise taxes on the November ballot. The ballot language, proposed by the Michigan Alliance for Prosperity, would subject all future tax increases to a two-thirds vote of the legislature or Michigan voters. Below are statements from Americans for Tax Reform and National Taxpayers Union.

“Over the last decade, Michiganders were hit with billions of dollars in higher taxes and even higher spending as they helplessly watched their families, businesses, and wealth flee the state. The Michigan Business Tax and other tax hikes did not help to save Michigan – they helped sink Michigan into higher unemployment and a single-state recession. Now more than ever, as the state rebounds, taxpayers need a strong protection against future attempts to take Michigan backward through once again raising taxes. Michigan’s dark, lost decade is behind it. A two-thirds supermajority requirement to raise taxes will help ensure Michigan’s economy can compete and grow well into the future. All taxpayers should stand up and vote YES this November on a two-thirds requirement to raise taxes.”
- Grover Norquist, president of Americans for Tax Reform

“Despite spending much of the 2000s in recession thanks in part to burdensome taxes and ever-increasing spending, the Great Lake State has lost some of its luster. With an unemployment rate currently sitting at 8.5 percent, Michigan’s top priorities must be to protect taxpayers and nurture a pro-growth environment. With this common sense two-thirds supermajority initiative, Michiganders can have a direct, constructive role in their state’s climb back to national prominence.  From liberal states like California and Washington to conservative states like South Dakota and Oklahoma, two-thirds supermajority thresholds enjoy widespread support because they provide reasonable restraints on the ability of governments to raise taxes. Our nearly 12,000 members in the state look forward to the upcoming effort on behalf of providing Michigan residents the same protection.”
-  Duane Parde, president of National Taxpayers Union

Click here for a PDF press release.

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More Shots Fired Over Farm Bill


Posted by Kelly William Cobb on Friday, May 25th, 2012, 3:24 PM PERMALINK


Members of Congress, taxpayer groups, and free market organizations slammed the direction that the Farm Bill has taken in two letters hitting Congressional office mailboxes this week.

Sen. Debbie Stabenow (D-Mich.), who chairs the Senate Agriculture Committee, has proposed a bill that largely maintains the status quo by artificially increasing consumer prices and hooking taxpayers with new, costly entitlement programs. Worse, the reforms proposed to cut a paltry $23 billion in spending over ten years are not only below the House of Representative’s minimum target set this month of cutting at least $33.7 billion, but are even below President Obama’s goal of cutting $30 billion.

Letters from eleven free market groups, including ATR, and eight Members of Congress, lead by Rep. Jeff Flake (R-Ariz.), directly questioned why the booming agriculture sector should still be propped up at taxpayer expense. Both pointed out how net farm income has nearly doubled over the past decade from $55 billion to $98 billion while we’ve spent almost a trillion dollars since 1995 in various forms of subsidies to farm businesses. The letter from Rep. Flake also correctly questioned why the House is letting the Senate - especially given the upper chamber's anti-free-market leanings - to take the lead on crafting the law. 

Click here to read the free-market letter and here to read the Congressional letter

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Will We Ever Have a Free Market Farm Bill?


Posted by Kelly William Cobb on Wednesday, May 9th, 2012, 2:37 PM PERMALINK


This week, the House will vote to slash Agriculture spending by $33.7 billion. This presents a huge opportunity to reform agriculture in a free-market direction, yet it’s an opportunity being squandered by Congress.

For one thing, Sen. Debbie Stabenow (D-Mich.), who chairs the Senate Agriculture Committee, is pushing a Farm Bill that reportedly contains only $24.7 billion in spending cuts. Yet not all farm programs are treated equal and some don’t even rely on direct payments to farmers at all. The most market distorting programs rely on a convoluted system of supply management and price control programs, where government buys products off the market, makes loans to farmers with their crop as collateral, and sets tariffs and other mechanisms so that food is significantly more expensive than it would otherwise be in a free market.

A couple examples: the government employs all three types of these programs just for sugar, keeping it nearly twice the world price. The reforms proposed by Stabenow to dairy programs would effectively tax farmers when prices drop, then use that money to buy the farmers’ own products back off the market, effectively guaranteeing them an income while consumer prices stay high. Taxpayers don’t directly see the cost from these programs in their tax bill, but find that it’s built into the price of their food.

It's with these market distorting programs that Sen. Stabenow’s Farm Bill doubles down on more of the same. While cutting direct payment programs, it generally replaces them with government crop insurance. This is just as distortionary a system that will be even harder to fix. Not only does it hide the cost of the programs from taxpayers – who won’t be able to see how much farmers are directly subsidized – but it keeps Americans oblivious to the extra cost built into food thanks to government involvement. The result: farmers continue to earn about twice that of the average American family, while some American families struggle just to put food on the table due to high prices.

For this reason, Americans for Tax Reform joined 10 other taxpayer and free-market groups calling on Congress to dramatically slash agriculture spending and also reduce government's role in artificially and unethically keeping food prices high. See below or click here for a copy of the letter.

Dear Representative:

On behalf of the millions of members represented by our organizations, we write urging you to support efforts to cut Washington’s outsized and outdated role in American agriculture.

Farm businesses are a testament to the skill, ingenuity, and persistence of Americans. While many sectors continue to feel the effects of the recession, American agriculture is one of the few bright spots in the economy. Net farm income is at $98 billion, nearly doubling between 2001 and 2011. Farm businesses exported nearly $140 billion worth of products, exceeding imports of agricultural products by more than $37 billion. And it’s estimated that one out of every 12 jobs is connected to agriculture.

With the Farm Bill reauthorization in progress, Congress must take this opportunity to reassess unnecessary and complicated federal policies that manipulate market decisions in this critical and vibrant component of our economy.

We believe the nearly $30 billion reduction in federal spending on agriculture agreed to in the House Budget Resolution should be the minimum reduction in the Farm Bill. Eliminating direct payments, as the resolution suggests, is long overdue. Making meaningful reforms to the largest Washington-based support for agriculture, federally subsidized crop insurance, is also a must. The Congressional Budget Office estimates this program—which provided $2.2 million in subsidies for just one agricultural producer’s insurance premiums in 2011—will cost more than $90 billion over the next ten years.

Also, we believe Congress must not create any new potentially budget-busting entitlement programs that would increase Washington’s role in farm business decisions, such as efforts to put taxpayers on the hook for “shallow losses” in annual farm business revenue. And Congress should not use the Farm Bill to undo the responsible cuts to biofuels programs the House achieved in last year’s minibus appropriations bill.

America’s agricultural economy is strong. This strength and the glaring weakness of the federal budget—$15 trillion in debt and trillion dollar deficits projected for the next decade—make it essential that Washington’s role in agricultural policy be reformed. The House of Representatives must lead a full and open legislative debate on Farm Bill reauthorization. For more information, please contact Joshua Sewell of Taxpayers for Common Sense at 202-546-8500 x116, or josh@taxpayer.net.

Sincerely,

American Commitment
Americans for Prosperity
Americans for Tax Reform
Council for Citizens Against Government Waste 
Competitive Enterprise Institute
FreedomWorks
The Heartland Institute
Heritage Action for America
National Taxpayers Union
Taxpayers for Common Sense
Taxpayers Protection Alliance

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Court Tosses Out Unconstitutional Internet Tax in Illinois


Posted by Kelly William Cobb on Thursday, April 26th, 2012, 4:34 PM PERMALINK


Back in March of last year, Illinois joined a small cadre of states putting a new tax on online sales into law. Backed by Gov. Quinn (D-Ill.), the law was designed to force out-of-state retailers who advertise in Illinois to collect and pay sales taxes. Yesterday, however, a Cook County Circuit judge rightly ruled the law violated the Commerce Clause of the U.S. Constitution.

The Supreme Court ruled in 1992 that states can not force out-of-state companies to collect and fork over sales taxes levied on in-state consumers, unless they have a physical presence in the state. That landmark case, Quill v. North Dakota, not only set a bright line rule, but also the stage for a push over the last three years to circumvent the Supreme Court’s ruling. The aim of Internet tax advocates is not only to raise taxes, but also to dissolve the physical presence standard.

Illinois’s law was the most frequently enacted by primarily liberal states, like New York, California, and Connecticut. Dubbed the “affiliate nexus tax,” it required online retailers who advertise on “affiliated” websites in the state to start charging the state’s sales tax. Not only did Cook County Circuit Judge Robert Lopez Cepero rule that a stretch under the Commerce Clause, he found it ran afoul of the federal Internet Tax Freedom Act, which prevents discriminatory taxation of e-commerce.

Almost immediately upon passage last year, the affiliate tax started to wreak havoc. Internet advertisers found their business relationships cut from major online retailers like Amazon.com, who were left with little choice after being handed an unconstitutional requirement. Since online ad contracts were severed, affiliate advertisers closed up shop and fled Illinois altogether. With no more online ads in the state, the law became moot. The only thing it accomplished was putting 9,500 of their own residents out-of-business. Not only did this mean the tax hike failed to raise revenue, but it lost the state an estimated $22 million from income taxes on businesses that no longer existed.

The problem is not unique to Illinois; advertisers in every other state where the law was passed were also put out of work. This led online affiliates to band together under the Performance Marketing Association to challenge the law, and they started with a great success in Illinois.

The win in Illinois is not the first time taxpayers have watched such unconstitutional Internet tax bills go down. Earlier this month, the U.S. District Court of Colorado finalized a permanent injunction against a different type of tax. Colorado’s “reporting requirements” law forced online retailers to tell the Department of Revenue who it’s customers were and what they purchased. That way the state could go after their own residents for “use tax” collection. Use tax is owed when a consumer buys something elsewhere and brings it in-state, but it goes largely uncollected. Like in Illinois, the court determined the law violated the physical nexus standard set in the Commerce Clause and Quill case. Another court found a similar law in North Carolina also violated the First Amendment, since consumers have a right to purchase goods anonymously to the state.

To be sure, this is not the end of the affiliate nexus Internet tax. The court’s ruling will be challenged up to the highest court possible. But let this be a shot across the bow to politicians in other states considering such taxes. This ruling is a monumentally important step in the fight against higher taxes online. It also helps preserve the critical physical nexus standard that prevents tax collectors from reaching across their borders to raid the wallets of residents in other states.

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Free-Market Groups Support the Digital Goods and Services Tax Fairness Act


Posted by Kelly William Cobb on Tuesday, April 24th, 2012, 5:11 PM PERMALINK


Revenue hungry state lawmakers and tax administrators have begun to enact new taxes on digital goods and services, like downloaded music, movies, apps, and books. Yet, due to varying and vague tax laws, some states can levy excessively high and discriminatory taxes on digital downloads, with the potential for multiple states to try to tax the same digital good as it travels across the Internet.

Today, 12 free-market organizations sent a letter endorsing the Digital Goods and Services Tax Fairness Act (S. 971) sponsored by Sens. John Thune (R-S.D.) and Ron Wyden (D-Ore.). The bill would prevent double taxation and hold state policymakers accountable for enacting new taxes on e-commerce. Click here or see below for a copy of the letter.

April 25, 2012

U.S. Senate Committee on Finance

RE: S. 971, Digital Goods and Services Tax Fairness Act

Dear Members of the Senate Committee on Finance,

On behalf of millions of taxpaying Americans, we write to urge your support for the Digital Goods and Service Tax Fairness Act (S. 971). Sponsored by Sens. John Thune (R-S.D.) and Ron Wyden (D-Ore.), the measure creates a much-needed framework for taxing digital goods and services across the fifty states to prevent double taxation and hold policymakers accountable for enacting new taxes.

Across the country, states are establishing new taxes on downloaded goods, such as music, books, movies, and mobile applications. This has resulted in a patchwork of varying standards for taxing digital e-commerce, and could result in multiple states taxing a single consumer purchase or levying higher and discriminatory taxes on downloads. S. 971 will ensure that when a digital product is purchased, it is taxed once and only once.

E-commerce is inherently an interstate activity, as the Internet does not acknowledge state borders. As a result, a consumer in Montana could purchase a digital product online from a company in California that is located on a server in North Carolina. The legislation would ensure that only the state where the consumer is based has taxing authority. Without the federal framework contained in this bill, each of these states could claim taxing jurisdiction, resulting in excessive taxation of online goods and services.

The Digital Goods and Services Tax Fairness Act will make sure there is accountability and public awareness should a state begin to tax digital goods. Today, eight states have begun taxing downloaded products by administrative fiat at state Departments of Revenue, bypassing the legislative process altogether.

Internet and digital commerce is a highly dynamic and rapidly growing sector of the American economy. The Digital Goods and Services Tax Fairness Act will help to eliminate tax-related burdens on interstate commerce that could stifle the vital online market.

As you consider a number of tax-related measures impacting interstate commerce, we urge you to support S. 971, the Digital Goods and Services Tax Fairness Act. The measure will bring much needed clarity and simplicity to interstate e-commerce, while preventing states from engaging in excessive and discriminatory tax policy.

Sincerely,

Grover Norquist

President

Americans for Tax Reform

 

U.S. Chamber of Commerce

 

Andrew Moylan

Vice President of Government Affairs

National Taxpayers Union

 

David Williams

President

Taxpayers Protection Alliance

 

Chuck Muth

President

Citizen Outreach

 

Seton Motley

President

Less Government

 

Jeffrey Mazzella

President

Center for Individual Freedom

 

James Valvo

Director of Policy

Americans for Prosperity

 

Tom Schatz

President

Council for Citizens Against Government Waste

 

Mike Wendy

Director

MediaFreedom.org 

 

Kelly William Cobb

Executive Director

Digital Liberty

 

Webb Scott Brown

President/CEO

Montana Chamber of Commerce

 

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Why is the Government Setting Your Milk Price?


Posted by Kelly William Cobb on Thursday, March 29th, 2012, 12:06 PM PERMALINK


Soon, Congress will begin debating the direction of farm subsidies, taxes, price controls, supply management programs, and tariffs. The Farm Bill, which dictates American agriculture programs, is notoriously anti-free market. Yet, this year presents an opportunity to scale back, reform, and even eliminate various farm programs. 

Yesterday, Americans for Tax Reform joined Citizens Against Government Waste and National Taxpayers Union in a letter slamming the controversial new Dairy Management Supply Program that could be included in the next Farm Bill. The letter came on the heels of comments by House Speaker John Boehner (R-Ohio) who also panned the program. The Dairy Management Supply Program (DMSP) would effectively tax dairy farmers when prices drop, then use the revenue to buy products off the market. By dramatically controlling supply, consumers are stuck paying higher prices while government bureaucracy grows. An excerpt of the joint letter is below, but if you really want to slam your head against the wall, here's a handy chart from the International Dairy Foods Association explaining how the government sets milk prices today.

Our organizations believe that DMSP is contrary to the goals of limited government and economic growth. A new federal program that will directly intervene in markets and increase milk prices for everyone is unnecessary.

The Chairwoman’s mark would reportedly create an extensive new federal apparatus to both limit milk supply and increase demand for dairy products when farmers’ profits are declining. Similar “supply management” programs have been tried and have failed here and abroad, because they repudiate free markets and harm consumers. At a time when countries around the world are moving beyond these mistakes and embracing market- and trade-based solutions, DMSP is an anachronism that will soon be regretted if it becomes law.

This new program would periodically penalize farmers who have been increasing dairy production by having a portion of their milk proceeds withheld – thus creating a disincentive to maximize efficiency. This has the same economic effect as a tax on dairy farmers. Resulting revenues would be forwarded to the USDA and used, under the direction of a board dominated by dairy cooperatives, to purchase dairy products for the sole purpose of getting them off the market and keeping prices high. Chances are good that this program will repeat the problem created by existing price supports, under which our government has an unfortunate history of purchasing what it deems “surplus” dairy products. As you know, attempts to dispose of such surplus products have resulted in embarrassing, high-profile boondoggles.

For a copy of the entire ATR, NTU, and CAGW letter, click here.

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End Government's Agriculture Supply Management


Posted by Kelly William Cobb on Monday, October 24th, 2011, 9:48 AM PERMALINK


Next year's reauthorization and reform of the Farm Bill, which governs federal agriculture programs, presents an opportunity to scale back or eliminate the government's intrusive role in manipulating our food supply, raising prices for consumers, and handing out large taxpayer-financed subsidies. Yet, the House and Senate Agriculture Committees have found opportunity in the ongoing Super Committee negotiations to quietly restructure some controversial ag programs ahead of time and in a less than free-market direction. Last week, ATR joined with Citizens Against Government Waste and the National Taxpayers Union in a letter strongly opposing a new market distorting dairy program, which has become one of the Ag Committees' top priorities in any Super Committee deal.

Dear Members of the Select Committee:  

We the undersigned organizations, representing millions of taxpayers nationwide, write to express concern over reports that the leadership of the House and Senate Agriculture Committees have agreed to include a proposal known as the Dairy Market Stabilization Program (DMSP) in its recommendations to your committee.

The openly acknowledged purpose of the DMSP is to assist dairy farmers through a new round of government market manipulation in a way that will increase milk prices for everyone. Our respective organizations believe that the inclusion of such a program in any plan that is intended to solve our long-term budgetary problems would be both inappropriate and inexcusable.

The DMSP would create an extensive new federal apparatus to both limit milk supply and increase demand for dairy products when farmers’ profits are declining. Similar “supply management” programs have been tried and have failed here and abroad, sharing one major trait with the DMSP: repudiation of free markets and the consumers they serve. At a time when countries around the world are moving beyond these mistakes and are embracing market- and trade-based solutions, DMSP is an anachronism that will soon be regretted if it becomes law.

The DMSP would track the difference between farm milk prices and feed costs. When the difference narrows, farmers who have been increasing dairy production will have a portion of their milk proceeds withheld – thus creating a disincentive to maximize efficiency. The withheld amount will be forwarded to a board of dairy producers who will use the proceeds to purchase dairy products for the sole purpose of getting them off the market and keeping prices high.

This scheme will boost the regulatory burden on dairy processors as well as wasteful spending by our government. In addition to being required to withhold funds from producers, processors will be subjected to dozens of new rules and regulations needed for the program’s operation. Under the existing price support program, our government has an unfortunate history of purchasing what it deems “surplus” dairy products, a practice that has resulted in embarrassing, high-profile boondoggles from attempts to dispose of them.

By artificially inflating milk prices, the DMSP will ratchet up budgetary pressures on the government’s food and nutrition programs.  Elected officials should seek to eliminate, not exacerbate, unnecessary spending.

Rep. Collin Peterson (D-Minn.), who has sponsored legislation (H.R. 3062) that includes the DMSP, claims that he has responded to these and other concerns by making the program voluntary for farmers who choose to enroll in a margin insurance component also created under H.R. 3062. That change does not address the fundamental problem with the bill. Its purpose and design aims to use our government to distort milk prices. Even a “voluntary” program requires the expansion of the dairy program’s already large and expensive bureaucracy. That is a step in the wrong direction.

The DMSP cannot be fixed and should be rejected. Programs like the DMSP have no place in any bill, and particularly not in a bill to get our country’s fiscal house in order.

Sincerely,

Thomas A. Schatz
President
Council for Citizens Against Government Waste

Grover Norquist
President
Americans for Tax Reform

Pete Sepp
Executive Vice
National Taxpayers Union

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Blame Government for Debit Card Changes


Posted by Kelly William Cobb on Thursday, October 13th, 2011, 11:37 AM PERMALINK


We're just beginning to see the impact of the Dodd-Frank financial reform act with over 500 new regulations entering the pipeline. Yet, the fresh-out-of-the-gate price control on debit cards has already sparked an uproar.

Dodd-Frank, following a push by Sen. Dick Durbin (D-IL), instructed the Federal Reserve to set a price control that capped the interchange fee paid by retailers to banks in order to accept debit cards. The fee traditionally covered the cost of checking accounts, consumer card rewards, and ensured secure transactions and fraud prevention. As predicted, banks have had to cover the cost of Durbin's price control, now set at roughly 21 cents a transaction, by eliminating free checking, charging for use of a debit card, or reducing card benefits dramatically. For these reasons, over 30 free-market groups called for the regulations to be rolled back earlier this year.

This has sparked some consumer backlash, but instead of laying blame on financial institutions, it should be placed squarely at the feet of Sen. Durbin and the Federal Reserve. Changes to consumers' bank accounts or debit cards would not have occurred had this law never been implemented.

Thankfully for consumers, Reps. Jason Chaffetz (R-UT) and Bill Owens (D-NY) have introduced the Consumer Debit Card Protection Act that will repeal the Durbin price control. This follows an effort in the Senate last June that would have delayed and studied the impact of the regulation before it went into effect. That measure was supported 54-45, but did not reach the 60 votes needed to invoke cloture.

Americans for Tax Reform strongly supports the Chaffetz-Owens Consumer Debit Card Protection Act. As predicted, the interchange price controls by Sen. Durbin and the Fed have dramatically altered the market for debit cards and negatively impacted consumers in the process. The rule should be rolled back in its entirety.

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