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Kelly William Cobb

Brace Yourself Michigan: Granholm's Push for Higher Taxes Continues


Posted by Kelly William Cobb on Friday, August 14th, 2009, 5:28 PM PERMALINK


As expected, Governor Jennifer Granholm has widened her search for additional tax revenue in this year’s budget. Last week, she floated hikes in both the cigarette and beer tax, but this week the proposal became even clearer – and much worse.

Granholm is now in discussions with legislative leaders and pushing a $685 million tax hike package that would target bottled water, tobacco products, and sporting events, while also lowering or phasing out a number of credits for low-income residents, the film industry, and other businesses.
 
As an apparent concession, Granholm would phase out her punitive and ill-conceived Michigan Business Tax Surcharge enacted at the end of 2007 that pushed the tax rate on businesses from 4.95% to over 6 percent. But, don’t get too excited if you’re an employer or employee in Michigan: the phase-out will start two years from now and take an additional 3 years to fully vanish. Until then, Michigan’s struggling businesses will have to deal with the higher tax by lowering wages or contributing to the state’s massive 15.2% unemployment rate.
 
As for further details on Granholm’s tax hike package, the governor’s spokeswoman said the following:
 
The governor and legislative leaders have agreed to not to negotiate in public and we’re sticking to that agreement.
 
Translation: this budget will be written completely behind closed doors and the public has no right to know what we fully intend to do to increase the tax burden on Michiganders.
 
In the meantime, tax collections from the Michigan Business Tax in July were down over 19 percent from last year and income tax collections are down nearly 20 percent this year. This is largely the result of a high tax structure that causes businesses to shut down or lay off employees, contributing to the unacceptable 15.2 percent unemployment rate and less income being generated in the state.
 
Michigan also has one of the highest outflows of residents of any state, having lost over 419,000 residents in the past ten years at an exponentially growing rate. Even worse, these residents took $9.5 billion in taxable income with them.
 
So if you’re one of the last remaining Michigan residents who decided not to flee the state when you lost your job or shut down your business, hold on tight – because with Governor Granholm in the driver’s seat, this ride is about to get even wilder
 
CLICK HERE to write the governor and your legislators to tell them taxes in Michigan are high enough already.  Also, click here for ATR's letter to the Michigan legislature.
 
(photo by mic stolz)

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Digital and Amazon eTaxes Pass in North Carolina Budget


Posted by Kelly William Cobb on Friday, August 7th, 2009, 2:50 PM PERMALINK


The following was originally posted on www.StopETaxes.com.

Lawmakers in the North Carolina General Assembly voted on Wednesday to approve a state budget that includes both an affiliate nexus etax and a new tax on digital goods.

While the state estimates the new etaxes will generate a combined $36 million - out of nearly $1 billion in higher taxes included in the budget - retailers have already ended programs to collect what is likely an unconstitutional tax.  The Amazon Tax requires out-of-state retailers with no nexus in North Carolina to collect and remit taxes to the state when consumers arrive from a click-through advertisement on a website based in North Carolina.

The tax was included despite strong opposition from in-state advertisers who will directly lose business from retailers ending advertising contracts to avoid collecting the unconstitutional tax.  Similar measures were vetoed in Hawaii and California last month for this very reason.

The budget was produced by a Senate and House conference committee on Tuesday and rapidly approved by the legislature on Wednesday.  While the Democrat controlled General Assembly and Governor Perdue (D) negotiated for weeks on various tax hikes to be included, the eTaxes were consistently left on the table.

North Carolina joins New York and Rhode Island in establishing an Amazon eTax and 18 other states that tax digital goods.

For more information on internet taxation, visit www.StopETaxes.com or check out ATR's eTax Policy Brief.  You can also follow "Stop eTaxes" on Twitter (@eTaxes) and Facebook.

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Jennifer Granholm Floats Cigarette and Beer Tax Hikes in Michigan


Posted by Kelly William Cobb on Thursday, August 6th, 2009, 4:58 PM PERMALINK


As budget negotiations continue behind closed doors in Lansing, Gov. Jennifer Granholm (D) has floated at least two new tax hikes on cigarettes and beer.

Under a proposal by Granholm and some state legislators, the state cigarette tax would rise by 12.5% to $2.25 per pack and the tax on beer would double to 3.8-cents per bottle. The additional revenue would be used partially cover Michigan’s $2.7 billion overspending problem (aka “budget shortfall”) for the next fiscal year.
 
On Wednesday, the “Coalition for the Needy” came out in public support of the Granholm plan arguing that higher taxes will ensure that government services are not cut for the poor in the current budget. However, the logic behind this argument is completely backwards: low-income residents are the primary consumers of tobacco and alcohol products. For example, smokers have a median income of a little less than $36,000, which is about 30% less than non-smokers. How is taking money out of low-income residents’ pockets, routing it through an inefficient government bureaucracy, and returning it in the form of subpar government services supposed to help anyone?
 
Over the past months, there has also been much discussion in Michigan – albeit unlikely – about switching to a graduated tax structure from the state’s current flat 4.35% personal income tax (see here and here). However, 81% of Michigan businesses are small businesses and well over two-thirds of these employers pay taxes under the personal income tax. This means higher taxes for small businesses and less money to expand, hire more employees, or raise wages.  All while Michigan has the highest unemployment in the nation at 15.2%.
 
See below or click here for ATR’s press release condemning Gov. Granholm’s proposed tax hikes.
 
Taxpayer Group Slams Gov. Granholm’s Tax Hike Proposals
Raising the Cigarette and Beer Tax will Disproportionately Affect Low-Income Michiganders
 
WASHINGTON, D.C. – Americans for Tax Reform (ATR) today condemned Michigan Gov. Jennifer Granholm (D) for proposing hikes in both the state cigarette and beer tax. The tax hike would be used to partially cover Michigan’s projected $2.7 billion overspending problem.
 
While the governor and special interest groups claim the additional revenue is needed to balance the budget and maintain services for the poor, ATR contends that low-income residents will predominantly pay for these higher taxes. Gov. Granholm’s proposal would double the beer tax to 3.8-cents per bottle and raise the cigarette tax by 12.5 percent. Tobacco consumers have a median income of a little more than $36,000, which is 30 percent less than non-smokers.
 
“The supposed rationale for raising taxes on smokers and beer drinkers in Michigan is completely backwards,” said Grover Norquist, president of Americans for Tax Reform.  “The proposed tax increases will disproportionately hit the poor – the very people these tax hikers say they are trying to help. How is taking more money out of the pockets of Michigan’s low-income residents to cover up a multi-billion dollar overspending problem going to help anyone?”
 
ATR also criticized calls from policymakers who have floated a graduated income tax. In Michigan, 81 percent of Michigan business establishments are small businesses and well over two-thirds of these small businesses pay taxes under the personal income tax. Small businesses would thus be subject to the higher graduated tax structure.
 
“Michigan’s flat income tax is the state’s one saving grace. Switching to a progressive, graduated income tax will result in more small business closures, more jobs lost in the state with the highest unemployment rate, and an even larger number of people leaving Michigan for better opportunities elsewhere,” added Norquist. “Between higher taxes on tobacco and alcohol, and calls for making the income tax even less friendly than it already is, Michigan policymakers are cooking up a dire recipe for disaster.”
 

(photo by Matt Hampel)

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Streamlined Sales Tax Project Helps Raise Taxes in Illinois


Posted by Kelly William Cobb on Monday, August 3rd, 2009, 3:02 PM PERMALINK


When Democrat Gov. Pat Quinn and the Illinois Legislature wanted some extra cash to pay for a massive $31 billion infrastructure spending bill, who did they turn to for help? The Streamlined Sales Tax Project.

Last month, Gov. Quinn signed House Bill 255 into law, which expressly raises taxes on distilled spirits, wine, and beer. However, the bill also went after two of the newest targets of tax-and-spend legislators: candy and soft drinks.
 
Illinois’s statewide sales tax is 6.25 percent and ranges all the way to 10.25 percent in Chicago (one of the highest in the nation), but groceries are taxed at only 1 percent to keep the cost of food low. So, under the guise of promoting public health – and with the sole intent of raising taxes – the Illinois legislature’s bill redefined and excluded candy and soft drinks from the definition of groceries and began taxing them at the higher 6.25 percent-plus tax rate.
 
The source of these new definitions of “candy” and “soft drinks” is the Streamlined Sales Tax Project (SSTP), a cartel of state policymakers that advocate for a simpler tax code, but in reality provide cover for raising taxes and often make the tax code even more confusing. SSTP’s board creates definitions for various goods and states adopt these definitions to purportedly “streamline” tax codes between states. While Illinois is not a member of SSTP, HB 255 directly adopted the SSTP definition for both “candy” and “soft drinks.”
 
First, the new SSTP definition of candy makes things more complicated for both storeowners and consumers. The Chicago Tribune provides some examples:
 
Hershey’s bar? Candy for sure. But the Cookies ‘n’ Cream spinoff? That’s food, not candy...A Butterfinger? Candy. Butterfinger Stixx with wafer center? Not candy. Likewise, Twix, Kit Kat and Twizzlers are all candy-aisle staples that Illinois no longer considers to be candy.
 
Another great example from Mike Wynne, the former general counsel of the Illinois Department of Revenue:  If you put yogurt on a piece of fruit it becomes candy, but if you put yogurt on a pretzel, it’s food.  Sounds a lot more simple, doesn’t it?
 
Second, not only does the SSTP definition of candy make the tax code more confusing and less simple, it provides cover for legislators who want to target candy or soft drinks for more revenue. States that are members of SSTP are required to adopt the group’s definitions for various goods. However, the SSTP definition of “food and food ingredients” clearly states:
 
A member state may exclude “candy,” “dietary supplements” and “soft drinks” from this definition.
 
It doesn’t take a state-focused taxpayer advocate to figure out why these exceptions exist. The popularity amongst tax hiking lawmakers of so-called "snack taxes" and taxes on soft drinks has grown enormously in recent years.
 
Sure the Streamlined Sales Tax Project’s Governing Board decries taxpayer groups and argues SSTP does not call for tax increases, but it’s frankly not hard to see where their intent truly lies.  Americans for Tax Reform strongly supports the goal of simplifying the tax code, however reform should always be done in a revenue neutral way that does not raise taxes – a goal SSTP outwardly does not accomplish.
 
For more information on SSTP, click here for ATR’s Policy Brief on eTaxes.  Also, click here and here for ATR’s letters opposing HB 255 in Illinois.
 
(Photo by Amarand Agasi)

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ATR Policy Brief: Internet and e-Commerce Taxes


Posted by Kelly William Cobb on Wednesday, July 29th, 2009, 11:40 AM PERMALINK


ATR has released a new Policy Brief covering all state-level efforts to impliment e-taxes on the internet and online purchases.  We mentioned earlier this year that with 46 states drowning in the red, money hungry politicians have become crafty at finding new ways to raise revenue - and taxing the fantastic free-market experiment that is the Internet is certainly no exception.

The brief covers four primary areas of taxation:

  • Amazon Tax (or "affiliate nexus tax"): An unconstitutional effort to require out-of-state online retailers to collect taxes for the state.
  • Streamlined Sales Tax Project: A tax-and-spend cartel that aims to extend tax collection to out-of-state retailers and rewrite states' tax codes behind closed doors to raise tax revenue - all under the guise of simplifying the tax code.
  • Digital Goods Tax: A state-by-state effort to tax music, ringtones, books, and movies purchased online, as well as other digital goods.
  • Internet Access Tax: New taxes on plugging into the internet.

CLICK HERE for a PDF copy.  Also, make sure to check out www.StopETaxes.com for all updates on states' efforts to tax the internet.  You can also follow Stop eTaxes on Twitter (@etaxes) and Facebook.

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Rhode Island Lawmakers Shoot Themselves in Foot Over eTaxes


Posted by Kelly William Cobb on Monday, July 6th, 2009, 6:10 PM PERMALINK


The following is cross-posted at www.StopETaxes.com.

Last week, the Governors of Hawaii and California vetoed Amazon eTax bills that would unconstitutionally force out-of-state online retailers to become tax collectors.  In vetoing the bills, the governors argued they were net tax increases and violated the interstate commerce clause.  Additionally, the governors noted that online retailers would terminate contracts with in-state advertisers, as the legislation assumed these business affiliations provided a strong enough "nexus" in the state to force retailers to collect the tax.  By simply severing this connection, retailers would no longer be forced to collect the tax.

However, Rhode Island lawmakers and the Division of Taxation failed to get the hint.  After retailers sent letters to their advertisers and to legislators in Rhode Island stating they would be ending advertising agreements to avoid the unconstitutional law, lawmakers and Gov. Carcieri passed the tax hike as part of the budget anyway.  Then, as if completely unaware of what had just happened, the state's tax collectors showed up late to the party and sent a notice to "a list of the top 100 internet retailers" explaining that they now need to collect the tax.  This comes despite the fact that under current law, the Division of Taxation is in charge of collecting tax directly from consumers on purchases made out of state.

Thanks for the courtesy note, Rhode Island Division of Taxation, but the retailers already decided not to do your job for you.

Did policymakers in Rhode Island and the Division of Taxation not get the hint that passing a law in clear violation of the U.S. Constitution and current Supreme Court jurisprudence would cause their own in-state advertisers to lose business?  Not only could they have looked to their counterparts in California and Hawaii, but lawmakers in Rhode Island were also informed through press and otherwise that termination of these contracts would occur if the law was passed.

Hawaii and California based advertisers have kept their business thanks to these vetoes, while Rhode Island policymakers simultaneously passed an unconstitutional law and caused in-state companies to lose business.  Let this contrast between states be a lesson for other lawmakers around the country.

Click here for ATR's letter to Gov. Carcieri urging his veto of the budget, which included the eTax.

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Arizona Standoff Continues: Legislature Rejects Gov. Brewer's Tax Hike; Brewer Vetoes Budget


Posted by Kelly William Cobb on Thursday, July 2nd, 2009, 3:31 PM PERMALINK


In the early hours of Wednesday morning, the Arizona Legislature completed their annual session by sending Gov. Brewer a budget that rejected her massive $3 billion sales tax hike.

The rejection of the 17.8% tax hike came even as legislative leadership and the Governor had crafted a verbal budget compromise agreement that would have sent the tax increase to the ballot, while establishing a flat state income tax in Arizona.

While Americans for Tax Reform strongly advocates for a flat tax, the compromise agreement would have been at least a net $2.5 billion tax hike in Arizona and a violation of the Taxpayer Protection Pledge, a promise 9 state senators and 20 state representatives have made to oppose any and all tax increases.  From ATR's press release:

“The state’s current fiscal crisis is a perfect impetus to reform Arizona’s reckless overspending addiction,” said Grover Norquist, president of Americans for Tax Reform. “Despite this, Gov. Brewer continued through the late hours to advocate for her massive $3 billion tax hike. Fiscal conservatives throughout the legislature should be praised for rejecting this irresponsible proposal.”
 
However, a day later Governor Brewer responded by vetoing the state budget, forcing the legislature to reconvene in a special session next Monday.  This came despite significant Republican opposition in the legislature, which even rejected sending the tax hike to the Senate or House floor.
 
Click here or read below for ATR's press release commending the legislature for refusing to cave to Gov. Brewer's $3 billion tax hike.  Also, click here for ATR's alert to lawmakers urging them to oppose the tax hike compromise agreement.
 
ATR Commends Arizona Legislature for Rejecting Gov. Brewer’s Sales Tax Hike
Budget Compromise, Multi-Billion Dollar Tax Increase Fails
 
WASHINGTON, D.C. – Americans for Tax Reform today commends the Arizona Legislature for approving a budget that does not include the $3 billion sales tax increase pushed by Gov. Jan Brewer (R). The legislature adjourned in the early morning after transmitting the finalized budget to the governor’s desk for her signature.
 
The 17.8% sales tax increase has been aggressively advanced by Gov. Brewer over the past several months, ostensibly to resolve the state’s $3 billion overspending problem. Opponents of Brewer’s proposed tax hike contend it will adversely affect an already contracting economy and counter that excessive spending from the Napolitano administration should be paired back. Arizona’s general fund spending has grown at 66% over the last five years, which is double the rate of population and inflation.
 
“The state’s current fiscal crisis is a perfect impetus to reform Arizona’s reckless overspending addiction,” said Grover Norquist, president of Americans for Tax Reform. “Despite this, Gov. Brewer continued through the late hours to advocate for her massive $3 billion tax hike. Fiscal conservatives throughout the legislature should be praised for rejecting this irresponsible proposal.”
 
A verbal budget compromise agreement between Gov. Brewer and legislative leadership died as the legislature adjourned. That plan would have referred the Governor’s sales tax hike to the ballot, while establishing a flat state income tax in Arizona. While Americans for Tax Reform strongly supports the flat tax, the compromise would have been a net $2.5 billion tax increase and a violation of the Taxpayer Protection Pledge, a promise made to constituents to “oppose any and all efforts to raise taxes.” Nine state senators and twenty state representatives have signed the Pledge.
 
“The compromise with Gov. Brewer was nothing more than a $2.5 billion tax increase – plain and simple,” said Grover Norquist, president of Americans for Tax Reform. “Establishing a flat tax in Arizona would have been a wonderful idea, had it not been tied to a gigantic tax hike. While there is still much work to be done to rectify Arizona’s overspending problem, today was a victory for Grand Canyon State taxpayers.”

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eTaxes Vetoed in Hawaii, California


Posted by Kelly William Cobb on Thursday, July 2nd, 2009, 3:08 PM PERMALINK


The following is cross-posted at www.stopetaxes.com.
 
Great news for Hawaii and California consumers! Governors Linda Lingle (R) and Arnold Schwarzenegger (R) yesterday vetoed legislation in Hawaii and California that would have required consumers to pay tax on purchases made over the internet.
 
The "affiliate nexus tax" has caused a storm of attention in recent days after a number of retailers, including Amazon.com and Overstock.com, rightly took steps to end advertising agreements to avoid collecting the tax, arguing that it is blantantly unconstitutional and violates the U.S. Supreme Court decision Quill v. North Dakota.  That court case determined states cannot force businesses to collect taxes if they have no physical presence in the state.  The nexus tax requires out-of-state retailers to collect and remit taxes if they advertise through in-state websites.
 
In her Statement of Objections, Gov. Lingle highlighted these very legal concerns.  She also noted that the bill violates Article III, Section 14 of the Hawaii Constitution, as it is overly broad in its subject.  In California, Gov. Schwarzenegger noted that it makes "absolutely no sense to go back to the taxpayers to solve the current shortfall."
 
A similar measure is still pending in North Carolina and the nexus tax was approved as part of Rhode Island's budget this week.
 
NORTH CAROLINA RESIDENTS: Click here now to write your legislators and Governor in opposition to the eTax!
 
Also, Click here for ATR's letter to Governor Lingle urging her to veto the nexus tax.
 
For updates on eTaxes, go to www.stopetaxes.com or follow on Twitter and Facebook.

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Unemployment and President Obama's Fudged Economics


Posted by Kelly William Cobb on Thursday, July 2nd, 2009, 1:34 PM PERMALINK


The Department of Labor’s report this morning that unemployment rose to 9.5% nationally – a 26 year high – should come as a surprise to the Obama administration, who used a highly questionable formula to determine that the stimulus package would create more jobs. According to the original White House analysis, stimulus spending would increase GDP by 3.7% and a “1% increase in GDP corresponds to an increase in employment of approximately 1 million jobs.” 

However, this formula relied on the White House assumption that government spending has a multiplier effect of 1.57 in growing the overall economy, while tax cuts have a multiplier effect of only .99. This means for every unit of government spending, the economy grows by 1.57 times that amount, while for every unit of tax cuts the economy grows by only .99.
 
Really? Under this false logic, government spending always grows the economy, while tax cuts can actually be an economic drain. In fact, the government can theoretically just keep spending us into job growth and prosperity!

Not so.  To the left, the blog Innocent Bystanders has conveniently highlighted just how well this White House multiplier has worked to stimulate GDP growth and thus create jobs. The graph shows the White House estimates for unemployment with and without the stimulus, while the red dots depict what actually occurred. Luckily, the White House has already come up with a terrific non-falsifiable theory called “jobs created or saved.” Under the assumption that the White House is never wrong, if the estimated 3.5 million jobs weren’t created, the stimulus must have saved them! (Note: the economy shed 467,000 jobs last month.)

Meanwhile, the San Francisco Federal Reserve compiled a number of economic studies and released a paper directly countering the White House’s absurd multiplier. As summarized so eloquently by the Goldwater Institute:
 
It turns out that a dollar of government spending results in 70 cents of job-creating activity after two years. A dollar in tax cuts results in $1.30 to $3 of job-creating activity after two years. Put another way, a $1 cut in spending cuts job-creating activity by 70 cents. A $1 increase in taxes cuts job-creating activity by as much as $3.
 
The kicker: these numbers that show tax cuts have a high multiplier effect were derived from a study by Christina Romer in 2007 – the same Christina Romer that serves as Obama’s Chair of the Council of Economic Advisers and who wrote the White House’s stimulus analysis above. I wonder who got to her first: John Maynard Keynes or President Obama?
 

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eTaxes Galore in North Carolina's Budget


Posted by Kelly William Cobb on Monday, June 29th, 2009, 2:02 PM PERMALINK


The following is cross-posted at www.StopETaxes.com.

As North Carolina's budget remains stalled in the legislature, proposed tax hikes on internet transactions are taking on heat.

Most notably, the budget includes an "affiliate nexus" etax, which requires out-of-state retailers to collect taxes on North Carolina consumers.  The tax flies in the face of the U.S. Supreme Court's decision in Quill v. North Dakota, which determined that such a tax violates the interstate commerce clause of the U.S. Constitution.  As a result, the proposed tax hike has caused online retailers to fire back against the legislature, noting the unconstitutionality of such a tax collection scheme.

The budget also would apply the sales tax to digital goods purchased online, such as music, movies, ringtones, and films.  Together with the nexus tax, these provisions constitute a $31 million tax hike on North Carolinians.

Meanwhile, negotiations between the House and Senate budget writers have broken down and this week legislators are expected to pass "continuing resolutions" to keep state government operating.  A conference committee is poised to work out the budget differences in the coming weeks.  All told, the budget contains nearly $2 billion in tax and fee increases.

CLICK HERE NOW to write your state legislator and urge them to oppose etaxes in the North Carolina Budget!  Also, click here for ATR's letter opposing etaxes in the budget.

You can find out more about internet taxes at www.stopetaxes.com, or follow Stop eTaxes on Facebook and Twitter.

(photo by Mr. T in DC)

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