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Matt Blumenfeld

High U.S. Income Tax Rate Has Boxing Superstar Manny Pacquiao on the Ropes


Posted by Matt Blumenfeld on Thursday, February 14th, 2013, 10:48 AM PERMALINK


With the announcement that top ranked boxer Manny Pacquiao will seek to hold his upcoming boxing matches away from the bright lights of Las Vegas and off U.S. soil, the Filipino boxer becomes the latest professional athlete to highlight the current non-competitive U.S. income tax rate. As reported by Yahoo! Sports:

[Pacquiao chief advisor] Michael Koncz told Yahoo! Sports that the 39.6 percent tax rate Pacquiao would face if he were to fight again in the U.S. makes a fall bout in Las Vegas "a no go."

Pacquiao’s concerns lie with the federal income tax. As Nevada is one of the nine states that do not have an income tax, Las Vegas has grown to become the home for major bouts because fighters do not have to worry about the state taking a bite out of their winnings or purse. Unfortunately, Nevada’s economic benefit is now overshadowed by the federal income tax rate.  According to Yahoo! Sports:

"Manny can go back to Las Vegas and make $25 million, but how much of it will he end up with – $15 million?" [boxing promoter] Arum said.

For boxers who stand to earn over $1 million per fight through winnings, pay-per-view revenue shares, fight bonuses, and other forms of taxable income, they will be taxed at the top marginal income tax rate of 39.6 percent. Pacquiao, boxing’s second biggest PPV draw, understandably views boxing in America under this tax rate to be a bad business decision.

Since Pacquiao is not a U.S. citizen or permanent resident, he can keep a larger percentage of his fight earnings by taking fights outside of the U.S. The other options Pacquiao and his management team have considered are Macau and Singapore: both casino and gaming markets comparable to Las Vegas and ideal to host a grand boxing event.

If Pacquiao or any other non-resident of the U.S. were to take a fight in these two markets and earn a $20 million purse, this is what their savings would be:

 

 

Location

 

Top Marginal Income Tax Rate

 

Difference in Tax Rate

 

Tax Liability

 

Difference in Tax Liability

United States

39.6%

-

$7.9 million

-

Macau

12%

27.6%

$2.4 million

$5.5 million

Singapore

20%

19.6%

$4 million

$3.9 million

 

With the millions of dollars in savings factored with the relatively short career of a professional boxer, more non-resident boxers could soon follow Pacquiao’s lead for greater economic freedom and financial security. Since most professional boxers are non-citizens or non-residents, the exodus would see the economic burden worsen for American cities that host boxing bouts of this magnitude.

Fewer boxing matches per year would mean fewer vendors, a decrease in tourism, and less money being spent in host cities. Hosting a major sporting event has proven to create jobs and insert economic life within the city. The federal government needs to follow the examples being set by GOP governors seeking to reduce their respective state’s income tax burden or risk losing investments across every industry.

At the end of the day, people migrate and invest in places where they will receive the most for their services and skills. The higher the income tax, the less return these same people will see. By continuing to have this excessively high income tax, the U.S. continues to discourage businesses and workers looking to make profitable investments.

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Deceptive Taxes Cannot Hide with Passage of New Rule in Texas House


Posted by Matt Blumenfeld on Friday, February 1st, 2013, 3:26 PM PERMALINK


While Texas has been a leader in government transparency when it comes to spending, Rep. Van Taylor recently introduced and secured approval of a rules change in the Texas House of Representatives that will further the state’s legacy as a leader in government transparency that other states may strive to emulate. With Texas already a leader in government spending transparency, Rep. Taylor’s rule change will bring greater transparency to the tax writing process in 2013 and beyond.

Rep. Taylor’s rule change requires that any bill that imposes, authorizes, increases, or changes the rate or amount of a tax, assessment, surcharge or fee must include a short statement indicating so at the end of its title. This proposed rule change greatly improves the legislative process through increased transparency and will ensure that all lawmakers and their constituents know exactly what they are voting on.

Americans for Tax Reform supports Rep. Taylor's proposal because it will thwart efforts to covertly insert tax increases into legislation through the amendment process. Just as businesses are not allowed to provide false or misleading information in their advertisements, state lawmakers should not be allowed to mislead their colleagues or the public when it comes to legislating.

“Americans for Tax Reform applauds Rep. Van Taylor for his leadership in making the legislative process in Texas more transparent and taxpayer-friendly.  ATR urges lawmakers in other states to look to Rep. Taylor’s reform as a model to emulate” said Grover Norquist, President of Americans for Tax Reform.

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Oklahoma's Hospital Provider Tax Is Back


Posted by Matt Blumenfeld on Monday, January 28th, 2013, 1:32 PM PERMALINK


Oklahoma state representative Doug Cox (R-Grove) has introduced HB 1031, legislation that aims to permanently extend the 2% tax levied upon hospital revenues in the state.  During the 2011 legislative session, Rep. Cox promised the state legislature that the “provider fee” would be a temporary tax; however, much like unicorns, temporary tax increases simply do not exist.

As noted during the passage of the original bill, the tax increase applies to 77 hospitals and exempt 69 others, including specialty hospitals and state-owned hospitals such as the OU Medical Center. The legislation remains a gimmick aimed to game the Medicaid system for more federal dollars for the state. With the enactment of “Obamacare”, the federal Medicaid system will continue to be strained and will increasingly become unsustainable. With several states looking to enact a similar scheme as Oklahoma has, there is no guarantee that Medicaid dollars will be around in years to come as the system becomes increasingly burdened. Rather than footing rural hospitals and taxpayers across the state with the tab, Oklahoma should push to block grant Medicaid funding provided to their state from the federal government.  

Americans for Tax Reform encourages members of the Oklahoma legislature to vote NO on HB 1031. The facts remain unchanged, HB 1031 is a tax increase that seeks to game an unsustainable Medicaid system.

To contact your Oklahoma state legislator, click here.

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California's "Balanced" Budget All Smoke and Mirrors


Posted by Matt Blumenfeld on Friday, January 25th, 2013, 1:59 PM PERMALINK


Jerry Brown used his State of the State speech yesterday to gloat that "California has once again confounded our critics," and that under his leadership California has “wrought in just two years a solid and enduring budget.” "Two years ago,” Brown added, “they were writing our obituary…Well, it didn't happen. California is back, its budget is balanced and we are on the move."

Sounds like a great comeback story right? Too bad it’s not true. Leonard Gilroy, director of government reform at Reason Foundation, published an article this week in which he methodically dispels California Gov. Jerry Brown’s claims that the Golden State’s fiscal woes have been cured. Gilroy notes the following problems with Brown’s claims:  

“For all of Gov. Brown’s talk about spending cuts and ‘fiscal discipline,’ his budget forecasts a 5 percent jump in state spending, rising from $93 billion in 2012‑13 to $97.7 billion in 2013‑14.”

But those figures don’t tell the whole story, as Gilroy points out:

“You need to add in all the other spending that is not included in those numbers: nearly $41 billion in special funds and over $7 billion in bond funds. Suddenly, the state is spending over $145 billion in 2013-14, not $97.7 billion.”

Despite boisterous claims from the Department of Finance that California has already paid down their debt to less than $28 billion, that figure does not include the state’s mountain of unfunded pension and benefit liabilities, which total around $181 billion –  as high as half a trillion according to some estimates -  and unfunded state retiree healthcare liabilities set at $77.4 billion that continue to steadily increase each day.

Gilroy points out another key fact that Brown left out of his speech:

“Golden State politicians have systematically skimped on making annual contributions to retiree pension and health systems so future taxpayers’ tab to cover the cost of the “shadow” state workforce that’s no longer actually working continues to climb.”

In light of this, and the fact that Gov. Brown is pressing forward with his $68 billion high-speed train to nowhere, which is shaping up to be a an almost tragic budgetary folly, don’t be surprised if Brown and his friends in the asylum, more commonly known as the California legislature, unexpectedly find themselves back in the red in the not-too-distant future. 

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ATR Supports Gov. Jindal's Tax Reform Proposal


Posted by Matt Blumenfeld on Tuesday, January 15th, 2013, 12:36 PM PERMALINK


Louisiana Governor Bobby Jindal recently announced that he will introduce legislation this year to eliminate the state’s personal and corporate income taxes. Gov. Jindal’s proposal, if approved by the legislature, would increase the disposable income of hard-working Louisiana taxpayers and make the Pelican State more appealing to businesses and investors.

While we are awaiting full details on the plan, which would also eliminate the state’ s franchise tax, preliminary estimates from the Tax Foundation show Gov. Jindal’s proposal would greatly improve Louisiana’s business tax climate:

 

Current Rank

Jindal's Plan

Overall

32

4

Corporate

18

1

Individual

25

1

Sales

49

50

UIT

4

4

Property

23

7

Jindal’s reform would move the state to a predominantly consumption-based tax system similar to that of neighboring Texas. The plan is for lost revenue from the income tax elimination to be offset with a slightly higher sales tax that applies to a broader base of goods and services. Gov. Jindal has stated that his goal is to keep the sales tax “as low and flat as possible.”

In announcing his plan, Gov. Jindal made a compelling case for why tax reform is his top priority this year:

"The bottom line is that for too long, Louisiana's workers and small businesses have suffered from having a state tax structure that is too complex and that holds back economic prosperity. It's time to change that so people can keep more of their own money and foster an environment where businesses want to invest and create good-paying jobs."

Florida, Texas, Tennessee, Washington, and five other states currently have no income tax. Experience shows that Jindal’s proposal to eliminate the income tax, one of the most economically damaging taxes, would be a boon to the state. No income tax states outperform the rest of the country in terms of economic growth, population growth, and job growth.  

Americans for Tax Reform supports Gov. Jindal’s effort to eliminate the state income tax in a way that simplifies the tax code and makes the state more economically competitive in the process.

The Louisiana legislature convenes the 2013 session on April 8th. ATR will be following this issue closely. To read Gov. Jindal’s statement, click here.

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Why Gov. McDonnell Shouldn't Take Tax Policy Advice from Ed Rendell


Posted by Matt Blumenfeld on Tuesday, December 18th, 2012, 1:50 PM PERMALINK


Former Pennsylvania Governor Ed Rendell recently offered some advice to Virginia Governor Bob McDonnell when it comes to funding a possible $500 million transportation spending increase. While it remains unclear where the revenue for this spending hike would come from, former Gov. Rendell did not mix words when he suggested that Gov. McDonnell tell Grover Norquist, president of Americans for Tax Reform, to “pound sand”, and suggested that McDonnell should raise taxes. With that in mind, ATR would suggest that McDonnell take a look at Rendell’s record and decide if he really is the best person to take advice from.

During Rendell’s time as governor for the better part of the last decade, Pennsylvania’s total operating budget rose from $45 billion to $66 billion, while the General Fund Budget increased from $20 billion to $28 billion. Despite inflation being under 20 percent, spending increased by 47 percent. Not only was spending a problem during Rendell’s tenure – leaving his successor with a $4 billion deficit to close –Rendell was also well known for diverting taxpayer dollars from all over the state to Philly’s corrupt SEPTA.

Gov. Rendell even refused to leave office quietly, instead calling for an 8% tax on oil company profits. Pennsylvania lawmakers told Rendell to “pound sand” back then, and, given Rendell’s record, Virginia lawmakers would be wise to tell the MSNBC contributor the same. 

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The Impact of the Cadillac Insurance Tax for Massachusetts


Posted by Matt Blumenfeld on Wednesday, December 5th, 2012, 12:04 PM PERMALINK


In October, the Boston-based Pioneer Institute published a new study on the impact that the tax on high-end “Cadillac” insurance plans, one of 20 new or higher taxes contained within Obamacare, will have on the commonwealth of Massachusetts.

With Massachusetts being one of seventeen states that are actively working to set up a state-based healthcare exchange by 2014, this new excise tax on high-end insurance plans, which goes into effect in 2018, will have a disproportionately adverse impact to Bay State residents. Given the fact that Massachusetts residents pay relatively high premiums for insurance coverage relative to other states, its residents will be among the hardest hit by this new excise tax.

The Pioneer Institute report used the most conservative estimate to accurately detail what the average person is most likely to pay in additional federal taxes during the first decade of implementation.

The tax does not discriminate between economic classes, and will reduce disposable income for the lower-middle class to the upper-middle class. In one of the scenarios outlined in the Pioneer Institute report, small business owners can expect to pay $86,905 in additional taxes per employee plan over 10 years. The economic impact of the excise tax is not limited to one demographic or industry. As the report notes:

Any profession that has robust healthcare benefits – construction workers, teachers, police, state and local public workers, and a majority of those on private insurance – will be immediately and significantly impacted by this tax.

The Pioneer Institute report is a reminder that, while the tax increases associated with the fiscal cliff are getting all of the attention, there are nearly a trillion dollars in additional tax increases from Obamacare that are scheduled to kick in over the next several years, five of which will saddle the economy with a $268 billion tax increase at the end of this month.

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ATR Opposes Illinois Satellite Provider Tax


Posted by Matt Blumenfeld on Tuesday, November 27th, 2012, 2:41 PM PERMALINK


Today the Revenue and Finance Committee of the Illinois General Assembly will hold a hearing regarding House Bill 5440. The proposed legislation would establish a 5 percent tax based on gross revenue for satellite broadcast providers.

Americans for Tax Reform has drafted a letter urging members of the committee and Illinois General Assembly to vote against this tax increase. Not only does the legislation levy a new tax on Illinois residents, but also unfairly affects rural satellite customers who often lack the choice of being able to switch to a cable service provider.

The full letter can be read here.

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Prop. 204 Aims to Permanently Extend AZ Sales Tax Hike


Posted by Matt Blumenfeld on Wednesday, October 31st, 2012, 12:29 PM PERMALINK


As ATR predicted three years ago when Arizona Gov. Jan Brewer first proposed her “temporary” billion dollar per year sales tax hike, there would be an effort to extend it, or make it permanent before the sunset date. Fast forward to today and we have Proposition 204, AKA the “Quality Education and Jobs Act,” on the November 6th Arizona ballot. Prop. 204 would make Gov. Brewer’s sales tax hike permanent. What advocates for Prop. 204 fail to realize is that maintaining such a high sales tax rate serves only to hurt businesses and diminish jobs for Arizona residents.

Arizona’s 6.6 percent sales tax is currently the ninth highest in the country.  When factoring in the average local sales tax rate, Arizona has second highest sales tax burden in the nation at 9.12 percent. If the Prop 204 passes and the sales tax increase is made permanent, small businesses in Arizona will be hit the hardest. ATR recently summarized for the NRO a 2004 Pricewaterhouse Coopers survey that was the first national measure of retailers’ sales tax compliance costs:

The report found that retailers with less than $1,000,000 in annual sales were burdened with sales tax compliance costs in excess of 13 percent of sales tax collected. Meanwhile, the big guys — retailers with income between $1,000,000 and $10,000,000 — had average compliance costs of less than six percent. The really big boys, retailers with more than $10,000,000 in sales, had compliance costs that were less than three percent on average.

ATR encourages Arizona residents to vote No on Prop. 204. For a list of ATR’s recommendations for ballot measures that will be decided on by voters from coast to coast next week, click here

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Boulder, CO Voters Set to Decide on Dubious 20-Cent Bag Tax


Posted by Matt Blumenfeld on Thursday, October 11th, 2012, 1:52 PM PERMALINK


For the past several years, local officials in cities and towns around the globe have been implementing bag taxes in a misguided attempt to diminish the usage of paper and plastic bags. Bag tax proponents within these localities claim that their efforts have not only curbed bag usage, they have also mitigated litter and generated millions of new taxpayer dollars for politicians to spend. However, other studies have shown bag taxes negatively impact the local economy and do nothing to benefit the environment or reduce litter.

The Wall Street Journal hosted an online debate on the topic over the weekend with Daniella Dimitrova Russo, Co-Founder and Executive Director of the Plastic Pollution Coalition making the case in favor of bag taxes and Todd Myers, Environmental Director at the Washington Policy Center, arguing against the taxation of plastic bags.

Myers contends bag tax and ban proponents fail to consider the unintended consequences of the bag ban, as well as implementing an incorrect cost benefit analysis to attempt to boost their argument:

“When Seattle considered its first bag ban, politicians touted the benefits, including reductions in energy and water use. The claims ignored the use of substituted bags, thus making the projections extremely favorable toward the ban. Even with those skewed numbers, my estimates show a saving of $278,452 worth of carbon emissions and water for a cost of $10 million to consumers. Somehow spending $100 to receive $3 in environmental benefit is supposed to be smart policy. Weighing the costs and benefits makes it clear that banning plastic bags yields little benefit at very high cost.”

While bag tax and ban proponents have not had success at the state level – even very liberal legislatures in California and Oregon have rejected bag tax bills in recent years – they continue to push their misguided policies at the local level. Their latest target is Boulder, CO, where voters will decide on a local 20-cent bag tax in less than four weeks.

The proposed tax in Boulder would apply to all paper and plastic bags at food retailers, including grocery stores, convenience stores and department stores such as Target. Gas stations would be exempt if food sales account for less than 2 percent of their business. Retailers would keep four cents to compensate for increased administrative costs. City officials say the remaining 16 cents would be used to pay for educating people about reusable bags, and supplying reusable bags to low-income residents who would be disproportionately affected by the fee.

A recent study commissioned by ATR found that Washington, D.C.’s bag tax has failed to generate the results and revenue the D.C. City Council had projected due to the residents finding ways to avoid paying the tax. Worse, D.C.’s bag tax has negatively impacted the local economy. According the report, “Employment losses will rise to 136 net local jobs from 101 in FY 2011, and aggregate real disposable income will fall further by $8.08 million from $5.8 million in FY 2011. Investment declines will increase to $1.58 million from $600 thousand in FY 2011.”

Even worse economic consequences can be expected if Boulder imposes a whopping 20-cent tax on every paper and plastic bag. The revenue that would be generated does not even go towards solving any real problems faced by city residents, but merely “educates” the people about why reusable bags are supposedly better. This proposed tax would add increasing volatility to the city’s business climate while negatively impacting local businesses and jobs.

ATR encourages all Boulder residents to speak out against the 20-cent tax proposal, and contact the members of the City Council and Mayor Matt Applebaum so this measure does not pass. Their respective information can be found by clicking here.

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