The Return of the King: A King’s Ransom
The NBA’s prodigal son LeBron James is going home, announcing on Friday that he is taking his talents back to Cleveland.
The Cavaliers have signed on James with a 2-year deal worth $42.2 million; the going rate for the best player in basketball.
James, a four-time league MVP, has spent the last four seasons in Miami. In those four years, James and the Heat have played in four NBA championships, giving the King his first two rings. With the new contract, there is no doubt that Cavilers’ owner Dan Gilbert paid a king’s ransom to bring LeBron back home.
Four years ago, LeBron made ‘The Decision’ to leave his home state of Ohio for the warmer weather in South Beach to the dismay of Caviler fans. Hometown-hero turned villain is making his triumphant return as LeBron’s “relationship with Northeast Ohio is bigger than basketball.”
Surprisingly, James has never been the highest paid player on his team, but that doesn’t mean the King has ever been strapped for cash since entering the league as the first overall pick in the 2003 NBA draft. According to Forbes, LeBron has amassed over $450 million during his NBA career. The Star’s new contract will keep him in Cleveland through 2016 and will pay him handsomely for his basketball prowess. Last year, ATR calculated the highest paid athletes for 2013 after-taxes. LeBron was the second highest-paid, with earnings of $37,885,150 and federal income tax liability of a whopping $18,659,850.
When considering the tax implications of LeBron’s contract, it is important to note if James selects the tax-friendly state of Florida as his residency, or if he claims his 30,000 sq. ft. mansion in Akron as his home. Assuming that LeBron is an Ohio resident, below are his estimated tax liabilities on his new contract:
Est. Federal Tax Burden
Est. State Tax Burden
Est. City Tax Burden
Total Tax Liability
The Federal Income Tax Burden listed above is comprised of the 39.6 percent tax bracket and 3.8 percent Medicare Tax. For illustrative purposes, the marginal combined tax rate of 56.1 percent (which includes Federal, State, Medicare, and Local tax rates) is applied only to his contract salary and does not take into account his bonuses, endorsement, and other sources of viable income.
Over the life of the contract, LeBron will lose over half of his earnings to federal, state, and local taxes. At twenty-nine years-old, LeBron is entering the prime of his career in his quest to bring a championship to Cleveland. In the meantime, Uncle Sam is happy to collect on the King’s earnings.
Photo Credit: Keith Allison
Processing Error Leaves 16,000 Minnesotans Without Health Insurance
According to the Minnesota Star Tribune, 16,000 MNsure applicants STILL do not have insurance.
Here we go again.
Despite receiving $155,020,465 in federal funding to build a functioning exchange, the online interface continues to deprive people from receiving much-needed healthcare. The reason 16,000 Minnesotans who applied for Medical Assistance are still without coverage? Simple; state officials never got around to sending out letters informing consumers of problems with their original applications.
“It was a serious error on our part of not being more on top of understating that process, and having the oversight in place,” said Deputy Commissioner Chuck Johnson of the Minnesota Department of Human Services.
‘Serious error’ is quite the understatement. The mailing process was supposed to be fully automated, but like many facets of online state-exchanges, they were implemented without properly addressing critical issues.
Back in February, ATR noted that HealthCare.Gov left 22,000 site error appeals untouched. In May, Cost of Government Center reported that over 1 million enrollees received incorrect subsidies. Unfortunately, 16,000 uninsured Minnesotans are the next real-life example of the technical issues that continue to plague the President’s misguided healthcare law. This is problematic on two fronts: if you have an issue with your application you won’t get a response, and, if the state has a problem with your application you won’t be notified.
On Obamacare, “the idea is simple. By enrolling in what we’re calling these marketplaces, you become part of a big group plan,” said the President in the Rose Garden last October. What the President fails to acknowledge is that with a big group plan, come big problems that are anything but ‘simple’.
Obamacare has failed to deliver on its main goal, to provide health coverage. If the President requires citizens to sign up for his law, Americans at least deserve one that actually works.
Happy Fourth of July! BBQ, Fireworks, and Historically High Gas Prices
On the eve of the Fourth of July, many Americans across the country already have their plans mapped out. Unfortunately, the estimated 41 million people that are expected to travel this holiday weekend are going to be disheartened when they pay big at the pump.
According to AAA Travel, the national average price of gas heading into Independence Day stands at $3.67 per gallon, roughly 20 cents more than last year and the highest mark in the last 6 years for Fourth of July weekend. With over 41 million Americans planning to travel over 50 miles from their homes this weekend, “AAA does not believe that high gas prices will have a significant impact on the number of people traveling, but it could result in some consumers cutting back on dining, shopping or other trip activities,” wrote AAA’s Heather Hunter.
With rising escalation in Iraq, it is no surprise that the price of crude oil has increased domestically, but that shouldn’t confine Americans to higher gas prices. While the U.S. has seen drastic improvements in energy production through the oil shale boom and advancements in refining methods, the Obama regulatory regime has restricted the nation from reaching its true energy and economic potential.
ATR noted last year that Obama has the ability to affect gas prices by approving the Keystone Pipeline that would potentially deliver 830,000 barrels of oil to Texas and Oklahoma every day, but citing illegitimate environmental concerns, Obama has yet to approve the pipeline. By proposing unnecessary regulations, such as EPA’s Tier III Sulfur Rule which would set new vehicle emission and fuel standards, Obama is subjecting Americans to higher gas prices. Although the rule has not been implemented yet, if the mandates eventually come to fruition, it is the consumers who will pay big. Making matters worse, the President has ordered the EPA to issue stringent regulations that restrict the development of America’s Outer Continental Shelf (OCS). Under the administration’s plan, 85 percent of offshore areas are untapped, eliminating potential job creation and energy production.
Opening up the Keystone Pipeline, eliminating dubious regulations, and authorizing more offshore drilling could be a great start in lowering the price of gasoline for Americans while also creating much needed employment and help establishing American energy ascendance. While Americans will be enjoying the holiday weekend with barbecues, fireworks, and liberty, the Obama administration’s flawed energy policies will be hurting the nation’s economy.
Ohio Gov. Kasich Freezes Renewable Energy Standards
Americans for Tax Reform applauds Ohio Governor John Kasich (R) for signing SB 310 into law last Friday.
Ohio, along with 29 other states and the District of Columbia, have expensive Renewable Portfolio Standards (RPS) in place requiring that a certain percentage of energy come from renewable sources and mandates that citizens and businesses consume less electricity. Last month, ATR praised Ohio’s House of Representatives and Senate for passing SB 310, an energy bill that would freeze renewable energy standards.
The bill was passed by the Ohio Senate on May 7 by a vote of 21-12, and the Ohio House followed that up with a 55-42 vote on May 28. With Gov. Kasich’s signature, Ohio has become the first state to successfully pass legislation that puts a hold on the energy mandates that require the state to meet RPS requirements and that forces Ohioans to use less electricity. As ATR noted, other states are sure to follow suit, as meeting RPS requirements will become increasingly difficult and expensive.
SB 310 will sanction a two-year RPS pause while also suspending the forced electricity reduction mandate that is financed through high monthly customer surcharges. In addition, the bill will also create a commission to study the effects of these electricity mandates.
Before the passage of SB 310, it was required that 12.5% of electricity of sold in Ohio come from renewable sources by 2025. As laid out in the text SB 310, the new law freezes the renewable energy benchmarks for 2015 and 2016 at the 2014 level of 2.5%.
“We are pleased that Governor Kasich signed SB 310, protecting Ohio’s consumers and business owners from higher energy prices … these standards have proven to be unrealistic. Governor Kasich has done the right thing by providing a temporary freeze to these standards so that the economic well-being of our working families and businesses can be factored in before moving forward,” said Eli Miller, the Ohio State Director for Americans for Prosperity.
Although just a two-year hiatus, Ohio legislatures have taken the first step towards rectifying the expensive and unrealistic goals set by RPS requirements by signing SB 310 into law. ATR supports Gov. Kasich in his mission to provide the citizens of Ohio with affordable and available energy.
Upcoming Tax Filing Season Could Be the Most Chaotic in Years
Last month, Cost of Government Center reported that over one million Americans have received incorrect subsidies due to Obamacare’s incomplete backend. But the situation is likely even bleaker than initially thought.
Americans for Tax Reform’s Tax Policy Director Ryan Ellis joined a distinguished panel on Tuesday to testify in front of the Committee on Ways and Means Committee Subcommittees on Health and Oversight’s hearing on the Verification of Income and Insurance Information Under the Affordable Care Act. Ellis, who is also an IRS Enrolled Agent, warned that “the upcoming tax filing season has the potential to be one of the most chaotic in years.”
Ellis pointed to the failures of HealthCare.gov, poor record keeping by the government, and individual error or some combination of the three as a reason the tax-filing season will be a taxpayer's worst nightmare: “it won’t be the taxpayer’s fault—it will be the government’s fault,” said Ellis. Unfortunately for taxpaying citizens receiving incorrect subsides, Uncle Sam and the IRS doesn’t like to accept blame, and the burden will be unfairly placed on the taxpayers.
The “flawed, confusing process” currently hinders both applicants and employers to correctly file for tax credits, making matters worse is the government’s “failure to complete the back-end of the web site.” Ellis continues, “it’s in the interest of Congress to make sure that the entirety of the Obamacare signup system is fully functional—not just the front-end website, but the really important back end where this complex income verification system must be able to work.”
Supporters of Obamacare cannot realistically stand behind a law that was implemented with many integral features missing. The technical issues that continue to define Obamacare are much more than a political talking point, as the health of millions of Americans depend on the functionality of Obamacare.
Obamacare Still Raises Debt by Trillions
It would seem like members of the Obama Administration will find anything they can to celebrate when it comes to the Affordable Care Act.
Slow your roll, Mr. Carney. Not too long ago the President prematurely boasted Obamacare as a success due to hitting the targeting goal of 7.1 million sign-ups. What that 7.1 million figure fails to mention is how many people were previously uninsured, lost coverage due to Obamacare, and how many people have begun and will continue to pay for their new healthcare plans. Before that, the Obama Administration was quick to dismiss CBO reports that said the ACA would kill 2.5 million jobs and create a disincentive for people to work.
So why is the President so giddy about the new CBO report? Because it projects slightly less deficit estimates as if it were a good thing. According to the report, the federal government has a projected net cost of $36 billion for 2014, $5 billion less than previously projected while projecting a net cost of $1,383 billion for 2015-2014, $104 billion less than February estimates. Time to pop the champagne in the Oval Office, right?
The ACA is still going to cost taxpayers, a lot. According to Billy House of the National Journal, “the nation is doomed to return to trillion-dollar shortfalls by 2024 if lawmakers don’t alter existing tax and spending policies…the rising debt [will] have serious consequences.” How has President Obama addressed the nation’s bleak financial future? By creating an unsustainable healthcare program and no original framework to help alleviate the nation’s financial woes as evidenced by the 442 tax hikes Obama has proposed since taking office.
Although the Affordable Care Act was intended to provide affordable healthcare for all, the middle class is paying far too much out of pocket costs to fund Obamacare. While new tax hikes plague average income earners in America, others are losing coverage under the Affordable Care Act. Furthermore, the ACA will kill part-time worker's healthcare coverage and small business owners cannot hire more employees because of Obamacare’s mandates. If the President wanted to properly address healthcare concerns for the middle class, he need only look to healthcare plans proposed by House conservatives Rep. Steve Scalise and Rep. Tom Price.
According to a new Gallup Report, 55 percent of Americans see the writing on the wall and believe the economy is getting worse. The need for responsible spending and practical tax reform is evident, and unless the President and his Administration realize that fact, the American people and the economy will continue to suffer.
Numbers Never Lie; The True Cost of Obamacare
Although President Obama claimed victory on Tuesday due to the 7.1 million people who have signed up on federal or state exchanges for his health care law, the Affordable Care Act has been anything but ‘affordable.’
Not only is that 7.1 million figure skewed due to the fact that it is still unknown how many people have actually paid for their plans and how many were previously uninsured, but it has also cost federal taxpayers billions.
As ATR noted in November, the Obama Administration spent $4.5 billion of federal taxpayer dollars on building state exchange websites. According to new research from CNBC, the Federal Government spent an average of $6,894.05 for each state exchange enrollee.
Furthermore, of the states receiving federal funding, four states and the District of Columbia have disproportionately high cost per enrollee:
|STATE||TOTAL ENROLLMENT||FEDERAL FUNDING||COST PER ENROLLEE|
|Source: State Obamacare exchanges, Kaiser Family Foundation, and Pew Charitable Trusts|
ATR compiled statistics last month that highlighted the high cost to federal taxpayers to fund faulty state exchange websites. Not surprisingly, the states that received the most federal funding are the states with the highest cost per enrollee.
At the top of the list is the Hawaii Health Connector, which has received $205,342,270 in federal funding, only to insure 5,744 people, or $35,749 per enrollee.
According to American Commitment President Phil Kerpen, “just obscene amounts of money have disappeared into these state exchanges for very little actual performance.”
Just because '7.1 million people' now have health insurance, it is far too early for the administration to claim Obamacare as a victory. It is still uncertain how many people have paid for plans, and with the rising cost of healthcare, it is unknown how people will continue to pay for their plans.
Get Ready to Pay Capital Gains Tax on Your Bitcoins
Bitcoin is the world’s first completely decentralized digital currency and has dramatically changed the landscape of the world market place. As the digital currency has grown in popularity, so too has the Internal Revenue Service’s interest in taxing it.
Bitcoin does not comply with existing definitions of currency or fit the mold of other financial instruments or institutions. According to the Mercatus Center, “Bitcoin has the properties of an electronic payments system, a currency, and a commodity, among other things.” Furthermore, the Financial Crimes Enforcement Network (FinCEN) defines Bitcoins as “virtual currency…a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency.” The problem with taxing Bitcoins is in its ambiguity, and the fundamental concern is whether to define the technology as a currency or a commodity.
Before the release of the guidelines, users, miners, and traders of Bitcoin have been left in the dark as to what their tax implications of the online tender are. Now, “virtual currency is treated as property for U.S. federal tax purposes...general tax principles that apply to property transactions apply to transactions using virtual currency,” according to the IRS.
This means that even though “in some environments, it [Bitcoin] operates like ‘real’ currency…it does not have legal tender status in any jurisdiction.” Essentially, Bitcoin functions and operates like a real currency, but unlike the U.S Dollar, the value of a Bitcoin is only backed by its ability to hold its value.
Because Bitcoin is defined as property, not currency, the IRS will tax Bitcoin transactions the same way it taxes stocks and “a payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property,” as laid out in the guidelines.
Senator Tom Carper (D-Del.) who serves as a member of the Finance Committee said that the guidelines “provide clarity for taxpayers who want to ensure that they’re doing the right thing and playing by the rules when utilizing Bitcoin and other digital currencies.” The guidelines issued by the IRS have validated Bitcoin as a legitimate investment by defining the digital currency as value holding property.
Federal Government Spending Billions on Faulty State Exchanges
In November, a month after the disastrous rollout of Obamacare, ATR’s Alyssa Canobbio reported that the Obama Administration Spent $4.5 Billion on State Healthcare Websites. Of the states collecting federal grant money to help build, run, and maintain state exchange websites, five states are responsible for spending at least $1 billion of the total $4.5 billion federal taxpayer dollars. Although the five states received disproportionate federal funding to ensure sites were running properly and on time, their state exchange websites epitomize the shortcomings of the online market place under the Affordable Care Act. Here is a quick rundown of how each state got themselves into this predicament and where they are now:
Oregon: Total Federal Grants: $305,206,587
Although Cover Oregon was touted as one of the White House’s favorite health exchanges, reality quickly set in when enrollees were devastatingly low. Now Oregon is forced to consider scrapping the entire website. More troubling is the fact members of Congress have called for a federal investigation into how Cover Oregon managed to spend $305 million on a broken exchange.
Vermont: Total Federal Grants: $208,232,414
The independently operated Vermont Health Connect used CGI, the former lead contractor for HealthCare.gov, and faced a myriad of issues just like their federal counterpart. The state exchange was not functioning on October 1 and problems with small business insurance options have persisted and remain unfixed today. Like Oregon, Vermont lawmakers are also requesting a federal investigation into the much maligned state-run website.
Hawaii: Total Federal Grants: $205,342,270
Hawaii received gracious federal funding to create an online health exchange, and the state also shelled out an additional $120 million into the Hawaii Health Connector. Problem is, Hawaii has the lowest number of enrollees of all the states, only 4,300. The low number is less alarming when considering the smaller population, but when federal and state contributions are added together, each enrollee has cost taxpayers roughly $75,500.
Massachusetts: Total Federal Grants: $179,036,455
The Massachusetts online exchange, called the Connector, is labeled as “America’s Worst-Performing ObamaCare Exchange” by Forbes. According to Forbes, the website has encountered numerous problems of users trying to enroll, and has only enrolled 5,428 people, a mere .02% of the first-year goal. Massachusetts will continue to work with CGI, but has paid technology firm Optum another $10 million to help fix the site.
Maryland: Total Federal Grants: $171,013,111
Leading up to the launch of Maryland’s online exchange, it would have been wise for state officials to listen to warnings about the ill-fated website. Instead, the website launched as scheduled and subsequently has encountered continued technical problems. Earlier this week it was announced that the Maryland Health Benefit Exchange voted to terminate the $193 million contract with its IT contractor, Noridian Healthcare Solutions.
These five exchanges prove that throwing billions of dollars towards the development of online exchanges is pointless if the whole underlying framework is flawed. Taxpayers have funded the underperforming and dysfunctional state exchanges and will continue to suffer unless key issues, both technical and legislative, are properly addressed.
Photo credit: Shane T. McCoy
How Many Millennial Jobs did Obama Kill Today?
According to a report by Gallup, one in seven young adults ages 24-34 is currently living with their parents, while over half of 18-23 year olds are still subject to ‘my house, my rules’ of their parents. Sorry Mom, young Americans are most likely living with their parents involuntarily.
Since 2009, labor force participation has dropped from 66 percent to 63 percent, its lowest mark in decades. In addition, another four million Americans are long-term unemployed and have been looking for work for a staggering 27 months or more. Generation Opportunity, an organization focused on young people, released its Millennial Jobs Report stating that 15.8 percent of people 18-29 years old are currently out of work and of the 56 percent of working millennials, 32.8 percent are underemployed. Moreover, only half of college grads are actually using their college degree.
The Congressional Budget Office released a report on Tuesday that said the minimum-wage hike could kill as many as one million jobs. Contrary to Obama’s claims that a wage hike would help the economy, a raise in the minimum-wage would only act as another barrier for young Americans trying to enter the workforce.
Obama requires young Americans to sign up for Obamacare and foot the bill, but in line with the CBO reports of millions of lost jobs and an inflated unemployment rate among youths, fewer people have health insurance now than in 2009. The generation credited with getting Obama elected into office is now getting the short end of the stick as Obama hasn’t properly addressed issues facing America’s youth.
President Obama also promised that his healthcare law would create jobs, but according to the CBO, Obamacare will result in 2.5 million fewer jobs by 2024. Needless to say, young Americans trying to enter to the work force are having a difficult time navigating through Obama's muddled economy. The generation faced with a 15.8 unemployment rate, in addition to a collective $1.2 trillion in student loan debts, is left empty handed.
Health and Human Services Secretary Kathleen told Politico on Monday that "There is absolutely no evidence, and every economist will tell you this, that there is any job-loss related to the Affordable Care Act." Like the broken promises of the stimulus bill, Obamacare has followed suit and has yet to deliver on promises made of a better tomorrow.
Either underemployed or unemployed and stuck living with the parentals, the Obama administration's economic policies have grounded America's youth. Promised economic gains have failed and subsequently added significant handicaps for young adults entering the workforce. On a positive note, plenty of parents are experiencing the joy of having their children live at home, you're welcome Mom.