Paul Blair

ATR Opposes Kentucky Legislature’s Efforts to Create Local Option Sales Taxes

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Posted by Paul Blair on Monday, March 31st, 2014, 8:00 AM PERMALINK


The Kentucky Constitution prohibits local governments from imposing sales and excise taxes at the local level. Two bills before the legislature this year seek to change that. Senate Bill 135 and House Bill 399 would amend the Constitution to permit the General Assembly to authorize cities and counties to impose a local option sales tax of up to one percent.

Kentucky is long overdue for tax reform. Ranging from state and local income taxes in more than 200 local tax jurisdictions to a narrow application of the sales tax to goods and not services, Governor Steve Beshear was correct in claiming that Kentucky has “an archaic tax system that works against us, not for us,” in his State of the Commonwealth speech earlier this year.

Unfortunately, the governor and legislature is avoiding much needed reforms that would encourage growth and create jobs and has moved to permit localities to tax goods with new sales taxes. Taxpayer groups and local small business oppose this effort because higher tax burdens decrease tax competitiveness, stymie economic growth, and ignore the reality of Kentucky’s genuinely “archaic tax system.”

Because there are so many different tax jurisdictions in the state, this legislation would hurt tax competitiveness not only with border states but within state lines as well. As Tod Griffin from the Kentucky Retail Association points out, “Consumers ‘shop’ sales tax rates between communities within a state. Retailers in a community that elects to impose a local-option sales tax would be put at a competitive disadvantage to those in neighboring communities that elect not to do so. Consumers could save one percent by crossing the county line or, in some areas, by merely crossing the street.”

The Kentucky Retail Association predicts that if enacted statewide, a one percent local option sales tax would reduce disposable income by $500 million annually. Given that Kentucky is ranked in the bottom half of all states for the Tax Foundation’s Business Tax Climate rating, HB 399 and SB 135 will exacerbate Kentucky’s waning competitiveness.

Because these bills require voter approval, some have suggested that letting voters decide whether taxes go up locally is common sense. It remains to be seen whether those same pundits support putting local option income tax cuts on the ballot. Kentucky is after all only one of twelve states with local income taxes ranging up to 2.5 percent, on top of the top rate of 6 percent.

Americans for Tax Reform urges legislators to reject efforts to authorize local option sales taxes. Supporters of Kentucky HB 399 and HB 135 will be directly responsible for every dollar in higher taxes imposed by localities if these bills pass and a referendum is successful. As such both bills are a violation of the Taxpayer Protection Pledge.

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ATR Supports New York Governor Andrew Cuomo's Death Tax Reform Proposal

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Posted by Paul Blair on Thursday, March 27th, 2014, 3:40 PM PERMALINK


Over the past decade, two-thirds of states – including California – have phased out their state death tax. New York remains one of a shrinking number of states that still taxes estates. New York Governor Andrew Cuomo's 2014-2015 budget takes a step in the right direction towards tax relief for small businesses and individuals who are currently forced to grapple with one of the most burdensome state death taxes in the country. 

His plan increases the New York estate tax exemption from $1 million to match the federal exemption at $5.34 million and lowers the top tax rate from 16 percent to 10 percent. This would reduce the number of estate tax filings by as much as 90 percent – a huge step towards full repeal. As a matter of tax filings, the federal government taxed 3,737 estates in 2012. Because New York failed to follow the national norm of phasing out the death tax, in 2012 the state taxed nearly 4,000 estates.

Forbes recently listed New York as a place “Not to Die” in 2014 because of its high death tax. The $1 million exemption can easily hit a middle-income family with a modest home and retirement savings with a 16% tax. As such, Governor Cuomo's proposal comes at a critical time as states like Ohio, Indiana, North Carolina, and Tennessee have all eliminated their state death taxes. 

Americans for Tax Reform supports the measure and encourages New York legislators to work to fully phase out the state death tax. Click here to read the coalition letter sent to Governor Cuomo in support of this important first step.

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Among States with Corporate and Individual Income Taxes, Arizona Legislature Considering Lowest Rates in Nation

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Posted by Paul Blair on Tuesday, March 25th, 2014, 1:17 PM PERMALINK


English: Map of USA showing states with no sta...

Map of USA showing states with no state income tax in red, and states that tax only interest and dividend income in yellow. (Photo credit: Wikipedia)

Eight states currently impose a flat rate income tax throughout the United States. Another seven impose no income taxes at all, while the rest have progressive tax systems imposed at varying income levels (and then there's Tennessee and New Hampshire). A budget amendment filed by Representative Jeff Dial (R-Ariz.) would make Arizona the ninth state in the nation to impose a simple, flat rate on income taxes paid by state residents. 

The 2.5 percent flat rate would also make Arizona the state with the lowest top rate in the nation, eighth only behind the no income tax states of Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. It would be a huge step in the right direction towards the full elimination of the income tax and would unquestionably boost the state's regional tax competitiveness. It would also result in income tax cuts for each and every Arizona income tax bracket that currently exists.

Current top individual income tax rates in the region: 

SouthWest Top Income Tax Rates

The amendment to S.B. 1487 also reduces the corporate tax rate by more than 60 percent, from 6.5 percent to 2.5 percent by 2016. As taxpayers and large companies flee high income states like California, Illinois, and New York for states declaring that they are open for business, this particular tax cut would be a huge boost for business in Arizona. According to the Tax Foundation, Arizona is currently ranked 22nd for its corporate tax rank. At an imposed rate of 2.5 percent, among states that impose a corporate tax, Arizona would have the lowest top rate in the nation.

The House floor amendment also establishes a Legislative Study Committee tasked with finding ways to implement this tax change in a revenue neutral manner. This would likely mean eliminating a number of credits and deductions since allowable deductions will now be capped at 25 percent of Arizona gross income before subtractions. 

If the Study Committee fails to make specific recommendations, then it must propose a bill to expand the transaction privilege tax, which is essentially a gross receipts tax. Because this type of tax creates an extra layer of taxation and "tax pyramiding," it is our hope that specific recommendations can avoid the expansion of this specific tax. 

Americans for Tax Reform supports Representative Dial's budget amendment and looks forward to working with the legislature to pass these tax cuts into law. 

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Hospitals and Chambers of Commerce Launch Medicaid Expansion Campaign in Virginia

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Posted by Paul Blair on Wednesday, March 19th, 2014, 1:31 PM PERMALINK


In the midst of the Virginia General Assembly's failure to pass a budget before session ended, a coalition of Virginia business groups and hospitals have launched a campaign to expand Medicaid in the state. "A Healthy Virginia Works" and state chambers of commerce have launched a website, Facebook and Twitter pages, and a radio ad to promote Obamacare's Medicaid expansion in Virginia. 

The radio ad can be heard here: 

"Virginia lawmakers are wasting $5 million a day. It's tax money we're already paying to Washington to support Obamacare. Frankly we need to get our money back." 

In the simplest of terms, this campaign is a farce. It lies about the direction of tax dollars and Obamacare without explaining the truth about costs in the off years. 

First, this is not a private option.That should be abundantly clear by the fact that the ad demands that we take $5 million "back" per day from the federal government. If your plan begins by using federal tax dollars to fund expanding services, it is not private. It's exactly what was envisioned by the President when Obamacare passed in 2010. 

Proponents of Medicaid expansion may throw out a grab bag of terms endearing to conservatives like "private option" and "free market-based alternative" but a reliance on federal money exempts you from being defined as  "private." 

Second, expanding Medicaid will not save Virginia money in the long term. State costs will grow faster than state savings. As we have explained before, cost per enrollee has increased 6% per year, an unsustainable rate of compounded growth with significant impact on the state's budget.

Medicaid will continue to be an ever-growing burden to the state, especially when the federal match shrinks, which will happen as a matter of law. Also, don't forget this warning from Congressman Paul Ryan (R-Wisc.):  “The fastest thing that’s going to go when we’re cutting spending in Washington is a 100 or 90 percent match rate for Medicaid. There’s no way. It doesn’t matter if Republicans are running Congress or Democrats are running Congress. There’s no way we’re going to keep those match rates like that.” 

If Democrats are genuinely concerned about the working poor in the state, they should work with Republicans to bring down the cost of health care in Virginia. Medicaid does the opposite and provides sub-par coverage in the process. 

Hospitals concerned about their bottom line should be also be working with Republicans to repeal Obamacare, not expand the very program that is hurting business. Disproportionate Share Hospital (DSH) funding is being reduced as a result of Obamacare and working to make taxpayers foot the bill for the difference may partially explain the motive behind this campaign. 

Either way, Republicans would be wise to reject attempts to categorize any plan that uses tax dollars as a "private" or "free market-based alternative" to Medicaid expansion. 

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Florida Senate Unanimously Votes to Repeal Charlie Crist's $400 Million Car Tax

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Posted by Paul Blair on Wednesday, March 19th, 2014, 8:03 AM PERMALINK


By a vote of 40-0, the Florida state Senate passed S.B. 156, a $395 million tax cut which repealed a car tax increase signed into law by former Governor Charlie Crist in 2009. This was a top legislative priority for Republican Governor Rick Scott, who has made cutting taxes the focus of this year's legislative session. 

Democrat Charlie Crist's 54 percent increase in automobile registration fees raised the cost of annual vehicle registration from $46 to $71 back in 2009. In undoing this tax hike, Republicans will save Sunshine State motorists an average of $25 per vehicle per year. 

Upon passage of the Senate bill, Governor Scott had this to say:

"This tax cut will let families keep nearly $400 million of their hard-earned money in their own pockets. It's critical to our "It's Your Money Tax Cut Budget," which cuts taxes, pays down the debt, and cuts government waste. Today's vote is  great news, and we'll continue working with the Legislature to let families keep more of their hard-earned dollars."

Lawmakers who had set a goal of more than $500 million in tax cuts this year got even more welcome news recently when state economists predicted that Florida would take in about $150 million more over the next 16 months than current estimates called for. Republican House Speaker Will Weatherford immediately declared what would be done with most of that money: "Obviously...tax cuts" He is pictured on the right, thinking about which taxes will be cut next.

Under Governor Scott's leadership and Republican control of the legislature, the state has gone from an inherited $3.6 billion deficit to more than a billion dollar surplus without higher taxes. The state's astounding economic growth has happened as a direct result of rolling back high taxes and sustained fiscal restraint, leading to massive new investments in the state by businesses and an influx new taxpayers from high tax states like New York and Illinois. 

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Governor McAuliffe Preparing to Shut Government Down Over Medicaid Expansion

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Posted by Paul Blair on Tuesday, March 18th, 2014, 3:21 PM PERMALINK


When Virginia's 2014 General Assembly regular session ended just over a week ago, Republicans and Democrats hadn't come to agreement on the budget. The disagreement? Whether or not Virginia will expand Medicaid, brought about by passage of Obamacare. 

Little attention has been given by state Democrats to the massive drain on state resources Medicaid continues to be and the program's huge growth over the past thirty years. In Virginia, Medicaid expenditures account for roughly one fourth of the state budget, even with a federal match that exceeds 70 percent in some cases. Between 1984 and this year, total funds budgeted for Virginia's Medicaid program grew from $455 million to $8.1 billion, a 1,700 percent increase over three decades. Adjusted for inflation, that increase is still roughly 700% in growth. Cost per recipient has also risen. In 1980 the cost per enrollee was $1,617. Today it is about $6,500, a 6 percent increase per year.

This dramatic and unsustainable growth crowds out funding for transportation, education, and public safety. Government employees certainly should be hesitant to blindly support expansion if they're concerned about future pay raises or increased spending for their chunk of the budget pie. 

Fortunately, most state Republicans have rightfully rejected the idea of expanding Medicaid services without a state audit and comprehensive examination of the amount of taxpayer dollars being spent on waste, fraud, and abuse. Unfortunately, Governor Terry McAuliffe is prepared to shut the government down, without any sort of reform to the state Medicaid program. 

And if Democrats continue to refuse a "clean budget," this will be the result:

“Teachers and police would not get paid, the Virginia Department of Transportation would shut down, and state employees would be laid off.The state has endured budget stalemates before, most recently two years ago when legislators needed more than a month of overtime to break a logjam. But a full-on shutdown would be unprecedented.” - Virginian-Pilot, February 21, 2014

Virginia's government employees concerned about their July paychecks can email Governor McAuliffe here. Concerned taxpayers should do the same. 

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ATR Opposes Governor Christie’s Proposed Tax Hikes on Small Businesses and E-Cigarettes

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Posted by Paul Blair on Tuesday, March 11th, 2014, 2:16 PM PERMALINK


New Jersey Governor Chris Christie recently presented his budget recommendations to the legislature for the next fiscal year. Though the proposal holds the line on most significant taxes, it does contain a number of tax law changes that would result in higher taxes on small businesses and consumers.

The first misguided budget recommendation is to tax vapor products like e-cigarettes and e-liquid on the same basis as traditional cigarettes, which are currently taxed at $2.70 per pack. Small businesses like convenience stores and especially brick and mortar vape shops will be hardest hit by this $35 million tax increase. This is particularly troubling in a time of tepid economic growth and in light of the 20 new and higher federal taxes that have been imposed by Congress in the last few years.

Taking aim at e-cigarettes works at cross-purposes with efforts to cut down on the harm associated with smoking. A number of studies have shown that electronic cigarettes stand to improve health and prevent disease. By choosing to “vape” e-cigs instead of smoking traditional tobacco, consumers get their nicotine fix without the combustion and smoke, which are responsible for many of the negative health effects of tobacco cigarettes.

The imposition of new taxes on innovative products that reduce smoking and people’s dependence on tobacco cigarettes is misguided and will impede proven harm reduction methods.

The second budget proposal imposes $28 million in new taxes annually on sales of purchases made by New Jersey residents through out-of-state online retailers. Similar to the federal Marketplace Fairness Act, this proposal is a violation of the U.S. Constitution, which provides that Congress shall regulate interstate commerce, not the states. Making small businesses the tax collector for the state will burden them with compliance requirements that will ultimately increase costs for New Jersey consumers.

Making little progress on New Jersey’s uncompetitive tax climate may be somewhat understandable given Democrats’ obsession with a traffic jam on the George Washington Bridge but the opening proposal for a budget compromise should never include higher taxes.

Americans for Tax Reform president Grover Norquist sent a letter to the New Jersey legislature outlining our opposition to these new and higher taxes, which can be read here (pdf). 

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Update: Proposal to Tax E-Cigarettes at 95% in Washington State Up for Debate in House


Posted by Paul Blair on Thursday, February 27th, 2014, 7:30 AM PERMALINK


Americans for Tax Reform recently sent a letter to the state Senate in Washington outlining our opposition to a proposal which would subject vapor products like e-cigarettes to a new 95 percent state tax. The $40 million annual tax hike would hurt small businesses like convenience stores that are struggling to make ends meet.

Senate Bill 6569 seems to have been defeated in the Ways and Means Committee but an identical proposal has arisen in the Washington House of Representatives. Below is ATR’s letter to the House Finance Committee, where the bill is being considered:

Dear Legislator,

I write today in opposition to House Bill 2795, which would redefine vapor products like e-cigarettes as tobacco substitutes and impose a 95 percent tax on these products. Not only is this bill and its inclusion in the budget a massive tax increase that will hurt small businesses in Washington, it makes little sense from a health perspective as well.

By imposing a 95 percent tax on e-cigarette and e-vapor products, some suggest that H.B. 2759 will generate upwards of $40 million for the state. Small businesses that are struggling to make ends meet will bear the burden of this tax increase. Convenience store owners will be hardest hit because they rely on tobacco and vapor products for a large share of total store sales. This is particularly troubling in a time of tepid economic growth and in light of the 20 new and higher federal taxes that have been imposed by Congress in the last few years.

Additionally, raising taxes on consumers will significantly decrease in-state sales, resulting in increased cross-border tax leakage. The Washington Department of Revenue estimates that the state lost about $376 million in tax revenue in 2012 due to tobacco tax evasion, with more than one third of cigarettes in Washington being contraband. As is the case with traditional tobacco taxes, e-cigarette taxes will prove to be an extremely volatile source of revenue and it is unwise for Washington State to increase its reliance on them.

The proposed 95% tax will make Washington extremely uncompetitive in e-cigarette pricing. That will lead to an increase in smuggling, which will cost Washington small businesses tens of thousands of dollars in lost revenue. This is especially true considering that on Indian lands businesses are not subject to the tax. 

Taking aim at e-cigarettes works at cross-purposes with efforts to cut down on the harm associated with smoking. A number of studies have shown that electronic cigarettes stand to improve health and prevent disease. By choosing to “vape” e-cigs instead of smoking traditional tobacco, consumers get their nicotine fix without the combustion and smoke, which are responsible for many of the negative health effects of tobacco cigarettes.

With e-cigarettes, the free market has provided a solution to a problem that social engineers have not been able to address through stiff government regulations. The imposition of new taxes on innovative products that reduce smoking and people’s dependence on tobacco cigarettes is misguided and will impede proven harm reduction methods. It makes little sense in this fragile economy to impose tens and millions of dollars in higher taxes on a product that provides consumers a viable and harmless alternative to traditional tobacco products.

If you have any questions about ATR’s position on this issue, please contact state affairs manager Paul Blair at 202-785-0266 or by email at pblair@atr.org.  

Grover Norquist

President, Americans for Tax Reform

The bill is scheduled to be heard by the House Finance Committee Friday morning at 10AM.

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Proposal to Tax E-Cigarettes at 95% Will Hurt Washington State Small Businesses


Posted by Paul Blair on Monday, February 24th, 2014, 3:00 PM PERMALINK


A bill before the Washington state Senate would redefine "vapor products" like e-cigarettes as "tobacco substitutes" and "tobacco products," subjecting them to a 95 percent state tax. Supporters of the bill have suggested this will generate more than $40 million annually for the state. This tax hike would hit Washington small businesses hardest, especially convenience store owners who have had to grapple with some of the 20 new and higher federal taxes imposed since President Obama took office. 

Americans for Tax Reform opposes Senate Bill 6569 and sent a letter to the Washington Senate Committee on Ways and Means today that reads as follows

Dear Legislator,

I write today in opposition to Senate Bill 6569, which would redefine vapor products like e-cigarettes as tobacco substitutes and impose a 95 percent tax on these products. Not only is this a massive tax increase that will hurt small businesses in Washington, it makes little sense from a health perspective as well.

By imposing a 95 percent tax on e-cigarette and e-vapor products, some suggest that S.B. 6569 will generate upwards of $40 million for the state. Small businesses that are struggling to make ends meet will bear the burden of this tax increase. Convenience store owners will be hardest hit because they rely on tobacco and vapor products for a large share of total store sales. This is particularly troubling in a time of tepid economic growth and in light of the 20 new and higher federal taxes that have been imposed by Congress in the last few years.

Additionally, raising taxes on consumers will significantly decrease in-state sales, resulting in increased cross-border tax leakage. The Washington Department of Revenue estimates that the state lost about $376 million in tax revenue in 2012 due to tobacco tax evasion, with more than one third of cigarettes in Washington being contraband. As is the case with traditional tobacco taxes, e-cigarette taxes will prove to be an extremely volatile source of revenue and it is unwise for Washington State to increase its reliance on them.

The proposed 95% tax will make Washington extremely uncompetitive in e-cigarette pricing. That will lead to an increase in smuggling, which will cost Washington small businesses tens of thousands of dollars in lost revenue. This is especially true considering that on Indian lands businesses are not subject to the tax. 

Taking aim at e-cigarettes works at cross-purposes with efforts to cut down on the harm associated with smoking. A number of studies have shown that electronic cigarettes stand to improve health and prevent disease. By choosing to “vape” e-cigs instead of smoking traditional tobacco, consumers get their nicotine fix without the combustion and smoke, which are responsible for many of the negative health effects of tobacco cigarettes.

With e-cigarettes, the free market has provided a solution to a problem that social engineers have not been able to address through stiff government regulations. The imposition of new taxes on innovative products that reduce smoking and people’s dependence on tobacco cigarettes is misguided and will impede proven harm reduction methods. It makes little sense in this fragile economy to impose tens and millions of dollars in higher taxes on a product that provides consumers a viable and harmless alternative to traditional tobacco products.

If you have any questions about ATR’s position on this issue, please contact state affairs manager Paul Blair at 202-785-0266 or by email at pblair@atr.org.  

Grover Norquist

President, Americans for Tax Reform

Call the Republican sponsor of S.B. 6569, Andy Hill, at 360-786-7672 and tell him to lay off small businesses and their consumers in search of traditional tobacco alternatives. 

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Deleware Governor Jack Markell Proposes Gas Tax Hike


Posted by Paul Blair on Friday, February 7th, 2014, 5:11 PM PERMALINK


Deleware's lame-duck Democrat Governor Jack Markell has asked state legislators to increase taxpayers' pain at the pump with a 10-cent per gallon gas tax hike. State motorists already pay 23 cents per gallon in state gas taxes (on top of the 18.4-cents federal tax) and this plan takes another $50 million directly from their pockets. It also borrows another $50 million annually to pay for 55 new road projects, totaling $500 million over 5 years. 

Deleware may be a small state but state Democrats have a huge appetite for spending. That's precisely why in 2013 state residents had to work until April 14th  to pay the state's total tax bill, which is directly connected to the state's budget growth and cost of government. From 2010-2013 the state budget grew more than 16%, far outpacing inflation and population growth. To claim that the state has a revenue problem, as opposed to a spending problem is absurd. 

This might explain why even House Majority Leader Valerie Longhurst, a Democrat, opposes the plan. Then again, she like every other member of the House faces re-election this fall and tax hikes are a hard thing to campaign on.  

Democrats who claim that road projects are a top priority should reexamine the entire budget instead of focusing solely on the gas tax, a tax originally designated to pay for transportation projects. If it's actually a top priority, legislators should fund new projects before everything else, instead of last, which is the status quo. Additionally, as Senate Republican Whip Greg Lavelle said, "it's hard to contemplate a gas tax increase without some reforms to the Transportation Trust Fund to ensure its integrity." The Governor's plan makes no attempt at any sort of reforms, making it clear he has no interest in determining how much waste exists. 

Deleware is already poised to lose nearly 8,000 jobs thanks to the effects of Obamacare, which imposed nearly $1 trillion in higher taxes after its passage in 2010. Taxpayers cannot afford yet another tax hike and legislators would be wise to focus on budget restraint instead of increasing motorists' pain at the pump.

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