Taxpayers Crown Winner of America’s Biggest Loser: New York
Newly released IRS migration data from 2013 shows that New York lost more taxpayers than any other state in the nation. That year, nearly 115,000 residents left the Empire State, taking with them $5.65 billion in adjusted gross income (AGI) to spend elsewhere.
This new data shows that New York will remain America’s “Biggest Loser,” having lost nearly 1.6 million taxpayers between 1985 and 2013. Those residents took with them more than $80.8 billion in annual AGI.
The phenomenal failure of New York to retain taxpayers and businesses is directly related to its uncompetitive tax and business climates. By some measures, New Yorkers face the greatest tax burden of any state in the nation. The personal income tax system consists of eight brackets and a top rate of 8.82%. The corporate tax of 7.1% and property tax collections are $2435 per person. The Tax Foundation ranked New York 50th until this year after a set of minor tax reductions.
In 2013, New York had the largest population losses to the following states:
- Florida -20,465 (-$1.35 billion)
- New Jersey -16,223 (-$1.1 billion)
- Texas -10,784 (-$354 million)
- North Carolina -9,070 ($294 million)
- California -7,849 (-$200 million)
Even Democrat Governor Andrew Cuomo acknowledged that the status quo has “cost us dearly” being the “highest tax state in the nation.”
In an attempt to edge out some bottom-of the-list competitors, Cuomo has enacted minor property tax caps, corporate tax relief, and attempted to lure G.E. from Connecticut in the midst of that state’s massive tax hikes this year.
Who was the biggest winner in 2013? Click here to find out.
Vapers Remain Top Target of Lawmakers and Bureaucrats
In my last podcast with ATR president Grover Norquist, we discussed the newest target of tax hikes at the state level. The new “sin,” an alternative to combustible cigarettes, is vaping, or the use of electronic cigarettes.
With nearly every state legislative session coming to a close, Grover and I re-examined the status of e-cigarette taxation at the state level and the looming threat of Food and Drug Administration (FDA) over-regulation. In this podcast, we preview the two temporary Congressional pathways to prevent the prohibition of the products currently on the market.
We last examined the lay of the land in January of this year. At the time, I predicted 25-30 states would look to raise taxes on e-cigarettes and vapor products and wrote about the trend in Forbes, which you can read here. Listen to the podcast to see if my predictions were correct!
ATR Opposes Massive New Excise Tax on Vapor Products in Washington State
In a letter to legislators in Washington, Americans for Tax Reform reminded members of the House Finance Committee of the potential consequences of raising taxes on electronic cigarettes and vapor products. Now into their second special session on the budget, legislators are scrambling to tie up loose ends to fund their overspending problem.
Click here for a PDF of the letter.
This afternoon, behind closed doors, legislators will debate House Bill 2211, which includes a new 60 percent tax on the wholesale cost of e-cigarettes and vapor products sold in Washington. The threat of this tax has already forced a medium-sized company that employs more than 100 Washington residents to begin its relocation to Arizona.
“These bills are a clear existential threat to our business,” Mt. Baker Vapor explained. “Even if the bills did fail, Governor Inslee has another year left in office and has made it clear that he will continue tormenting our industry.”
The vaping industry and the consumers who are using the products have been a top target for state lawmakers since the products began gaining popularly among smokers looking for an effective way to quit with a healthier alternative product.
Electronic cigarettes and vapor products don’t contain the tar or countless carcinogens that can produce cancer, illness, and disease. Where some see a new technology that is helping people quit smoking, cash-hungry politicians like Gov. Inslee and his legislative allies in Washington see a new target to tax.
The letter to the House Finance Committee from ATR president Grover Norquist can be read below:
I write today in opposition to House Bill 2211, which would impose a 60 percent tax on e-cigarettes and vapor products sold in Washington. Not only is this a massive tax increase that will hurt small businesses in Washington, but to impose a massive tax on vapor products makes little sense from a health perspective as well.
This 60 percent tax will make Washington extremely uncompetitive in e-cigarette and vapor product pricing, leading to an increase in online purchasing. E-cigarettes will prove to be an extremely volatile source that costs in-state businesses tens of thousands of dollars in lost sales, resulting in even less revenue for the state government.
The threat of onerous taxation on vapor products and businesses has already resulted in the announcement that Mount Baker Vapor, which employs more than 100 Washington residents, will be relocating to Arizona this year. The income, property, and sales taxes generated by this medium-sized company will no longer be collected in Washington as a result of legislative threats like HB 2211.
Taking aim at e-cigarettes with higher taxes works at cross-purposes with efforts to cut down on the harm associated with smoking. Mitch Zeller, Director of the Center for Tobacco Products at FDA has recognized this reality. He recently noted, “If we could get all of those people to completely switch all of their cigarettes to one of these non-combustible products, that would be good for public health.”
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 hundreds of thousands of dollars in higher taxes on a product that provides consumers a viable and harmless alternative to traditional tobacco products.
I would urge you to reject House Bill 2211 in its present form and in any form that imposes an excise tax on e-cigarettes and vapor products. Not only will the tax yield insignificant revenue for the state, it will keep smokers from transitioning to a far healthier alternative. While this might protect state cigarette tax revenue, it will continue to impact state health care costs in a far more detrimental way.
Florida Governor Rick Scott Cuts Spending and Taxes in 2015
This week, Governor Rick Scott (R-Fla.) signed a 78.2 billion budget that included a historic $461.4 million in line item spending cuts, among the largest cuts ever made by a governor. This comes on the heels of a $429 million tax cut package, which he signed just last week.
Taxpayers have a friend in Gov. Scott, who said this of his cuts: “I went through the budget looking at every project and saying: What’s a statewide priority? Can I get a good return on investment? Has it gone through a state process?”
In his letter to the legislature, he explained why he line item vetoed specific projects by noting:
“Tax revenue is generated by Floridians who are working hard to provide for their families and we are committed to effectively using these dollars by investing them in areas with proven results. That is why I have vetoed $461.1 million in special projects.”
Below is a list of several special spending projects inserted into the budget by lawmakers, both Republican and Democrat alike:
- $300,000 for a water taxi on Clearwater Beach
- $1 million for the restoration of a marina in Pahokee
- $1 million to expand a library in Palm Harbor
- $5 million for “strategic land acquisition”
- $250,000 for the Institute for Cuban and Cuban-American studies, which already received $600,000 for two prior reports
- $1.5 million for Teach for America
- $260,000 for the Therapeutic Performing Arts Therapy program
- $140,000 for “Nature’s Paradise”
- $500,000 for a children’s “ability center”
- $5.5 million for no-bid contracts for wetland/chemical treatment systems and two floating aquatic vegetative tilling treatment systems
- $550,000 for “promotional awards” at the Department of Agriculture and Consumer Services”
- $2 million for a horse park
- $250,000 for the Arcadia Rodeo
- $10 million in “Quiet Zone” improvements
- $500,000 in media campaigns to publicize the dangers of unlicensed real estate activity
- $500,000 for the Circus Arts Conservatory
- $500,000 for the relocation of the Miami Boat Show
- $61,366 for the a Plant Museum in Tampa
- $200,000 for a contemporary dance company in Miami
A health insurer also tried to pass on the costs of federal Obamacare taxes onto state taxpayers. Rick Scott put a stop to $136,000 in that expenditure and hundreds of thousands in tax dollars intended to fund electronic medical record systems for private organizations.
The governor also vetoed millions of dollars in local water treatment and improvement projects; expenditures the governor rightly argues must meet a statewide investment benefit.
At the conclusion of his letter, Scott again voluntarily reduced his state-funded salary to one cent per month.
For Republican governors looking for role models, one needs to look no further than the Sunshine State where a beacon of hope remains. Transparency remains an effective disinfectant for out-of-control spending and Scott’s vetoes send an effective message to legislators, even in years where the state has a surplus: taxpayers will not be swindled by back-room budget deals; the governor is watching.
Florida Legislature Overwhelmingly Passes Tax Cuts in Special Session
Monday, the Florida Legislature passed a $429-million tax-cut package that among other things will lower cell phone and cable taxes for Florida taxpayers. Though a debate over Medicaid expansion and proposals on higher health care spending resulted in a special budget session, the tax relief package passed the Senate by a vote of 34-2 and the House by a margin of 91-2.
Governor Rick Scott pushed for nearly $700 million in tax cuts this year with his “Keep Florida Working” annual budget, but he applauded the legislature’s smaller plan in a statement yesterday afternoon:
“Florida’s budget had an over $1 billion budget surplus this year because of the hard work of Floridians, and this tax cut package will send more than $400 million back to the people who earned it. I applaud the Florida House and the Florida Senate for their work on this legislation and I look forward to working with them to keep cutting taxes next year and to keep Florida working.”
The largest component of the tax package involved a reduction of the Communications Services Tax (CST). Currently, Florida has the fourth highest CST rate in the country with a total tax bite of 22.38 percent when you consider all levels of government that tax wireless services (including federal).
Communication services like cell phones and satellite television are subjected to a myriad of taxes, including a state tax and gross receipts tax, local communications services taxes, 911 operator fees, and a federal Universal Services Fund tax.
The CST cut passed by the legislature will permanently reduce the state portion of cell phone and satellite taxes by 0.9 percent to 5.75 percent on cell phones and to 9.9 percent on direct-to-home satellite services. It also temporarily reduces both taxes by another 0.9 percent through 2017.
Gov. Scott sought a permanent 3.6 percent CST reduction and the legislature met him half way, at least for two years.
The bill doesn’t only lower a $100 cell phone bill by $1.73 a month; it includes a number of other smaller tax cuts and exemptions as well.
- New 10 day back-to-school sales tax holiday
- Exempts college textbooks from the sales tax for one year
- Adds irrigation equipment to a list of farm supplies that are exempt from sales tax
- Exempts gun club memberships from the sales tax permanently
- Caps boat repair taxes at $60,000
- Exempts food and drinks sold by school support organizations like booster clubs from the sales tax after they’ve been purchased, before resale
- Increases corporate income tax credits for one year for companies who clean up the Brownfields (polluted area of land)
- Corporate income tax credits of up to 10 percent for R&D
- Sales tax exemption for aviation fuel at flight schools and colleges
- Prolongs life of Florida Enterprise Zones, which were set to expire this year, by 3 more years
The governor is expected to sign the $429 million tax relief package this week, bringing the total size of tax cuts signed by Gov. Rick Scott to more than $2.6 billion.
Anti-Business Governor Jay Inslee Forces Emerging New Vapor Business to Relocate from Washington to Arizona
Mount Baker Vapor, an electronic cigarette and vapor product business based in Bellingham, Washington announced today that they would be relocating their business operations to Mesa, Arizona “due to legislative pressure.”
In their announcement they explain, “Legislative pressure from Washington State has made it clear that they no longer offer a suitable environment for a growing business in the vaping industry.”
That pressure has come in the form of proposal to ban online sales and the imposition of astronomical taxes ranging as high as 95 percent, both proposals from Democrat Governor Jay Inslee.
“These bills are a clear existential threat to our business,” they explain. “Even if the bills did fail, Governor Inslee has another year left in office and has made it clear that he will continue tormenting our industry.”
The vaping industry and the consumers who are using the products have been a top target for state lawmakers since the products began gaining popularly among smokers looking for an effective way to quit with a healthier alternative product.
Electronic cigarettes and vapor products don’t contain the tar or countless carcinogens that can produce cancer, illness, and disease. Where some see a new technology that is helping people quit smoking, cash-hungry politicians like Gov. Inslee in Washington see a new target to tax.
An analyst for Wells Fargo estimates that e-cigarette sales will top $10 billion by 2017 and could overtake combustible cigarettes within a decade. Among those looking to prevent that growth are politicians like Gov. Inslee and bureaucrats at the Food and Drug Administration (FDA).
Arizona is far friendlier to businesses than states like Washington. Governor Doug Ducey (R-Ariz.) ran for office on the platform of significantly reducing the income tax. He’s rejected Nanny-State proposals like plastic bag bans and cut spending by hundreds of millions of dollars in just one year.
“I want Arizona to be the best state in the country to work and do business,” Ducey remarked in March.
Mt. Baker Vapor’s move to Arizona makes it clear that businesses looking to escape high taxation and unnecessary regulations have a friend in Gov. Ducey and the state of Arizona. NJOY, another company that produces and sells e-cigarettes and vapor products is also headquartered in Arizona.
Though a Democrat lawmaker from Arizona proposed imposing sin taxes on e-cigarettes this year, the bill got no traction, didn’t come up for a vote, and garnered no support from the governor.
Mt. Baker Vapor employs more than 100 people in Washington and expects to be fully operational in Arizona later this year.
Might Arizona become the Silicon Valley for electronic cigarette companies looking to relocate to more business friendly states? Only time will tell.
Nevada Legislature Vetoes Voters and Passes Largest Tax Hike in State History
Last night, by a vote of 30-10, the Nevada state Assembly joined the Senate in approving a $1.5 billion tax hike over the next two years. Governor Sandoval sought at least $1.1 billion in new revenue to fund the expansion of Medicaid, higher education spending, and corporate handouts to companies like Tesla immediately after winning re-election last year. The legislature gave him even more than he asked for when the Senate sent him the tax hike bill this afternoon.
When the question of whether Nevada should impose a margins tax on businesses in the state to fund increased education spending was put before Nevada voters last year, they rejected the “Education Initiative” by an 80-20 margin.
“The margins tax, if approved, will jeopardize Nevada’s recovery,” Gov. Sandoval said last year when he too opposed one of the worst elements of this year’s budget bill.
Gov. Sandoval told voters that he opposed tax hikes so that he could get re-elected. Unfortunately, the legislature let him get away with it.
Here’s a list of the tax hikes:
- Higher state business license fee
- Higher payroll/modified business tax
- Higher payroll/modified business tax; even higher on mining
- New “Uber” tax on ride-sharing customers
- New tax on taxis and limousines
- Higher Live Entertainment Tax on auto racing and concerts
- A 125% increase in the cost of a pack of cigarettes
- Higher tax on elk hunters car owners (registration fee)
- Higher sales tax
Every Democrat in the Assembly and the following Republicans voted for the largest tax hike in Nevada history: John Hambrick (violated the Taxpayer Protection Pledge with yes vote), James Oscarson, David Gardner, Erv Nelson, P.K O’Neill, Steven Silberkraus, Derek Armstrong, Glenn Trowbridge
None of them ran on raising taxes last year. All of them were elected and re-elected on false pretenses.
Assembly Republicans who voted against the tax hike included: Michele Fiore, Victoria Seaman, Brent Jones, Ira Hansen, Jill Dickman, Chris Edwards, Shelly Shelton, Robin Titus, Jim Wheeler and John Ellison. Senate Republicans who opposed the final bill included: Pete Goicoechea, James Settelmeyer, and Don Gustavson.
"The leadership of both houses should be ashamed of themselves for forcing through the largest tax increase in history," said Sen. Gustavson of the vote.
ATR applauds those legislators who opposed Sandoval's proposals and thanks them for standing with taxpayers by voting no.
ATR Supports Rep. Tom Cole’s FDA Deeming Authority Clarification Act of 2015
Congressman Tom Cole (R-Okla.) recently introduced H.R. 2058, the “FDA Deeming Authority Clarification Act of 2015.” This legislation would prevent the Food and Drug Administration (FDA) from banning tobacco products (like cigars) and 99 percent of the innovative vapor and electronic cigarette products that have hit the market since 2007.
The FDA is finalizing a regulatory framework for premium cigars and vapor products that stands to require pre-market approval for all products that have hit the market since February 15, 2007. Any product on the market prior to that date would largely be exempt and any product that has hit the market since then would be given two years to apply for approval.
H.R. 2058 moves up the 2007 date to the date of the announced “deeming regulation,” which is likely to occur later this year. This would permit products that have hit the market since 2007 to remain on the shelves, pending approval. This is important for a number of reasons. First, nearly every vapor product on the market today did not exist in 2007. The thousands of e-liquids and countless versions of electronic cigarettes available to smokers looking for an effective way to quit would be banned pending FDA approval without a change to the Federal Food, Drug, and Cosmetic Act or subsequent Tobacco Control Act of 2009, which established the 2007 date.
That Act was intended to apply to cigarettes, smokeless tobacco, and roll your own products. The FDA’s attempt to categorize new products under the authority given to them by that legislation lays out two pathways to “legalization” for new products on the market. The first is “substantial equivalence,” whereby a manufacturer must file for a tobacco product application, which includes clinical trials and would be relatively expensive for small and medium sized businesses.
Rep. Cole’s common-sense legislation moves up this substantial equivalence 2007 date to date of deeming regulation in 2015 and would prevent countless companies from having to cease operations given the cost of compliance for products that are already being sold to consumers.
If this legislative change if not made, and for the companies who could afford compliance, the FDA would be inundated with applications that the agency is not equipped to fast-track for approval. For combustible cigarette smokers looking to or considering quitting with e-cigarettes, this would be a tragedy as countless innovative smoking cessation devices would be at risk of never being sold.
The FDA has claimed that it does not have the power to modify the February 15, 2007 date, making a Congressional solution imperative. Americans for Tax Reform supports H.R. 2058 and urges more members to join on as co-sponsors in the coming weeks. This legislation will encourage innovation and teardown an unnecessary federal barrier to the sale of many products that stand to improve public health.
ATR Opposes DC Mayor Muriel Bowser's Proposed Tax Hikes
As the Washington, DC City Council weighs Mayor Muriel Bowser’s 2016 budget, low and middle-income taxpayers should be wary. Last Friday, ATR testified before the Committee of the Whole to express our concerns regarding Bowser’s regressive tax hikes.
Among other things, the $12.9 billion budget submitted by Bowser raises the city’s sales tax from 5.75% to 6% despite growing city revenue and annual growth. This $22 million tax hike would adversely affect the city’s poorest, even if intended to fund government projects to their benefit. The city rejected this increase last year, when Bowser was on the Council.
“It’s the most regressive kind of tax . . . and besides, you save raising the tax for the rainy day,” said D.C. Council Chairman Phil Mendelson (D), noting that local revenue is projected to grow to more than $7 billion next year, an increase of $185 million, or nearly 3 percent. “When revenues are growing by 3 percent, you don’t need to be raising taxes.”
Another tax increase contained in the budget targets smokers looking for an effective way to quit. Bowser's 70% tax on electronic cigarettes (e-cigs) would constitute more than 1200% increase on the products currently subjected to the city’s 5.75% sales tax. This tax on quitting smoking is misguided and will result in closed businesses and a loss of city jobs.
That testimony can be found in its entirety here:
Chairman Mendelson and Members of the DC City Council,
On behalf of Americans for Tax Reform, thank you for providing us the opportunity to testify before the Committee of the Whole this morning.
Americans for Tax Reform is a non-profit taxpayer advocacy organization based here in Washington, D.C. that has existed since 1985. Last year, ATR was happy to support the historic tax reform package passed into law by the Council, which broadened the base of taxable services, reduced tax rates for individuals and businesses and took a step in the right direction towards making DC more competitive.
Unfortunately, this year’s Budget Request and Support Acts take a step in the wrong direction, particularly targeting low and middle-income consumers with higher, regressive taxes.
First, the proposal to raise the sales tax to 6%. District revenues are growing. This happens in periods of natural and competitive growth and makes this tax hike unnecessary. To target those who can least afford it with $22 million in higher taxes on the products they purchase just to get by flies in the face of last year’s tax reform package aimed at encouraging people to live, stay, shop, and move into the District.
Second, the proposal to raise taxes on electronic cigarettes and vapor products contained in the Vapor Products Amendment Act of 2015. Last year this Council changed the way DC taxes tobacco based on a recommendation from the DC Tax Reform Commission and the Tobacco Free Coalition. Electronic cigarettes and vapor products were exempt from being defined as tobacco for good reason. They’re tobacco-free and they’re effective smoking cessation products that stand to save thousands of lives in DC and millions of tax dollars.
The massively unjustifiable 70% tax on the wholesale cost of vapor products will guarantee that the poorest DC residents continue smoking combustible tobacco cigarettes. And while projections assert that this new tax will result in $382,000 in revenue next year, that is extremely unlikely because it assumes two things.
First, that consumers who have and are looking to make the switch from tobacco to vapor products will not simply buy the products in Maryland or Virginia, where the products are taxed at 6 percent in retail locations.
Second, that DC vapor product sales won’t go online where the District does not have the authority to tax or regulate sales to consumers.
Both assumptions are wrong and will result in less revenue than anticipated and less sales tax revenue from products currently taxed at 5.75 percent in DC retail locations. For products costing as much as $300, not even wealthy consumers will purchase the products in DC retail locations.
There are real, operational, new businesses in this City who stand to be put out of business with this tax hike. While they can speak better to the new employees they’ve hired, the rent, income, and sales taxes they’re paying, I wanted to echo their concerns. Increasing the cost of vapor products by 70 percent will make their sales no longer viable in DC. These shops may shut down and the city’s tax policies will discourage new shops from opening. This budget stands to kill current and future jobs.
The Director of the Food and Drug Administration (FDA) Center for Tobacco Products remarked last year, “If we could get all of those people to completely switch all of their cigarettes to noncombustible cigarettes (electronic/vapor), it would be good for public health.” Does this Council disagree? Should we not create tax policy that facilitates and encourages consumers switching to tobacco-free technology products without placing an undue and costly burden on them?
Even as the FDA considers a set of guidelines on the industry, they admit vapor products are likely good for public health. That’s precisely why vapor products may save the District millions of tax dollars. The cost borne by taxpayers for the use of tobacco by recipients of Medicaid far outweighs the revenue generated from cigarette sales or tobacco settlement payments by an astounding 200 percent, according to a recent study by State Budget Solutions. Vapor products, used by lower and middle-income consumers on Medicaid will bring down the long-term health care costs paid for by the rest of District taxpayers.
There’s a reason every state in the nation that considered taxing vapor products like tobacco in 2014 failed. Politicians in both parties agree that vapor products may just accomplish what lawmakers have failed to do for decades: ending tobacco cigarette use, as we know it. Any policies, including higher taxes that make it more expensive for residents to make the switch to far healthier alternatives, should be rejected.
We urge the City Council to reject the Mayor’s tax hike proposals.
Hawaii Bans Smoking For Young Adults, Lets Kids Continue to Have Sex
Hawaii is poised to become the first state in the nation to increase the legal smoking age to 21. In a move that indicates this has absolutely nothing to do with public health, the bill passed by the legislature on Friday also prohibits anyone under the age of 21 from purchasing tobacco-free electronic cigarettes.
While some localities, like New York City, have raised the legal smoking age to 21, if Gov. David Ige signs this law, Hawaii will become the first state to impose a statewide ban on young adult access to legal cigarettes. The law would go into effect January 1, 2016.
An example of an absurd claim regarding cigarette advertising came from Sen. Rosalyn Baker, who introduced the bill. “While the industry is not allowed to directly market to children, it is still developing packaging and advertising products in ways that appeal to children.”
No offense to the producers of Marlboro, but these are among the most boring and unappealing packaging designs imaginable:
Regarding e-cigarettes, the Food and Drug Administration (FDA) is currently weighing a new set of deeming regulations regarding advertising and sales. Hawaii should defer to the FDA for guidance on this regulatory framework.
At least one opponent of the legislation, Democratic Sen. Gil Riviere had some common sense insight: “You can sign contracts, you can get married, you can go to war and lose an arm or lose an eye… you come back and you’re 20 years old and you can’t have a s cigarette.”
The logic behind legislation saying “cigarettes are disgusting and should be banned” might as well apply to all adults, Riviere’s thinking goes (sarcastically).
The Nanny State is out of control.
Think about this. Beyond being able to serve in the military - putting your life at risk in many cases in the course of war for your country, in Hawaii, the legal age of consent is 16. There is a “close in age exception” that allows kids, yes children, who are 14 years old to also legally have sex with anyone who is less than 5 years older than they are. Hawaii has clearly concluded that middle schoolers have enough maturity and cognitive development to consent to sex with high school graduates, but not enough to think about the impact of cigarette use.
Think what you will about age of consent laws but compare the double standard for permitting two different personal choices, both of which may have significant life-long consequences.
Hawaii’s rationale seems to be that what you do in your own bedroom is your call, unless it includes the use of tobacco and e-cigarettes. In the latter cases, the government must save you from yourself.
Give me a break.