Paul Blair

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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The Miller Center of Public Affairs at UVA

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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). 

Photo Credit: Gage Skidmore

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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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ATR Opposes Governor Beshear's Tax Hikes on Traditional Cigarettes and E-Cigarettes


Posted by Paul Blair on Thursday, February 6th, 2014, 4:25 PM PERMALINK


In a proposal to the Kentucky legislature, Democrat Governor Steve Beshear presented a "tax reform" package that included more than $124 million in higher taxes on both traditional tobacco cigarettes and e-cigarettes. The overall package is a $210 million tax hike, which we have written about here

Not only will his plan chase business out of the state, it will cost small business struggling to make ends meet tens of thousands of dollars in lost revenue. As described, Beshear's proposal is a violation of the Taxpayer Protection Pledge and should be rejected unless substantive changes are made. Americans for Tax Reform opposes the proposal, and ATR president Grover Norquist sent a letter to the legislature, which reads as follows: 

Dear Legislator,

I write today in opposition to all efforts to increase cigarette and e-cigarette taxes in Kentucky. Governor Steve Beshear’s “Kentucky Competes” tax reform plan includes both. His proposal increases the per pack tax on cigarettes from 60 cents to $1 dollar and creates a 20 percent excise tax on all e-cigarettes. Not only are these proposals punitive for low-income individuals, they make little sense.

Increasing taxes on tobacco and e-cigarettes will hurt countless Kentucky small businesses, especially convenience stores that rely on these products for one third of total store sales. Raising taxes on consumers will significantly decrease in-state sales, cutting into the state’s bottom line.

A 40-cent increase of the current cigarette tax will send consumers to surrounding states with lower rates and increase smuggling across state lines. Just ask Illinois lawmakers. In May of 2012 when Illinois raised the cigarette tax by $1-per-pack, the tax delivered $138 million less than expected. Local small businesses lost tens of thousands of dollars as a direct result as consumers purchasing tobacco across state lines in Indiana and Missouri. This is precisely why tobacco taxes are an extremely volatile revenue source that prompt future tax hikes. Revenue for Kentucky coffers would likely fall short of the annual $125 million projection cited by the governor. Furthermore, the last thing that those who seek to combat smoking should want is the commonwealth increasing its reliance on tobacco tax revenue.

The proposal to create a 20 percent excise tax on e-cigarettes is particularly troubling. 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.

For decades, lawmakers have tried to mitigate smoking and the harm it causes through punitive taxation and heavy regulation. However, 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 these products perpetuates an issue lawmakers have spent so much time trying to eliminate, as e-cigarettes cut down on smoking and people’s dependence on tobacco cigarettes.

The cigarette and e-cigarette tax hikes are shameless cash grabs that make little sense from a revenue or public health perspective. Legislators should remove these provisions from the plan before considering the rest of the package during this year’s legislative session. While Governor Beshear’s Kentucky Competes proposal is a good start for a discussion on the need for tax reform in the state, it represents a $210 million annual net tax hike on Kentucky taxpayers, which is the last thing Kentucky residents need after seeing over 20 new and higher federal taxes imposed from Washington in just the past few years.  

Please look to ATR as a resource and if you have any questions about ATR’s position on any number of tax issues, please contact state affairs manager Paul Blair at 202-785-0266 or by email at pblair@atr.org.

Onward,
Grover Norquist

[Click here for a PDF of the letter]

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Kentucky Governor Steve Beshear Proposes a $210 Million per Year Tax Hike


Posted by Paul Blair on Wednesday, February 5th, 2014, 4:39 PM PERMALINK


Kentucky Governor Steve Beshear just released a 22-point tax proposal, 20 days into a 60 day legislative session. The plan is a much smaller version of one put together by a 2012 blue ribbon commission on tax reform, which was a tax hike three times the size as the current one. It also comes one the heels of a $45 million gas tax hike he proposed last month. 

According to the Governor, his plan raises an additional $210 million in taxes per year. It has three major provisions which raise this revenue:

First, it broadens the base of taxable services subject to the sales tax of 6 percent. It subjects labor for installation, repair and maintenance of personal property to the sales tax. The sales tax is also then expanded to a select few other services bringing the total cost for this tax hike to $280 million per year.

Second, the plan raises the cigarette tax from 60 cents to $1 per pack and taxes e-cigarettes. The Governor projects this will generate $125 million for the state. Unfortunately for Beshear, raising tobacco taxes does not necessarily raise revenue. Take the Illinois example:

In May of 2012 when Illinois raised the cigarette tax by $1-per-pack, nearly doubling the state’s tax rate to $1.98 per pack, the tax delivered $138 million less than expected. What’s more, local small businesses lost tens of thousands of dollars as a direct result as consumers purchasing tobacco across state lines.

To avoid higher cigarette taxes, consumers constantly demonstrate that they are willing to purchase the products in less expensive markets. Additionally, tobacco taxes are an extremely volatile revenue source that prompt future tax hikes. Proponents of cigarette taxes neglect economic realities. To argue that a cigarette tax will increase revenues while decreasing the number of people buying cigarettes is absurd. When prices increase, consumption declines, taking revenue with it.

Additionally, increasing the level of taxation on e-cigarettes is counterintuitive to the concept of reducing the number of smokers in the state. Studies have shown that electronic cigarettes stand to improve health and prevent disease. By choosing to “vape” e-cigs instead of smoking cigarettes, consumers get their nicotine fix without the combustion and smoke — responsible for much of the negative health effects of tobacco cigarettes. It's clear this is simply about money. 

Third, the plan reduces pension and retirement income tax breaks for taxpayers, subjecting more of their well-earned and saved income to taxation. This results in $176 million in additional revenue for the state. 

Not everything about this plan is ill-conceived. It cuts hundreds of millions of dollars in taxes in a way that would make the state more competitive, if not for the three provisions explained above.

The plan reduces the individual income tax for the middle class ($180 million tax cut) and corporate income tax by one-tenth of one percent ($6 million tax cut), which a step in the right direction but a step that pales in comparison to the historic tax reform package signed into law in North Carolina last year.

It also grants an income tax credit for bourbon distillers ($13 million tax cut), lowers the wholesale taxes on beer, wine and distilled spirits ($16 million tax cut), and changes the formula for income tax for multi-state corporations ($155 million tax cut). Click here for the full list. 

If not for the three proposals clearly designed to raise money for more state spending, this wouldn't be a net negative for Kentucky taxpayers. State legislators would be wise to strip the three tax hike provisions out of the proposal and focus on broadening the base and lowering the rates in a revenue neutral way. North Carolina provided a good example on how to do this the right way.

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West Virginia Foolishly Weighs Tobacco Tax Increase


Posted by Paul Blair on Tuesday, February 4th, 2014, 5:27 PM PERMALINK


Mountain State smokers beware: Democrat Delegate Don Perdue has (again) introduced legislation to raise the state tax on cigarettes by $1 per pack. In justifying the proposal, Purdue claimed that the state "needs the estimated more than $90 million such a tax increase could generate every year," according to the West Virginia Metro News. 

The tax hike would be aimed at raising $90 million per year for the Bureau of Medical Services, with $6 million going into tobacco "control" annually and $1 million per year going to West Virginia University's School of Public Health. Doubling down on his motivations, Delegate Perdue said, "we need the money." 

Unfortunately, cities and states who have made the same argument about revenue time and time again have been disappointed at the results. Raising tobacco taxes does not necessarily raise revenue. 

Take the Chicago and Illinois examples:

In 2006, Chicago collected $32.9 million in cigarette taxes. After two consecutive tax hikes, revenue fell to $16.5 million last year. Carrie Austin, chairman of the City Council’s Budget Committee acknowledged this reality, stating, “we’ve run sales away.”

In May of 2012 when Illinois raised the cigarette tax by $1-per-pack, nearly doubling the state’s tax rate to $1.98 per pack, the tax delivered $138 million less than expected. What’s more, local small businesses lost tens of thousands of dollars as a direct result as consumers purchasing tobacco across state lines.

To avoid higher cigarette taxes, consumers constantly demonstrate that they are willing to purchase the products in less expensive markets. For West Virginia, that would be neighboring Virginia, whose state tax on cigarettes is 30 cents per pack, the lowest in the nation. For proof that consumers and businesses will purchase cigarettes across state lines, New York provides the best evidence. Nearly 21 percent of cigarettes in the state are smuggled into the state as a direct result of extremely high tobacco taxes, which disproportionately target low income individuals. 

Tobacco taxes are an extremely volatile revenue source that prompt future tax hikes. Proponents of cigarette taxes neglect economic realities. To argue that a cigarette tax will increase revenues while decreasing the number of people buying cigarettes is absurd. When prices increase, consumption declines, taking revenue with it.

Delegate Purdue's proposed tax hike will do little to solve West Virginia's budget shortfalls. It will hurt Mountain State small businesses and when tobacco sales fall, resulting in less revenue for the state, West Virginia legislators will again be debating what to do about the state's empty coffers.

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Governor Steve Beshear Proposes Gas Tax Hike to Pay for $2 Billion in New Road Projects


Posted by Paul Blair on Tuesday, February 4th, 2014, 4:41 PM PERMALINK


In his two-year budget proposal to Kentucky lawmakers, Governor Beshear recently proposed reversing the 1.5 cents-per-gallon gas tax decrease that automatically went into effect on January 1. The Governor’s proposal would increase the current gas tax that Kentucky motorists pay from 24.4 cents per gallon at the state level to 25.9 cents.

Fluctuating gas tax rates in the state are the result of legislation that tied the tax to the wholesale price of motor fuels, which is automatically recalculated every three months. When the price of gasoline falls, so does the calculated gas tax and revenue to the state.

Governor Beshear takes issue with the relief that falling gas prices provide Kentucky motorists. His proposal would ensure that Kentucky drivers wouldn’t ever pay less than 32.2 cents per gallon, regardless of gas prices. This is because he isn’t concerned with taxpayers pain at the pump; in typical fashion, he’s much more concerned about new government contracts

Though he'll be announcing a more comprehensive tax reform package soon, his first tax hike proposal would range from $45 million to $100 million depending on gas prices in the next two years. This revenue would comprise between 2.3 percent to 5 percent of his planned $2 billion in new spending for transportation. The rest will likely be made up of additional tax hikes he will be proposing in the coming days. 

It seems likely that the Democrat Governor's legislative agenda will not be comprised of reforms that make the state more competitive for businesses or provide much relief to taxpayers.

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Americans for Tax Reform Announces Virginia Legislative Scorecard for 2014 Session


Posted by Paul Blair on Monday, January 13th, 2014, 3:23 PM PERMALINK


As Virginia legislators begin the 2014 legislative session, Americans for Tax Reform will be tracking and issuing “key votes” on important bills up for consideration. Voters in search of a legislator’s record on taxes, spending, and regulatory matters will be well equipped to judge elected officials on their records instead of their rhetoric.

Virginia State Capitol, Richmond

The first factor considered on ATR’s 2014 Virginia Scorecard will be whether or not a legislator has signed the Taxpayer Protection Pledge. The Pledge is a written commitment to voters to “oppose any and all efforts to increase taxes.”

ATR offers the Pledge to all candidates for elective office. To date, fourteen governors and over 1,000 state legislators have signed the Pledge, including 31 in the Commonwealth of Virginia. Additionally, 39 U.S. Senators and 219 members of the U.S. House of Representatives have signed the Pledge.

“Last year, a number of Republicans joined Democrats in passing the largest tax hike in Virginia history so that the outgoing governor could have a ‘transportation legacy.’ As a result, two powerful Republicans were held responsible by voters when they were defeated in primaries last June,” said Grover Norquist, president of ATR.

“Our 2014 scorecard will track legislators’ willingness to put their name on and vote for legislation that begins to rein in state spending, cut taxes, and help small businesses thrive. Voters deserve easy access to a politician’s record on these issues and to know whether their legislative record matches their campaign rhetoric,” continued Norquist.

[PDF of Press Release]

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