Nevada's Education Initiative A Massive $750 Million Annual Tax Increase
This November, Nevada voters will have the ability to reject a teachers union-led effort to impose a new margin tax on all Nevada businesses that gross more than $1 million per year. Commonly referred to as the "Education Initiative," Question 3 on the ballot this year would impose a 2 percent margin tax on all businesses in Nevada. If approved, Nevada would jump "from a state with one of the lowest business tax burdens in the nation into the top five."
Thomas Mitchell from Watchdog Nevada points out that, "When added to the current Modified Business Tax, which is a 1 percent tax on businesses’ payrolls, the 2 percent tax on gross receipts, because of limited deductions for expenses, would give Nevada an effective corporate income tax rate on profits of 15 percent — the highest in the West and nearly double California’s business tax rate of 8.8 percent."
According to an analysis conducted by Jeremy Aguero of Applied Analysis, "nearly every business analyzed bore significantly higher business tax liability under the proposed margin tax." The initiative would increase the average tax rate on Nevada businesses by 450 percent and would be four times larger than the Texas Franchise Tax, a commonly referred to example for precedent on this type of business tax. The analysis concludes that while a majority of Nevada businesses would not pay the tax because they do not meet the $1 million gross revenue threshold, businesses who employ a majority of Nevada's workers and account for most of the state's economic activity would bear increased liability.
This will increase the cost of countless goods and services provided by Nevada businesses, including groceries, electricity, and health care. It would do this without any guaranteed improvement in the quality of education provided to Nevada public school students.
That's because while money generated by the measure will be put into the "Distributive School Account," nothing would prevent the legislature from taking general fund education dollars and spending it on other budget priorities. The simple appropriations process could result in less education dollars, according to a 2012 District Court judgment, even after imposing hundreds of millions of dollars in higher taxes for an "Education Initiative."
And of course, increasing money "for education" is in no way a guarantee that anyone's quality of education or learning will actually increase as well.
Visit www.stopthemargintax.com to learn more.
ATR Applauds Virginia Speaker Bill Howell's Fight Against Medicaid Expansion
The budget showdown in Virginia continues as Democrats have refused to pass a clean budget that does not include Medicaid expansion. Though disagreements between the House and Senate regarding the actual budget are small, if not non-existent, the state Senate has insisted that Medicaid expansion be a part of this year's budget.
Republicans control 68 out of 100 seats in the House of Delegates and under the leadership of House Speaker Bill Howell have rejected all efforts to expand Medicaid this year. ATR President Grover Norquist sent a letter to the Speaker today thanking him for his commitment in this important fight.
Dear Speaker Howell,
On behalf of our supporters, millions of Virginia taxpayers, and taxpayer advocates, I write to thank you for your leadership in the fight against Obamacare’s Medicaid expansion in Virginia.
As a candidate for governor, Terry McAuliffe was asked about the use of Obamacare as a negotiation tactic during last year’s federal budget impasse. He opined, “These things should never be used as bargaining chips for our budget.” Under your leadership, Republicans have rightfully held Democrats in Richmond to this standard. I would urge continued strength on this matter.
Medicaid expansion in Virginia would be disastrous for several reasons. First, Medicaid expansion will not save taxpayers money. Over the past thirty years, the program has grown by 1,683 percent. Adjusted for inflation, growth has still been roughly 700 percent, now comprising nearly a fourth of the state budget at $8.1 billion. Cost per recipient has also increased by roughly 6 percent per year to $6,500 per enrollee.
Medicaid will continue to be an ever-growing financial burden to the state. As far as the federal match, Congressman Paul Ryan’s warning is telling:
“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.”
Second, the dramatic and unsustainable growth of Medicaid in Virginia crowds out funding for other budget priorities like transportation, education, and public safety. Adding hundreds of thousands of more enrollees to the state system will decrease the quality of care already provided to individuals enrolled in the program now. It will do this while forcing the legislature to cut costs in other areas of the budget to fund a program that provides sub-par quality of care to Virginians in need.
Third, the state Medicaid system needs serious reform. Though that task falls within the purview of the Medicaid Innovation and Reform Commission, or MIRC, the legislature would be wise to take the issue head on in the next 12-16 months. Reform should not be a precursor to expansion; it should be the only alternative Republicans are willing to accept. Ken Cuccinelli was a leader in exposing the waste, fraud, and abuse that runs rampant throughout Medicaid and an independent audit would be a good start and would potentially save Virginia taxpayers millions of dollars.
Virginia should begin to follow in the footsteps of other states that are beginning reform the way they provide health care through Medicaid. For example, pilot programs in Florida have saved the state roughly $100 million per year by enrolling poor and disabled patients in private health insurance.
We applaud your leadership and commitment to stop Medicaid expansion and look forward to working with you and the legislature going forward. If you have any questions, please contact state affairs manager Paul Blair at 202-785-0266 or by email at firstname.lastname@example.org.
President, Americans for Tax Reform
If Democrats insist on Obamacare's Medicaid expansion in Virginia and refuse to decouple it from the budget, the Virginia state government will shut down on July 1, something the governor is prepared to do.
A Tale of Two Governors: Florida's Charlie Crist vs. Rick Scott
This November, Florida will host one of the most-watched gubernatorial races of the year. Republican Governor Rick Scott is running for reelection against former Republican Governor, Independent and now Democrat Charlie Crist. Their records stand in stark contrast to each other, especially when comparing economic indicators over the four year terms of each governor.
When Charlie Crist took office as governor in 2006, unemployment was at 3.5%, he had made a written commitment to oppose any and all efforts to raise taxes, and he was a Republican. When he left office, Florida had lost 825,000 jobs, unemployment had risen to 11.1%, he had signed more than $2 billion in higher taxes into law, he had embraced President Obama's Stimulus package, and he was no longer a Republican.
When Rick Scott took office as governor in 2010, he inherited this mess. He governed as he promised too, however, cutting taxes, reining in spending, and bringing Florida back from the brink of disaster. As a result, unemployment has fallen to 6.2%, there was a $1.2 billion surplus this year, and he's signed over $2 billion in tax cuts into law. This includes 24 individual tax and fees cuts up through 2014 and $400 million in cuts this year.
Both Rick Scott and Charlie Crist signed the Taxpayer Protection Pledge to Florida voters when they ran for governor in 2005 and 2009 respectively. Crist, however, broke his personal written commitment, by signing more than $2 billion in higher taxes and fees into law.
This is the tale of two governors. One candidate breaks promises to taxpayers and has a horrible record to run on. The other candidate is Rick Scott.
ATR Opposes 92 Percent Tax on E-Cigarettes in Vermont
The Vermont House of Representatives recently passed a bill that would subject e-cigarettes to a new 92 percent tax and increase the excise tax on snuff. Estimates suggest that the tax on e-cigarettes will raise $500,000 for the state and the tax on snuff will generate another $700,000. This tax hike would hit Vermont small businesses hardest, especially those 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 both tax increases and recently sent a letter to the Senate Finance Committee, where the bill is up for consideration.
I write today in opposition to a portion of House Bill 884, which would impose a 92 percent tax on e-cigarettes and increases the smokeless tobacco tax. Not only is this a massive tax increase that will hurt small businesses in Vermont, but to impose a massive tax on vapor products makes little sense from a health perspective as well.
By imposing a 92 percent tax on e-cigarettes, some suggest that H.B. 884 will generate upwards of $500,000 for the state. Small businesses that are struggling to make ends meet will bear the burden of this tax increase. Local brick and mortar vapor stores will be hardest hit, given that this will increase the cost of these products up to $14. 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.
This 92 percent tax will make Vermont extremely uncompetitive in e-cigarette pricing, leading to an increase in online purchasing and cross-border sales in New Hampshire. 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.
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 hundreds of thousands of dollars in higher taxes on a product that provides consumers a viable and harmless alternative to traditional tobacco products.
H.B. 844 did not go far enough in cutting state spending. As such, I would urge you to remove the entire $1.2 million in tax hikes from the budget and re-examine the your budget priorities. For a state that prides itself on human services and health, it would be particularly unwise to use tax hikes to discourage the sale of products that will save the state millions of dollars in health care costs over the long run.
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 email@example.com.
President, Americans for Tax Reform
ATR encourages opponents of the bill to email legislators on the Finance Committee.
- Senator Tim Ashe (Chair): firstname.lastname@example.org
- Senator Mark A. MacDonald (Vice Chair), email@example.com
- Senator Christopher Bray: firstname.lastname@example.org
- Senator Peter W. Galbraith: email@example.com
- Senator Robert M. Hartwell: firstname.lastname@example.org
- Senator Virginia "Ginny" Lyons: email@example.com
- Senator Kevin Mullin: firstname.lastname@example.org
New York Legislature Cuts Taxes in $140 Billion Budget
Late Monday night, lawmakers in Albany passed a $140 billion budget that included some noteworthy tax reform and relief. The budget unquestionably takes small steps to address New York's extremely uncompetitive business tax climate (50th in nation according to the Tax Foundation) though it does little to curb the state government's growth.
First, the death tax. As we have written, New York has one of the most onerous death taxes in the nation. Simply put, it's a bad idea to die in New York if you've amassed any sort of wealth. The Governor sought to raise the state asset exemption to the federal level and cut the tax from 16% to 10%. The legislature passed the first part, rejected the second. As Forbes's Ashlea Ebeling points out, there are problems with how the law is written but it's better than the status quo.
Second, the state will send 2.8 million taxpayers about $1.5 billion in rebates equal to local property tax increases over the next two years if localities agree to a 2 percent property tax cap. While this isn't a tax cut, it does incentivize localities to curb and prioritize spending. Essentially the state will pay homeowners if local governments behave. At present rates, property owners are still subject to the 4th highest property tax collections in the nation.
Not to ignore New York City renters, there are also about $85 million in available tax credits available based on the percentage of someone's income spent on rent.
Next, the corporate tax rate will decrease from 7.1 percent to 6.5 percent, the lowest since 1968, and the manufacturer's income tax will go from 5.9 percent to 0. Republicans succeeded in ensuring that this tax cut applied statewide, instead of only parts of the state, as the Governor originally proposed.
The utility tax surcharge is also phased out over three years, saving businesses and home rate payers about $600 million. This was a "temporary" tax signed into law in 2009 by Senate Democrats and Governor Patterson and Republicans rejected Governor Cuomo's attempts to extend the tax in his budget last year.
Bill de Blasio got some of what he wanted too. While he couldn't convince legislators to let him raise the income tax in New York City, the budget includes $340 million for the expansion of pre-k programs, $300 million of which will go to the Big Apple. Charter school funding was also increased, up to $500 per pupil in the third year and making them eligible for pre-k funding.
When you're ranked 50th in the nation for a business tax climate, there's only one direction you can go. And while this budget isn't a "grand slam" as Governor Andrew Cuomo called it, it certainly is more than a preservation of the status quo. There is some property tax relief, a reduction in the corporate income tax rate, utility bill relief, death tax reform, and a recognition that charter schools work. Republicans certainly succeeded in steering the budget in the right direction but there is still a lot of work to be done before New York can truly claim that it's "Open for Business."
ATR Opposes Kentucky Legislature’s Efforts to Create Local Option Sales Taxes
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.
ATR Supports New York Governor Andrew Cuomo's Death Tax Reform Proposal
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.
Among States with Corporate and Individual Income Taxes, Arizona Legislature Considering Lowest Rates in Nation
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:
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.
Hospitals and Chambers of Commerce Launch Medicaid Expansion Campaign in Virginia
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.
Florida Senate Unanimously Votes to Repeal Charlie Crist's $400 Million Car Tax
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.