NC Senate Moves Closer to Opening Up State's Energy Resources
A bill which would legalize hydraulic fracturing—a practice that has been used to extract natural gas for decades—was passed by North Carolina’s House last week. The Senate previously approved a different version of the legislation than the one passed by the House. The updated version is pending approval by the Senate tomorrow.
Senate Bill 820, titled the Clean Energy and Economic Security Act, would sanction the use of hydraulic fracturing by mid-2014, consequently lowering energy costs across the state and creating a plethora of new jobs for North Carolinians.
Currently the oil and natural gas industry supports 135,165 well-paying jobs in North Carolina and has the potential to create many more if hydraulic fracturing and horizontal drilling are legalized. The average salary for non-gas station oil and natural gas employees is nearly $6,000 higher than the average annual salary across all industries in North Carolina. And, in total, the industry also contributes $11 million to the state’s economy. One look at these figures and it is no surprise that a March 2012 poll found 75 percent of North Carolina voters are in favor of the further development of U.S. oil and natural gas resources.
To understand how the state’s economy could benefit from hydraulic fracturing, North Carolinians should look to Texas and Pennsylvania’s experiences with this form of natural gas extraction. Mario Hernandez, president of the San Antonio Economic Development Foundation, conducted a study to measure the economic impact and projections of Eagle Ford Shale development. According to the study, the economic impact of this development was $20 billion in 2011—with the possibility of reaching $96 billion in the next decade. Additionally, the new industry created tens of thousands of jobs for Texans—38,000 in 2011. The study projects that by 2021 the Eagle Ford Shale will support more than 82,000 jobs. In Pennsylvania, utilization of hydraulic fracturing has generated more than $7 billion in taxes, royalties, lease payments, and fees in the state over the past five years.
If SB 820 passes the Senate, ATR encourages Gov. Perdue to ignore the fringe of the Democrat party and approve this much-needed legislation. The energy industry has been boon to the NC economy and could create even more jobs in the Tar Heel State if this bill is signed into law.
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Key Issues Pending in LA with One Week Left in 2012 Session
With session heading into the home stretch, there are still a number of important issues for lawmakers to take up—top among them is pension reform.
The pension reform package under consideration by the legislature would move the state away from the unsustainable defined benefit plan currently in place. According to the office of the Governor, state retirement costs have quadrupled over the last two decades from $478 million in FY90 to $1.9 billion today. The accrual of $18.9 billion in unfunded liabilities due to the present system places an unreasonable burden on taxpayers.
Projections show that if passed in its entirety, Gov. Jindal’s pension reform plan will save taxpayers $450 million in the first year and more than $1.5 billion over the next 5 years. Additionally, the unfunded accrued liability will be reduced by $500 million immediately and its growth will be slowed.
With time waning in the session, the six-part pension reform package has a long way to go. Five of the most fundamental parts of the package have yet to pass. See the Pelican Institute’s “A Pension Reform Primer” for more details on the pending legislation, a step in the right direction for the Louisiana.
Aside from the pension reform package, there are still threats of tax increases on the radar. Two bills are being considered which would permit a 3 percent excise tax on car rentals in certain parishes, eradicating the benefits of the upcoming sunset provision. This tax hike is ill-advised—it will adversely impact the state’s economy, hurt businesses, and serve as an unnecessary annoyance to Louisiana residents and tourists alike. Not to mention, a discriminatory rental car tax would take a disproportionate toll on an industry that is vital to the Louisiana economy and the livelihood of a great many Pelican State residents: tourism.
The end of session is no time to grow complacent. Louisiana taxpayers must remain vigilant. ATR encourages Louisiana taxpayers to contact their representatives in Baton Rouge to encourage them to pass Gov. Jindal’s pension reform package and reject a rental car tax increase.
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ATR Rejects Gov. Quinn's Reckless Medicaid "Reform" Proposal
Americans for Tax Reform strongly opposes the budget framework for fiscal year 2013 that is being championed by Gov. Quinn and his allies in the Illinois legislature. The governor claims to reform Medicaid and reduce its liability by $2.7 billion. In reality, the majority of the “savings” are not cuts at all, but hundreds of millions of dollars in higher taxes. Unfortunately, there are rumors out of Springfield that Republicans are considering supporting the latest round of Quinn tax hikes.
This scheme also expedites the implementation of Obamacare in the Chicago area by almost 2 years – clearly out of step with the modern GOP. And to be clear: The bill does not include a reduction in accrued obligations, nor does it address the serious structural reforms that need to take place to right-size the state’s budget.
Disguised as “Medicaid Reform,” this package includes a 102 percent cigarette tax increase. Excise taxes have repeatedly been proven ineffective and bad policy that kills jobs and drives commerce across state lines. Not to mention, tobacco tax increases frequently miss revenue projections and lead to lost sales for small businesses. The pending cigarette tax hike is a step in the wrong direction for Illinois in terms of budget stability.
Lawmakers must reject this reckless budget proposal to provide relief for hardworking taxpayers and put Illinois back on the path of fiscal solvency. Click here to see the letter that ATR sent to the Illinois legislature today. Illinois taxpayers should demand that their elected officials stand up for them and reject this fiscally irresponsible bill. Click here to take further action on this issue.
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ATR Supports the Committee Substitute to Senate Bill 143 and House Bill 648 in Louisiana
While Gov. Jindal has had great success in advancing his reform agenda and Louisiana is no longer synonymous with political corruption, there is still one dubious distinction that makes the Pelican State a fiscal outlier. As it stands, Louisiana is one of only three states in the country that allows sales tax to be levied on medications. In Louisiana's case, the state itself does not levy the state sales tax, but Parishes are permitted to assess local sales tax on prescriptions.
Fortunately, legislation has been introduced to bring the tax code up to date by eliminating this disadvantage. The proposed committee substitutes for SB 143 and HB 648 by Sen. Fred Mills and Rep. Patrick Williams would eliminate this tax on medication that is unique to Louisiana.
ATR agrees with Sen. Mills and Rep. Williams that it is time to eliminate the excessive and discriminatory tax on medication in Louisiana, which places physicians, pharmacists, and hospitals at a competitive disadvantage and threatens patient care.
Click here to see ATR's letter to Chairman Robideaux and members of the House Committee on Ways and Means in support of the substitute to HB 648.
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ATR Supports Gov. Perry's Texas Budget Compact
Last week Texas Gov. Rick Perry unveiled “The Texas Budget Compact,” designed to protect taxpayers and promote economic growth in the Lone Star State. The platform laid out in the Texas Budget Compact, if implemented, will create a more transparent and efficient state government through the adherence to 5 simple principles that Gov. Perry asks legislators and candidates to keep in mind as they prepare for the 2013 legislative session and beyond:
1. Practice truth in budgeting;
2. Support a Constitutional limit of spending to the growth of population and inflation;
3. Oppose any new taxes or tax increases, and make the small business tax exemption permanent;
4. Preserve a strong Rainy Day Fund; and
5. Cut unnecessary and duplicative government programs and agencies.
Americans for Tax Reform (ATR) applauds and fully supports Gov. Perry’s Compact. Perry’s plan is very much in step with the goals of Texans for a Conservative Budget, a coalition of policy and grassroots organizations dedicated to cutting wasteful spending in Texas state government, of which Americans for Tax Reform is a member. ATR encourages legislators to adhere to Gov. Perry’s principles to create a stronger, more prosperous Texas. Gov. Perry’s Budget Compact should be used as a model of fiscal stewardship for other states.
Perry’s Compact recognizes that the problem is on the spending side of the ledger. Higher taxes at the state level will only have an adverse impact on the Texas economy. Not only does Perry’s Compact rule out job-killing tax increases, it proposes a solution to rein in out of control state spending.
The Texas Public Policy Foundation released a Policy Brief this month addressing Texas’s over-spending problem. According to the report, state spending has risen by 310 percent from fiscal year 1990 through fiscal year 2012. During this time, Texas’ population growth and inflation have only increased by a combined 132 percent. Gov. Perry’s proposal for a Constitutional limit of spending to the growth of population and inflation will correct the state’s unsustainable spending trajectory and ensure that Texas remains a magnet for job creators.
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Texans for a Conservative Budget Aims to Right-Size Lone Star State Government
At the same time that Congressman Paul Ryan was unveiling his plan to restore fiscal sanity in Washington and address unsustainable spending programs that threaten the nation’s economic future, a similar effort was launched in Austin to do likewise for the Lone Star State. Yesterday Texans for a Conservative Budget held a press conference announcing its budget recommendations for 2013 and beyond. Texans for a Conservative Budget, of which Americans for Tax Reform is a member, is a coalition of policy and grassroots organizations dedicated to cutting wasteful and unnecessary government spending in the Lone Star State.
To guide legislators in the right direction, Texans for a Conservative Budget offers “Real Texas Budget Solutions: 2013 and Beyond,” which provides lawmakers a path to decrease state spending by $1.1 billion in 2012-13 and $8.3 billion in 2014-2015. By cutting unnecessary programs, reducing government dependence, and prioritizing spending, lawmakers can save Texas taxpayers millions of dollars.
Though Texas has led the nation in job creation over the past decade, the state’s spending habits could stand in the way of future economic success. The numbers speak for themselves. State spending in Texas increased by 310% between 1990 and 2012, while population growth and inflation totaled 132%. Such spending is not sustainable and is not conducive to long term economic growth and prosperity.
While the Texas legislature is not in session this year, lawmakers are already beginning to pay attention. Just today, Representative Phil King (R-Weatherford) endorsed the coalition’s budget solutions.
The need to prevent job-killing tax increases at the state level is even more imperative in light of the fact that the largest federal tax increase in U.S. history is scheduled to hit Lone Star State families and employers in less than ten short months. ATR encourages all Texas legislators to join Rep. King in support of the recommendations offered by Texans for a Conservative Budget. Any lawmaker serious about continued economic success and prosperity in Texas must recognize the importance of cutting wasteful spending, reform or eliminating ineffective and unnecessary programs, avoiding tax increases, and balancing the budget. If tax hikes are taken off the table, spending is kept in check, and lawmakers prioritize government functions, Texas can be a model of fiscal responsibility for the nation.
For a copy of the the coalition's path to prosperity, click here.
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ATR Urges Chicago Taxpayers to Reject a Soda Tax Hike
Father of Chicago’s bottled water tax, Alderman George Cardenas, introduced a resolution to raise the tax on sugary drinks at a February 25, 2012 City Council meeting. According to reports, the tax increase could range from 15 to 35 cents per beverage to a penny per ounce. Americans for Tax Reform opposes Cardenas’s proposal as a misguided attempt to siphon more money from the private economy and heavily taxed Chicagoans under the phony auspices of improved health.
It is unlikely a soda tax will have any effect on mitigating obesity, as soda taxes do not necessarily decrease an individual’s caloric intake. According to a recent study by the Tax Foundation, consumers will likely substitute other food and drink to make up for the discrepancy in their diet when they discontinue soda consumption in response to higher prices. Thus, decreased soda consumption does not mean trimmer waistlines in Chicago.
Soda taxes have already proved to be ineffective policy. As such, Washington and Maine recently repealed failed taxes on soda. When it comes to the claim that a soda tax will improve public health, Cardenas’s proposal is bereft of empirical support.
Singling out soda, when many factors contribute to obesity, is an ill-advised use of government force that needlessly restricts citizens’ freedom of choice. A city-wide soda tax would fall on all Chicagoans, not just those who consume in excess. Perfectly healthy individuals who enjoy soda and other sweetened drinks should not have to incur higher prices from a nanny-state seeking to curb consumption.
In fact, Chicago should look to its own experience with other coercive lifestyle taxes as a cautionary tale. In July 2007, Chicago had a combined state and local cigarette tax rate of $3.66 per pack, while nearby Indiana had a 55.5 cent state levy and no local taxes. Given the tax differential between Chicago and neighboring locales, it is no surprise that Chicagoans flocked to neighboring Indiana to make their purchases. David Merriman, professor at the University of Illinois at Chicago’s Institute of Government and Public Affairs, conducted a study using a random sample of discarded cigarette packs to prove the prevalence of tax avoidance in Chicago. According to the study, 75 percent of the littered packs displayed no city tax stamp, indicating that they were purchased outside the city.
Cardenas’s proposed soda tax will hurt Chicago businesses and reduce their job creating capacity, particularly employers that manufacture, distribute, and sell soda and other sweetened beverages, as shoppers travel outside the city to purchase beverages. History has shown that consumers are not deterred by a short drive to evade onerous and exorbitant taxes.
Furthermore, another tax increase is the last thing individuals, families, and employers in the Windy City need. Chicago has already been hit with a wave of tax increases over the past year. Gov. Quinn signed a whopping 67% income tax increase into law last year and raised the corporate rate by 46%, taking a total of $7 billion out of the private economy. Cardenas’s soda tax would also come on the heels of Cook County’s 2011 alcohol and tobacco tax increases that were passed just last November. These included a 50% hike in alcohol taxes and an expansion of the cigarette tax to other tobacco products, such as smokeless tobacco, roll-your-own, and cigars. Adding insult to taxpayer injury, in less than 10 months the largest federal tax hike in history will hit the Chicago economy. Chicagoans simply cannot afford more job-killing tax increases at the local level.
Americans for Tax Reform urges Chicago taxpayers to reject Alderman Cardenas’s misguided soda tax hike and encourages his fellow City Councilmen to do the same. Chicago taxpayers should contact Alderman Cardenas at 773-523-8250 and urge him to withdraw this unnecessary tax increase.
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ATR Opposes a Cigarette Tax Increase in Alabama
Today Americans for Tax Reform sent a letter Gov. Robert Bentley in opposition to two proposals to raise the cigarette tax in Alabama. HB27 filed by Rep. Patricia Todd would increase the cigarette tax by 32.5 cents per pack, costing tax payers an estimated $75 million each year. HB9 filed by Rep. Joe Hubbard would increase the cigarette tax by $1 per pack, costing taxpayers $230 million per year. Both proposals are violations of the Taxpayer Protection Pledge, a commitment Gov. Bentley made to Alabama taxpayers. As a pledge signer, we urge Gov. Bentley to honor his commitment to protect taxpayers in Alabama by opposing and vetoing all efforts to increase cigarette taxes. To read the entire letter, see below. For a PDF version, click here.
February 21, 2012
Dear Gov. Bentley
I write today to urge you to loudly oppose and veto all efforts to increase cigarette taxes in Alabama. Any increase in the cigarette tax is a bad idea, including the two specific bills filed by Rep. Patricia Todd and Rep. Joe Hubbard. Rep. Patricia Todd’s bill (HB27) would increase the cigarette tax by 32.5 cents per pack, costing tax payers an estimated $75 million each year. Rep. Joe Hubbard’s bill (HB9) would increase the cigarette tax by $1 per pack, costing taxpayers an estimated $230 million each year. I urge you to honor the commitment you made do your constituents when you signed the Taxpayer Protection Pledge, as these misguided proposals include lifestyle tax increases that will adversely impact the state’s economy, hurt small businesses and, frankly, serve as an unnecessary annoyance to Alabama residents.
Excise taxes have repeatedly been proven ineffective and bad policy that kills jobs and drives business across state lines. Jobs are at a premium amid this tepid economic recovery, yet both of these proposed tax increases are sure to reduce the job-creating capacity of small business owners across the state by forcing commerce across state lines. It should be noted that taxes on cigarettes in neighboring Georgia, Tennessee, and Mississippi are considerably lower than the proposed rate. You should look to South Carolina, Washington, D.C., and Chicago’s recent experiences with cigarette excise tax increases. These cautionary tales demonstrate that consumers are not deterred by a short drive if onerous lifestyle taxes are lower in a nearby state.
South Carolina added $.57 to each pack of cigarettes in July 2010. Despite the rate increase, records show a decline in cigarette tax revenue in South Carolina since that time, while neighboring states saw growth. Neighboring Georgia saw a net increase in cigarette sales of nearly 1.3 million packs in the six months after South Carolina raised its excise tax rate. Washington, D.C. raised its cigarette tax by $.50 in 2009 only to see an 11 percent net decline in cigarette tax revenue as consumers flocked to neighboring states with a low tax rate on cigarettes like Virginia. When Cook County, which encompasses the city of Chicago, increased its cigarette tax by $1 in 2006, Chicagoans flocked to neighboring Indiana to make their purchases. Following that tax hike, The Huffington Post reported a team of University of Illinois-Chicago researchers collected a sample of discarded cigarette packs. According to their study, 75 percent of the discarded packs came from outside Cook County. Alabama, given its geography, can expect similarly dubious results if lawmakers in Montgomery elect to raise cigarette taxes.
Rep. Patricia Todd and Rep. Joe Hubbard will try to sell this tax hike under the auspices of a cigarette use mitigation initiative. In reality, these bills are nothing more than shameless cash grabs that put off necessary spending reforms. I know it irritates some lawmakers when ATR says that the government has a spending problem and not a revenue problem, but that statement is supported by the facts. From 1999 to 2009, the Alabama budget grew by 27 percent. If spending was limited to the growth in population and inflation during that period, the Alabama government would have spent $28.7 billion less. Please look to ATR as a resource on this issue. If you have any questions, please contact ATR’s Josh Culling at 202-785-0266 or firstname.lastname@example.org.
Grover G. Norquist
CC: Members of the Alabama Legislature