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Ryan Ellis

ATR Supports Permanent Tax Relief for Small Employers

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Posted by Ryan Ellis on Friday, June 6th, 2014, 3:11 PM PERMALINK


The U.S. House this week will consider three bills which would permanently cut taxes on small employers.  ATR is very supportive of each of these bills, and encourages pro-taxpayer Members of Congress to vote for them.

H.R. 4457, "America's Small Business Tax Relief Act of 2014," is sponsored by Congressman Pat Tiberi (R-Ohio).  It would make permanent a tax provision allowing small employers to expense (immediately deduct from taxable profit) up to $500,000 of equipment purchases per year.  If current law is not changed, small businesses can only expense $25,000 of purchases for things like computers, office furniture, manufacturing equipment, etc.  The rest must be subject to a slow, multi-year deduction process known as "depreciation."​

H.R. 4453 and H.R. 4454 are both sponsored by Congressman Dave Reichert (R-Wash.)  These are two permanent tax cuts which make tax compliance easier for S-corporations, a common tax form for medium-sized, mature businesses.  According to the IRS, there are 4.1 million S-corps with 7 million owners (S-corp owners pay the business' taxes on their individual 1040s). The permanent law changes involve built-in gains and basis adjustments for charitable contributions.

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ATR Supports H.R. 4777, the "Health Savings Act of 2014"

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Posted by Ryan Ellis on Tuesday, June 3rd, 2014, 11:27 AM PERMALINK


ATR is proud to support a new bill introduced in the U.S. House of Representatives last week. H.R. 4777, the "Health Savings Act of 2014," is sponsored by Congressman Michael Burgess, M.D. (R.-Texas).  

Health savings accounts (HSAs) are tax-advantaged accounts which are used to pay for routine, out-of-pocket medical expenses.  They are used in conjunction with insurance plans which tend to cover large and/or unexpected health events.

H.R. 4777 makes HSAs more readily available to the public by implementing the following reforms:

Creation of Child HSAs.  As a way of saving for the future health needs of children, child HSAs are created with a maximum annual contribution limit of $6350 (indexed to inflation). Importantly, these HSAs can be rolled out of or into upon the death of a family member.  This allows for a kind of pre-funding of a child's anticipated Medicare liability decades before she turns 65.

Increase HSA contribution limits.  HSA contribution limits would match the maximum out-of-pocket limit on HSA-qualified insurance plans.  That limit is currently $6350 for a single person, or $12,700 for a family.  These numbers are indexed annually to inflation.  This would allow people to use HSAs not only for short- and intermediate-term medical needs, but also as a real health retirement account.  This is important since the insolvency of Medicare means that future seniors will likely be called upon to pay for more of their own Medicare benefit.

Allow mandatory IRA and 401(k) withdrawals to be deposited tax-free into HSAs.  When seniors reach age 70 and 1/2, they are required to take minimum distributions every year from their pre-tax IRA and 401(k) plans.  H.R. 4777 would also these "RMDs" to be rolled over tax-free to HSAs.  That way, the pre-tax nature of these dollars can be preserved and the money used to pay for health needs in retirement.

Give HSAs the same bankruptcy protection as IRAs and 401(k)s.  Under the law, a bankruptcy settlement cannot access retirement savings accumulated in IRAs and 401(k)s.  H.R. 4777 would extend this protection to HSAs, as well.

Expand the definition of an HSA-qualified insurance plan.  There is a definition in tax law of an HSA-qualified insurance plan necessary to have in order to make HSA contributions.  H.R. 4777 would expand this definition to include any Bronze, Silver, or catastrophic plan offered on any health insurance exchange.  Furthermore, HSA compatible plans would be clearly identified for health market consumers.  This would mean that nearly all Americans on the individual market would be able to fund an HSA to pay for their out-of-pocket medical expenses.

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ATR Supports H.R. 4718, Permanent Bonus Expensing Legislation

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Posted by Ryan Ellis on Wednesday, May 28th, 2014, 1:06 PM PERMALINK


This week, the U.S. House Ways and Means Committee will report out H.R. 4718, a bill which would make the "50 percent bonus depreciation" temporary tax extender a part of permanent tax law.  

The bill, introduced by Congressman Pat Tiberi (R-Ohio), is a welcome one for taxpayers. All pro-taxpayer Members of Congress should support this bill.

Earlier this year, ATR went on record saying that the bonus depreciation provision is the "crown jewel" of the extenders package, and we urged the Ways and Means Committee to consider a permanent extension of this provision.  A dozen free market conservative groups sent a joint letter to Chairman Camp with the same request.  We're happy to see that Chairman Camp agrees that this tax policy should become a part of permanent tax law.

H.R. 4718 allows businesses of all sizes to immediately-deduct half the cost of new business equipment investments.  The remaining half of the cost remains subject to punitive and slow "depreciation" deductions over many years.  Under ideal tax policy, 100 percent of these costs would be recouped in the first year, a policy goal known as "full business expensing."  But Congressman Tiberi's bill gets us more than halfway there.  That matters greatly for economic growth and job creation.

The capital stock of the economy grows when businesses and households deploy scarce resources toward investments.  When a farmer buys a tractor, or an architecture firm buys a computer, they are investing in their own productivity: the farmer can grow more crops; the architecture company can design better blueprints.  This increased productivity results in more company profits, higher wages, new jobs, and an increased return to shareholders in their 401(k)s and IRAs.  Capital investment is the mother’s milk of wealth creation. 

There's not a more pro-growth bill the Ways and Means Committee will consider this entire Congress than H.R. 4718.  It deserves the broad and enthusiastic support of not only the committee, but the whole House.

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ATR Urges All Members of Congress to Co-Sponsor Bill to Kill Death Tax

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Posted by Ryan Ellis on Wednesday, May 28th, 2014, 12:01 PM PERMALINK


It's rare that a bill introduced in the House of Representatives attracts a majority of the chamber as co-sponsors.  Yet we're on the verge of that happening with regard to H.R. 2429, the "Death Tax Repeal Act of 2013," sponsored by Congressman Kevin Brady (R-Tex.).  

The bill currently has 217 co-sponsors, one short of a majority of the whole House.  Every Member of Congress--especially those who want to be on the side of taxpayers--should become a co-sponsor of this bill.

The death tax's time, if it ever had one, is over.  It collects less than one-half of one percent of all federal revenues.  It's given rise to a death tax avoidance industry army of accountants, lawyers, estate planners, actuaries, and others who profit from its existence.  It's a double- or even triple-tax on savings and investment.  It's time to end the death tax immediately.

Furthermore, the House has not voted on death tax repeal since 2005.  That's a full decade since the last time Members of Congress have had to go on record opposing or supporting the death tax.  Getting a majority of the House behind repeal is a powerful argument that it's high time for that vote to take place again.

All Members of Congress should co-sponsor H.R. 2429 today.  Kill the death tax.

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Healthcare.Gov to Cost Taxpayers over $1 billion

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Posted by John Kartch, Ryan Ellis on Monday, May 19th, 2014, 4:00 PM PERMALINK


Healthcare.gov, the federal Obamacare website, will cost taxpayers over $1 billion, according to congressional testimony submitted by HHS nominee Sylvia Mathews Burwell.

In response to questions from Sen. Lamar Alexander (R-Tenn.) Burwell noted that $834 million had already been obligated to the glitch-prone website as of Feb. 28, with “a need for approximately $200 million” more from taxpayers through Fiscal Year 2015.

The full responses from Burwell are as follows:

Question: What has been the total cost of creating healthcare.gov to date? What has been the total cost of “fixing” healthcare.gov? Please include a detailed accounting of all costs associated with this website, including (but not limited to) salaries and expenditures, contractor costs, and training.

Answer: “It is my understanding that as of February 28, 2014, CMS has obligated a total of approximately $834 million on Marketplace-related IT contracts and interagency agreements. These expenditures include the website and the systems that support enrollment through the Marketplace, such as the data services hub as well as other supporting IT infrastructure, including cloud computing, to support Marketplace IT development.”

Question: What financial outlays are expected for fixing the backend of healthcare.gov? Please include a detailed estimate of future costs for fixing and maintaining the website, including (but not limited to) salaries and expenditures, contractor costs, and training.

Answer: “The President’s Budget reflects a need for approximately $200 million for all Marketplace-related IT in FY 2015, some of which is funded through user fees. Much of this amount reflects ongoing operational and maintenance costs of HealthCare.gov, as well as continued development."

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ATR Supports Senate Tax Extenders Package

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Posted by Ryan Ellis on Monday, May 12th, 2014, 12:07 PM PERMALINK


The U.S. Senate this week will begin consideration of a so-called "tax extenders" package.  ATR supports this tax cut legislation and urges senators to vote for it.

On December 31, 2013, some 55 tax relief provisions in the code expired permanently.  Unless Congress acts soon and retroactively, these tax cuts will never again be available to families and businesses.  

Some tax provisions should not return--the wind production tax credit springs to mind, but there are a number of others.  However, these are more than balanced out by extremely important tax relief provisions which must not be lost from the code.  Broadly speaking, these are:

Cost recovery provisions for businesses.  By far, the most important extender is the "50 percent bonus depreciation" item.  This tax cut allows businesses of all sizes to immediately-deduct half the cost of new business equipment investments.  The remaining half of the cost remains subject to punitive and slow "depreciation" deductions over many years.  A number of free market groups are on record that this provision should be made permanent on the road toward full and immediate business expensing.  

For smaller firms, their ability to write off business equipment investments would be permanently reduced to a paltry $25,000, down from $250,000 today.  "Section 179" is relied upon by small- and mid-sized businesses, and it would be a massive tax increase on these employers to require them to submit to the antiquated depreciation regime.

There are a number of other cost recovery tax extenders, some of which have inaccurately been tabled as "spending" or bad tax policy.  In fact, any tax relief which accelerates the speed at which businesses can recover assets on their taxes moves the code closer to the ideal tax policy, full business expensing.  It would make no sense to let these provisions expire permanently, since that would move the tax code in the opposite direction from which conservatives have always wanted it to go.

Jobs here at home and the highest corporate rate in the world.  The biggest and most popular extender is the research and development credit.  It's been around literally since the Reagan tax cuts, and has been extended by Congress some 14 times.  It allows companies to quickly recover the cost of expenditures for research and experimentation.

Most importantly, it's a key placeholder for our largest employers until such time as the corporate rate can be lowered.  The United States has the highest marginal corporate income tax rate in the developed world at nearly 40 percent (including states).  By contrast, the developed nation average is now under 25 percent.  To maintain this super-high tax rate and simultaneously take away the most common way large employers deal with that reality is to invite jobs to be shipped overseas.

In that same light, the two major international tax extenders (CFC look-through and the Subpart F exemption) allow companies to deal with the fact that the U.S. seeks to tax income which has already been subject to tax in other countries.  

Corporate inversions are a predictable outcome when you pair the highest corporate rate in the world with one of the worst international set of rules.  Making the latter far worse is not a good thing if you want to keep jobs and capital here at home.

Tax relief for families.  Many don't realize that the extenders package is not just for employers.  There's also tax increases that families are living under, and which Congress should reverse.  These include: not having to pay income tax on homes sold underwater; a deduction for state and local sales taxes for taxpayers in states without an income tax; a deduction for teacher classroom expenses and for college tuition; the ability for retirees to donate money from an IRA directly to a charity.

These tax provisions were used by millions of taxpayers in 2013.  These families are counting on this tax relief to continue, and to strip away this tax relief without lowering their rates or cutting their taxes in any other way is a cruel twist of fate for the middle class.

Amendments to remove tax policies which should not be allowed to continue (as opposed to pro-growth tax relief, which should continue) should be made in order.  However, ATR is concerned that to date, many conservatives have been deeply confused on this distinction.  We have heard green energy tax credits mentioned in the same breath as accelerated depreciation, for example.  We would urge senators considering amendments to be careful about throwing out the pro-growth baby with the crony capitalist bathwater.

For these reasons, warts and all, the Senate should pass the tax extenders bill.  Ideally, the best of these tax relief items would be made permanent law, and the rest would be plowed into pro-growth tax reform.  For now, though, the mandate for the Senate is clear: do no harm.

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Free Market Groups Call for Permanent Bonus Depreciation Tax Cut

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Posted by Ryan Ellis on Thursday, May 8th, 2014, 4:46 PM PERMALINK


This week, the House of Representatives will be voting on a permanent tax credit for business research and development.  While many conservatives support this, there's another temporary tax provision in even greater need of permanent status--the 50 percent bonus depreciation tax cut.

Major free market groups sent a letter to this effect to the House.  The full text can be found here. Below is an excerpt:

The capital stock of the economy grows when businesses and households deploy scarce resources toward investments.  When a farmer buys a tractor, or an architecture firm buys a computer, they are investing in their own productivity: the farmer can grow more crops; the architecture company can design better blueprints.  This increased productivity results in more company profits, higher wages, new jobs, and an increased return to shareholders in their 401(k)s and IRAs.  Capital investment is the mother’s milk of wealth creation. 

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ATR Supports H.R. 4438, Permanent Research and Development Tax Cut

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Posted by Ryan Ellis on Monday, May 5th, 2014, 4:15 PM PERMALINK


This week, the House will consider permanent tax relief legislation for American employers. H.R. 4438, the "American Research and Competitiveness Act of 2014," would make permanent a 20 percent tax credit for qualified research and experimentation expenses (wages, supplies, contract research, and basic research costs). 

Americans for Tax Reform supports this legislation and urges all pro-taxpayer Members of Congress to vote for it.

H.R. 4438 is permanent tax relief for American employers.  This research credit has been a part of the tax code since the 1981 Reagan tax cut.  Because it has always been temporary, Congress has had to renew it some 14 times.  The uncertainty created by its expiration date (the credit expired on December 31, 2013) makes business planning difficult.  It's better to have this tax provision be the permanent part of tax law that it de facto has been for over three decades.

The research credit is a good placeholder for comprehensive business tax reform.  The United States imposes the highest corporate income tax rate in the developed world, at nearly 40 percent including states.  Unincorporated businesses are even worse off, with a combined federal-state rate approaching 50 percent.  The research credit is one of the few ways American employers can cope with these sky-high tax rates.  Until such time as these rates can come down, the research credit is an essential part of keeping our employers competitive internationally.

Investment in new technologies and sources of capital is under pressure from other areas of the tax code.  If you didn't know any better, you would think the U.S. income tax code is actually biased against new investment in technology.  We've already mentioned how the U.S. has the highest business tax rates in the developed world.  Couple that with a capital gains and dividends tax rate that just rose from 15 to 23.8 percent.  Pair that with a cost recovery system that makes a company depreciate a computer over 5 years when real-world technology makes it obsolete in half that time.  Throw in one of the only tax codes that exposes our own companies to international double taxation.  What you have left is not much to sell.

This tax credit for research and experimentation is one of the few tax code provisions actually aimed at encouraging new capital investment and growth.  To lose it without taking care of the basic tax code anti-growth bias first would be the wrong move for Congress.

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ATR Lauds Ways and Means for Permanent Tax Relief Bills

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Posted by Ryan Ellis on Tuesday, April 29th, 2014, 11:25 AM PERMALINK


The House Ways and Means Committee will today mark up six bills to make various temporary tax relief provisions permanent.  These bills represent most of the pro-growth provisions contained in the set of temporary tax relief measures known as the "extenders package."  If Congress does nothing, 55 separate tax increases which took effect on December 31, 2013 will be permanently-embedded in the tax code.  This would be a permanent increase in tax revenue to the federal government of about $80 billion per year.

The common theme here is "do no harm."  The permanent tax relief is targeted to prevent the worst anti-growth tax hikes from taking effect for good.  Unfortunately, there is one large omission--bonus depreciation.

These provisions include:

Small businesses can permanently expense up to $500,000 in business asset purchases.  If current law is not changed, small businesses can only expense $25,000 of purchases for things like computers, office furniture, manufacturing equipment, etc.  The rest must be subject to a slow, multi-year deduction process known as "depreciation."

Make the research and experimentation credit permanent for larger firms.  The biggest extender which drives the whole process is the "R&E credit."  This allows firms to claim a credit against tax for research and experimentation expenses which would otherwise have to be capitalized.  With the highest corporate income tax in the developed world, it's essential that companies be able to recover the costs of these investments quickly.  The alternative is to drive up average effective tax rates so high that it makes more sense to relocate overseas.

Improve tax accounting rules for Subchapter-S corporations.  There are two provisions considered by the committee which makes tax compliance easier for S-corporations, a common tax form for medium-sized, mature businesses.  According to the IRS, there are 4.1 million S-corps with 7 million owners (S-corp owners pay the business' taxes on their individual 1040s). The permanent law changes involve built-in gains and basis adjustments for charitable contributions.

Prevent potential double taxation of international income for large companies.  The final two items would make permanent two key tax provisions which serve to prevent U.S.-based multi-national companies from having to pay taxes twice on the same income.  The U.S. is one of the very few countries left in the world that seeks to tax the overseas income of its own companies, even if that income has already been subject to tax in the foreign jurisdiction.  To ameliorate this potential global double taxation, the U.S. tax code has a mind-numbing hodgepodge of relief measures.  The two being considered by the Committee are simply being made permanent.  Until such time as Congress is prepared to embark upon international tax reform, these relief measures are essential to maintain. To junk them would be tantamount to telling U.S. companies, "we don't want your business anymore--please take your jobs and capital overseas when it's convenient for you."

Bonus depreciation is the missing provision.  There is one tax provision that should be made permanent which is not being considered by the Committee today--bonus depreciation.  In fact, this tax measure is the crown jewel of the entire extenders package.  It allows any company which buys business assets to immediately-expense half the value of what is purchased.  The remaining half is subject to regular depreciation rules.

Under ideal tax policy, all the cost of business investment would be expensed in year one. That's a building block of every conservative tax reform plan from the Fair Tax to the flat tax to everything in between.  To lose 50 percent bonus depreciation would be a crippling loss.  It represents the biggest gains the conservative movement has achieved toward a consumption tax base, the goal of all conservative tax reformers.  

Bonus depreciation is the most important of all the extenders, and its permanent extension (on the way to full expensing in tax reform) should be considered by the Committee and the full House.

Addition by subtraction: the worst extender is not being considered.  On the other end of the spectrum is the worst of all the extenders, the wind production tax credit.  It is not being considered by the Committee today.  The Wind Production Tax Credit (PTC) is a misguided tax policy that distorts energy markets and, when combined with state laws and federal regulations, undermines the reliability of America’s power markets. The wind PTC is distinctly different from appropriate cost recovery provisions and allows wind producers to reduce their income tax liability for simply existing. ATR applauds Chairman Camp’s decision to cull the PTC from necessary tax extenders.

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Has President Obama Really Proposed Over 400 Tax Hikes?


Posted by Ryan Ellis on Tuesday, April 22nd, 2014, 4:51 PM PERMALINK


It's pretty bad when the liberal bias of a "fact check" site is such that it requires its own conservative watchdog, but that's sadly the case with Politifact. This week, and not surprisingly, they rated our claim that President Obama had proposed to raise taxes 442 times as "mostly false." Below is our response to their "fact check" which they refused to print:

Objection #1: Politifact didn't like that we counted Obama budget tax increase proposals each and every time they were put in a budget.

Our response: It is not misleading to count each time Obama proposed a tax increase. The stated goal of ATR’s effort was to total the number of tax increase proposals formally written down by President Obama in his six annual budget proposals.  The goal was not to count each type of tax increase proposed, an arbitrary metric created by Politifact.

If someone commits five counts of the same crime spread out over five years, he is not simply charged for one count of the crime. If a driver gets caught speeding five times over five years, the driver can’t tell his insurance company he only received one speeding ticket. But that’s the logic Politifact used to determine their “mostly false” ruling.

Objection #2: Politifact thinks we should have also listed President Obama's tax cut proposals in his budgets.

Our response: ATR’s press release was purposely and transparently not a comprehensive tax policy analysis of the Obama administration’s tenure. ATR was quite clear in this respect. ATR is under no obligation to account for tax relief in a study that merely seeks to count the total number of tax increases listed in formal budget proposals in black and white.

Politifact also failed to mention that ATR, in its release, clearly stated that it was not counting the 20 tax increases in Obamacare, which alone amount to a ten year net tax increase of over $1,000,000,000. Again, the simple intent of the ATR study was to find the total number of tax increase proposals formally written down by President Obama in his six annual budgets.

Objection #3: A liberal tax expert (Eric Toder of the Tax Policy Center) didn't like ATR's tax research because it didn't distinguish between large and small tax hikes.

Our response: Is this a joke? Politifact fancies itself as a neutral arbiter acting in the public interest. Eric Toder is an employee of a far-left think tank. We can’t recall Politifact ever calling upon Americans for Tax Reform to check on the work of Mr. Toder or any of his colleagues. Besides, the criticism invents a new standard (i.e., the "dollar amount test") arbitrarily foisted upon ATR after the fact. Again, the simple intent of the ATR study was to find the total number of tax increase proposals formally written down by President Obama in his six annual budgets.

That said, if Politifact and Toder want to assign dollar values to these tax increases, they will find them to be far more than pennies. The latest Obama budget raises net taxes over the next decade by hundreds of billions of dollars. As did the first five Obama budgets.

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