Ryan Ellis

Top Ten Reasons the House Will Kill the Death Tax

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Posted by Ryan Ellis on Tuesday, April 14th, 2015, 5:50 PM PERMALINK


Update: The U.S. House of Representatives recently passed The Death Tax Repeal Act of 2015! Now the fight begins in the U.S. Senate. Want to abolish the Death Tax? Take action now!

For the first time in ten years, the U.S. House of Representatives this week will vote on a bill to kill the death tax once and for all. H.R. 1105, the “Death Tax Repeal Act of 2015″ is sponsored by Congressman Kevin Brady (R-Texas.) and notably features the co-sponsorship of Congressman Sanford Bishop (D-Ga.), a member of the Congressional Black Caucus. Earlier iterations of this bill have enjoyed the co-sponsorship of a majority of the chamber, so passage is not in doubt. Maybe that’s why 81 business and citizen grassroots organizations have signed a joint letter under the auspices of the Family Business Coalition urging Congress to kill the death tax.

With the fate of the bill a sure thing, let’s reflect on the top ten reasons the death tax deserves to die:

1. The death tax is not fair.  At a basic level, Americans know that the death tax is not fair. It’s not fair that you earn income all your life and pay heavy taxes on it. It’s not fair that you save your hard-earned money and pay taxes on what you make. It’s not fair that you build a small business and face exorbitantly high tax rates. But all of these unfairness taxes pale in comparison to the death tax. The death tax is a tax you pay on savings you have already paid taxes on at least once, and potentially more than once. It results in the liquidation of first and second generation farms and businesses just to pay the tax. Why should a business have to pay taxes again just because an owner has died?

2. The death tax is not popular with the American people.  In a 2009 Tax Foundation poll, the death tax was considered the “least fair” by the American people, even more unfair than the income tax. In poll after poll for decades now, the death tax has consistently been opposed by 60 to 70 percent of adults, registered voters, and likely voters. The results are in, and the intense opposition to the death tax is unquestionable.

3. The death tax collects almost no tax revenue.  According to both the Congressional Budget Office and the Office of Management and Budget, the death tax is expected to bring in about $20 billion in tax revenue this year. Now, in the real world that’s a lot of money. It’s not a lot of money by Beltway tax collection standards, though.

The federal government is anticipated to collect $3.2 trillion in tax revenue this year, according to CBO.  Do the math, and it will take about 55 hours–out of the whole year–to collect all the revenue from the death tax.  That’s 2 days out of 365 days in the year.

To put it another way, suppose all the revenue the federal government was going to collect this year was represented as $100.  In that case, the death tax would be about $0.63 out of that $100.

You get the picture.  

4. The death tax is a declining source of federal revenue.  As recently as 2000, the death tax wasn’t the joke of a revenue source it is today.  Back then, it raised a respectable 1.5 percent of all federal revenues. But today it’s less than half that. As time goes by, we should expect the death tax to continue to wither on the vine as a real revenue source, as it has for years. The true reason for collecting it is not to raise tax revenue, but it’s out of a misguided sense of class warfare ideology.

5. The truly rich don’t pay the death tax.  As our liberal friends at the Center for Budget and Policy Priorities have recently reminded us, “many wealthy estates employ teams of lawyers and accountants to develop and exploit loopholes in the estate tax that allow them to pass on large portions of their estates tax-free.  These strategies don’t benefit the broader economy; they only allow the wealthiest estates to avoid taxes.” I couldn’t have said it better myself. The uber-rich can afford these “teams of lawyers and accountants” to “develop and exploit loopholes” for their clients. First and second generation business owners and family farmers cannot.  As a result, Paris Hilton will be death tax free her whole life (and beyond), but startup business owners will either have to pay the death tax or funnel scarce capital into their own little army of tax nerds and lawyers.

6. Chances are, you don’t live in a state with a death tax. While Congress has been sitting on their hands for ten years not repealing the death tax, states have been doing their “laboratories of democracy” thing.  Non-death tax states now outnumber death tax states about 30-20, and those dwindling number of states which still have a death tax are either looking to scrap it or are greatly increasing their state death tax’s “standard deduction.” It’s not a good revenue source, and states know it.

7. Most countries have a death tax rate far lower than our own, and many have no death tax at all.  The United States, with its gut-punching 40 percent federal death tax rate plus the various state rates, has the fourth-highest death tax rate in the world.  We’re only ahead of Japan, South Korea, and France.  Many familiar countries–Australia, Canada, Israel, and even Sweden–have no death tax at all. In a world where capital is mobile and global, this matters a lot. People don’t have to die in the United States.

8. The death tax is bad for jobs and killing it would give you a raise. Again according to the Tax Foundation (they’ve done some great work in this field) the death tax is an economy killer. They have a macroeconomic “dynamic” model to see what killing the death tax would do to the job market. It projects that killing the death tax would create 139,000 jobs, increase private business hours by 0.1 percent, and increase wages by 0.7 percent.

9. The death tax is bad for economic growth and repeal literally pays for itself. The same Tax Foundation report says that the death tax would increase the economy by 0.8 percent (or $137 billion in today’s dollars).

Because this additional economic growth would be subject to taxation all its own, it would more than make up for the revenue lost by repealing the death tax–it would make up the $20 billion per year, plus yield an extra $8 billion per year on top of that.  You heard that right–we’d actually collect more tax revenue if we stopped collecting the death tax.

10. The death tax is even bad for the environment. A recent study by Brian Seasholes at Reason shows that the death tax leads to the subdivision of many large, privately owned land tracts.  That’s because heirs–land rich but cash poor and in need of money to pay the death tax–sell off parcels of land in order to satisfy Uncle Sam. This leads to development of land which would never have been developed except for the death tax.

Do you agree with Ryan that the Death Tax should be repealed? Urge your senators to kill the death tax right now! 

Photo Credit: 
Keeva999 https://www.flickr.com/people/54159370@N08/

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Doctor Evil

Yup. True story. I recall because the left had a fit about George Steinbrenner's estate paying zero tax. From Forbes...

What’s also ridiculous is that the timing of Steinbrenner’s death makes such a difference to his heirs. I’m sure if you asked any of them, they’d give anything for one more hour of light. But I’m also sure that they won’t complain that their inheritances will be much larger because Steinbrenner died this year and not a year earlier or later. You see, 2010 is that magical year when, for one year only, the estate tax disappears. Had Steinbrenner died in 2009 when the estate tax was 45 percent on wealth over $3.5 million, the New York Times estimates his heirs would’ve lost about $500 million to federal taxes on an estate estimated by Forbes to be worth $1.1 billion.

So much blood shot out of Communist's eyes that day.

Doctor Evil

He skillfully spewed out a lot baloney disguised as food for thought as well as any politician. I think he scored lots of debate points. He's a good little statist.

Steve-O

Nick: We'll give you the benefit of the doubt.......you forgot to take your meds this morning. You're not thinking clearly your spelling is off, your typing co-ordination is off. You're the one who needs a major "reality alert". And how about you respond to ANY of the article's points ? Too difficult for you?


ATR Supports Legislation to Repeal the Death Tax


Posted by Ryan Ellis on Thursday, April 9th, 2015, 3:07 PM PERMALINK


Next Thursday, the US House of Representatives will vote on H.R. 1105, the “Death Tax Repeal Act of 2015,” sponsored by Congressman Kevin Brady (R-Tex.). This legislation will put an end to the immoral practice of the federal government demanding hard-earned taxpayer money after a family loses a loved one. ATR supports this bill and urges all Members of Congress to vote for it.

 

H.R. 1105 will kill the Death Tax once and for all. The Death Tax has a top federal rate of 40 percent on estates and the tax is a major reason that Americans are unable to pass along farms and small businesses to the next generation.

The Death Tax makes up a miniscule sliver of federal revenue and so repealing the tax will have an almost unnoticeable effect on the federal budget. In addition, a study by the Joint Economic Committee found that the Death Tax hurts economic growth and discourages savings and small business growth. 


The Death Tax places an unfair and unnecessary burden on American families in the event of a tragedy.  H.R. 1105 will repeal this ridiculous tax and help provide families peace of mind in a difficult time.

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JD

With Thomas Jefferson taking the lead in the Virginia legislature in 1777, every Revolutionary state government abolished the laws of primogeniture and entail that had served to perpetuate the concentration of inherited property. Jefferson cited Adam Smith, the hero of free market capitalists everywhere, as the source of his conviction that (as Smith wrote, and Jefferson closely echoed in his own words), "A power to dispose of estates for ever is manifestly absurd. The earth and the fulness of it belongs to every generation, and the preceding one can have no right to bind it up from posterity. Such extension of
property is quite unnatural." Smith said: "There is no point more
difficult to account for than the right we conceive men to have to dispose of their goods after death.

The states left no doubt that in taking this step they were
giving expression to a basic and widely shared philosophical belief that
equality of citizenship was impossible in a nation where inequality of wealth remained the rule. North Carolina's 1784 statute explained that by keeping large estates together for succeeding generations, the old system had served "only to raise the wealth and importance of particular families and individuals, giving them an unequal and undue influence in a republic" and promoting "contention and injustice." Abolishing aristocratic forms of inheritance would by contrast "tend to promote that equality of
property which is of the spirit and principle of a genuine republic.

Others wanted to go much further; Thomas Paine, like Smith and
Jefferson, made much of the idea that landed property itself was an affront to the natural right of each generation to the usufruct of the earth, and proposed a "ground rent" — in fact an inheritance tax — on property at the time it is conveyed at death, with the money so collected to be distributed to all citizens at age 21, "as a compensation in part, for the loss of his or her natural inheritance, by the introduction of the system of landed property.

Even stalwart members of the latter-day Republican Party, the
representatives of business and inherited wealth, often emphatically embraced these tenets of economic equality in a democracy. I've mentioned Herbert Hoover's disdain for the "idle rich" and his strong support for breaking up large fortunes. Theodore Roosevelt, who was the first president to propose a steeply graduated tax on inheritances, was another: he declared that the transmission of large wealth to young men "does not do them any real service and is of great and genuine detriment to the community at large.


Senate Should Pass H.R. 2, Medicare Reform Bill

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Posted by Ryan Ellis on Tuesday, April 7th, 2015, 9:01 PM PERMALINK


Why does an entry about a Medicare reform bill feature two preschoolers in the photo?  Because H.R. 2, the bill the Senate will vote on next week, is about these kids' Medicare benefit, and their share of the national debt.

Before the Easter recess, the U.S. House passed H.R. 2, a bill that combines the end of the annual "doc fix" charade with real, structural reforms to the Medicare system.  With nearly 400 "aye" votes out of a possible 435, H.R. 2 was a rare example of a legislative juggernaut.  

The Senate will take up the bill early next week, and ATR urges the upper chamber to pass this bill quickly and proudly, with lots of conservative support.

If you want to learn more about this bill, I would urge you to read my op-ed in National Review Online, or one by Grace-Marie Turner in Forbes, or a post by former CBO Director Doug Holtz-Eakin.  They all explain in detail why H.R. 2 is good, conservative policy.  They aren't alone among conservatives (even the godfather of "Cut, Cap, and Balance" has endorsed it), though there are others who have their doubts.

Some in the Senate are concerned that the bill doesn't save enough money with the structural reforms in order to justify ending the impending spending cut called "SGR."  

They lament that the wrong baseline was used (in fact, it's the baseline everyone uses for Medicare reform, or did before a month ago).

They say that the structural reforms don't create savings fast enough, too. It's this latter point I want to address.

The most important structural reform in the bill is to increase means testing in Medicare.  Already, Medicare has means testing in Parts B (doctor visits) and D (prescription drugs).  H.R. 2 makes those means tests stronger.  That means that, over time, more and more seniors of the future will be paying more and more of their own money for their own Medicare benefit.

We won't know for sure until next spring when the Medicare Actuaries report is released, but this deeper means test should reduce the unfunded liabilities of the program by a lot.  You see, the means test is indexed for inflation, but seniors' income grows faster than that.  If inflation grows at 2 percent per year, and your income grows by 5 percent per year, your income even after inflation will double every 25 years.  It's simple math.

The same will apply to this means test.  

Social Security initial benefits are wage-indexed, meaning they grow faster than prices (about 3 percent per year after inflation).  Social Security initial benefits will outpace the growth of inflation greatly over this century.

Pensions and other retirement savings grow far faster than inflation (most pension actuaries use 5 percent annual after-inflation growth as a solid predictor). Dividends tend to grow at the same rate as other retirement savings.  That means all the money piling up in 401(k)s and IRAs will eventually push up the real income of seniors of the future.

These key components of income for the "seniors" you see in the picture will grow far faster than inflation over the course of this century.  It's a very reasonable expectation that the little girl getting her tonsils examined by her sister will pay for most of her own Medicare benefit, when she's ready to retire in 60 or so years.  So will her friends, and they will think of that as perfectly normal and fair.

By then, H.R. 2 will be an historical footnote of ancient memory.  But the structural reforms H.R. 2 brought about will pay dividends for taxpayers long after we're gone.

Is there more to be done?  Absolutely.  Does H.R. 2 solve the Medicare crisis?  Of course not.  But it's a very solid down payment on doing so, it points the way forward for even further reforms, and it continues the process of shifting the Medicare program to the fully-funded, debt-free, and free market system we all want to move toward.

The Senate should pass H.R. 2 without delay.

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John R. Graham

Thank you, but the means testing is only funding $34 billion of the cost of the bill, leaving $141 billion added to the debt over ten years. It violates a clearly stated Republican commitment, rendering the budget resolutions meaningless.


Senate Should Reject Tax Hike to Benefit Trial Lawyers


Posted by Ryan Ellis on Thursday, March 26th, 2015, 8:33 PM PERMALINK


This week, the U.S. Senate will vote on an amendment (#587, introduced by Senator Leahy) to the budget resolution. This amendment is a clear payoff to trial lawyers in the form of a brand new tax hike.

The measure would permanently deny employers the ability to deduct punitive damage assessments from lawsuits as a business expense.​

It is not tax reform.  It is a permanent new tax increase.  Taking away this legitimate deduction results in higher taxes.  If it's not canceled out by equal or greater tax relief elsewhere, this income tax increase violates the Taxpayer Protection Pledge.

Businesses can deduct all “ordinary and necessary business expenses” under tax law.  This has always included punitive damage costs.  To deny this well-grounded deduction to employers is arbitrary and clearly intended to benefit a constituency.

Since settlements out of court are still deductible under this tax law change, trial lawyers will be empowered to file junk lawsuits (hoping that employers will choose to settle rather than risk a punitive damage award with no tax benefits). When a lawsuit is settled rather than challenged, the trial lawyer gets a guaranteed win.​

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U.S. Senate Should Reject Price Controls in "Vote-a-Rama"


Posted by Ryan Ellis on Thursday, March 26th, 2015, 10:09 AM PERMALINK


The Senate this week may be voting on a pair of amendments to the budget resolution pertaining to government price controls on prescription medicines.  The Senate should reject any and all such efforts.  They are bad health care policy, they are even worse trade policy, and they're not a free market solution.

Importing Foreign Government Price Controls

One amendment in question would allow Americans to purchase prescription medicines from Canada.  On its face, this is a pro-free market amendment.  Why should the government prevent people from buying goods or services from anywhere they want to, especially from a developed nation like Canada?

The free market answer is that consumers would often not be importing just the medicine, but also the price control.  In most countries, the prescription drug industry labors under burdensome government-imposed price controls.  These price controls allow politicians to give voters seemingly-cheap medicines, but there's a heavy price.  Since the drug companies are left with little or negative profit, there is virtually no money left over to finance the next generation of drug research and development.

One of the only countries left that allows drug prices to be (mostly) set by the free market is the United States.  The profits made here finance the next generation of life-saving and life-improving prescription medicines.  If the U.S. market suddenly gets flooded with price-distorted drugs from all around the world (they only need to make their way to Canada first), our drug market will be permanently-damaged by price controls in other countries.

Think about it this way: suppose you are taking a blood pressure medication that costs you $50 per dose.  This amendment passes, and you start to purchase a medicine from Canada (really, from anywhere) that only costs $20 per dose, thanks to the price control in the other country.  You would be a fool not to take that deal.  Millions of other Americans do the same, and suddenly no one is buying the $50 version of the drug anymore.  No new drugs have entered the country--it's the exact same medicine whether it's a market-set $50 or a government-set $20.  But price controls dictated by foreign bureaucrats have entered the country, totally distorting our drug market.  By importing price controls today, the miracle drugs of the future are strangled in the crib.  All the capital for future R&D is gone.

This type of amendment would be a good idea in a world free of market-distorting price controls.  Free trade is a good thing.  But free trade requires transparent, signal-setting prices set by markets, not by governments.

Price Controls from Our Own Government

A related amendment may also seek to impose price controls on prescription medicines from our own government.  There are already government price controls on medicines purchased in the Medicaid system.  Congressional Democrats would like to expand this price control regime to also include medicines purchased in the Medicare system.  

Doing so is the opposite of a free market solution.  Prices send signals.  If prices are distorted by governments, they can't do their vital job of regulating supply and demand.  

Furthermore, artificially lowering the price of anything--life saving medicines especially included--steals the capital needed to finance the next generation of that good or service.  Government imposed low prices today mean the miracle cures of tomorrow simply never happen.

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ATR Supports Tax Simplification for Seniors


Posted by Ryan Ellis on Thursday, March 19th, 2015, 3:22 PM PERMALINK


Earlier this week, the “Senior Tax Simplification Act” was introduced in both the U.S. House of Representatives and U.S. Senate. Complying with the U.S. tax code costs Americans six billion hours and $168 billion each year.  This legislation will simplify tax compliance for those who need it most – our seniors. ATR supports this legislation and urges all Congressmen and Senators to vote for and otherwise support this bill.

H.R. 1397, introduced by Congressman John Fleming (R-La) and S. 716, introduced by Senator Marco Rubio (R-Fla) would instruct the IRS to create a new 1040 tax form specifically for senior citizens. The form would simplify the process of filing taxes and include information for the most common types of income reported by seniors - interest, dividends, capital gains, Social Security benefits, pension payments, IRA distributions, wages, and unemployment compensation.  

Each year, 21 million returns are filed in households where the primary taxpayer is over 65. The creation of a streamlined tax form will make life easier for these millions of households and lead to a more efficient system.
A similar form already exists for young taxpayers, the 1040-EZ. This form is used by almost 5 million households each year. Given the success of this form in simplifying the tax code for younger workers, there is no reason that seniors should not be given this same assistance.

The Senior Tax Implication Act will provide much needed clarity and grant seniors a more efficient and streamlined process.

 

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ATR Supports Debt and Taxation Transparency for Taxpayers


Posted by Ryan Ellis on Wednesday, March 18th, 2015, 4:43 PM PERMALINK


Senator John Cornyn (R-Texas) introduced S. 745, the “Debt and Taxation Transparency Act of 2015” (DTTA) earlier this week. ATR supports this legislation and urges all Senators to vote for and otherwise support this bill.

Since 2009, the national debt has increased by 70 percent. Taxpayers deserve to know how this unsustainable runaway spending could impact their standard of living and economic well-being.

S. 745 will provide taxpayers with a better understanding of how Washington’s reckless spending affects them.

Specifically, the DTTA ensures that taxpayers will receive a “taxpayer financial statement” which will provide taxpayers with a calculation of their share of the federal government’s financial obligations.

S.745 will provide other important information to taxpayers including a 30-year projection of the increase in federal income tax rates necessary to completely finance the current fiscal path of the federal government, without running a budget deficit, and an estimate of income & payroll tax liability to taxpayers under this 30 year projection.

In addition, DTTA will provide taxpayers with a summary of the most recent Financial Report of the United States, including the long-term fiscal position of the Federal Government.

Taxpayers deserve the truth from Washington about the state of federal finances. This legislation will provide taxpayers with a more complete picture of long-term fiscal conditions. ATR Supports the Debt and Taxation Transparency Act and urges all Senators to support this bill. 

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Double Taxation on Corporate Profits Hurting U.S. Competitiveness

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Posted by Ryan Ellis on Friday, March 13th, 2015, 4:06 PM PERMALINK


A report compiled by Ernst & Young comparing U.S. corporate tax rates to the rest of the developed world has found that America’s inefficient corporate tax regime is hurting U.S. competitiveness – namely through double taxation on economic decision making.

According to the report, the U.S. has the second highest top integrated tax rates amongst 38 developed countries, including the 34 members of the Organisation for Economic Development (OECD) along with Brazil, Russia, India, and China (BRIC). The report calculates integrated tax rates by combining corporate-level taxes with investor-level taxes on dividends and capital gains at national and subnational level.

Most developed countries (but not the U.S.) provide some form of relief from double taxation on corporate profits. Double taxation is a drag on the economy because it distorts important economic decisions, including discouraging capital investment which can lead to the misallocation of resources. It also encourages firms to favor debt over equity financing which can leave them vulnerable during periods of economic weakness.

The 2001/2003 Bush Tax cuts were designed to lessen the impact of double taxation in the U.S. through reduced dividend and capital gains rates and put the U.S. on nearly equal footing with competing nations. Since then, other nations have further decreased their tax burden on businesses, while the 2012 fiscal cliff tax hikes resulted in the US integrated tax rate reaching second highest amongst developed nations.

Several reforms have been proposed to reduce the dividend and capital gains tax burden including a 2014 proposal by Former House Ways and Means Committee Chairman Dave Camp and the White House Budget for FY 2016. Unfortunately, none of these proposals would reduce integrated tax rates to levels below the average among OECD and BRIC countries.

The recently released Rubio-Lee tax plan would go some way to placing the U.S. at the forefront of international competiveness. Not only would this plan implement a zero percent tax rate on capital gains, dividends, and interest, it would also reduce the corporate tax rate to 25 percent. In today’s globalized economy, it is vital that a tax code is internationally competitive and this reform would help achieve that.​​

Photo Credit: 
Jason Dirks

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Medicare Reform to Be Voted on by U.S. House of Representatives


Posted by Ryan Ellis on Thursday, March 12th, 2015, 7:15 PM PERMALINK


Reports are out that the U.S. House of Representatives may this month take up a plan to put in place large structural reforms to the Medicare system.  This is a huge win for conservatives. Entitlement reform is the only way that the growth of government can be controlled this century.

Particularly, the House is considering a plan that controls the growth of Medicare in two key ways

Over time, wealthier seniors would pay for more of their own Medicare benefit, and taxpayers would pay for less of it.  This concept, known as "means testing," already exists in Medicare. Seniors with higher incomes already have to pay for a greater share of their Medicare Part B (physicians) and Part D (prescription medicines) subsidy benefit. 

Under the House's plan, this means testing would increase.  That is a spending cut, and a common sense one. There is no reason why a working family should have to pay taxes to support a Medicare benefit for a recipient who can afford to pay more of it himself. Warren Buffet can pay for his own Medicare quite easily, and should do so.

Reform Medigap plans. Seniors on traditional Medicare often buy a wraparound health plan known as a "Medigap" plan to cover what Medicare does not. Under the House concept, these plans would be reformed so that seniors would see more of the true cost of these Medigap policies.

Ideally, seniors would migrate over to the far more efficient Medicare Advantage market, where Medicare is delivered via a private sector insurance plan in a way familiar to anyone with a health plan at work.  Medicare Advantage plans compete with each other for seniors' business, and therefore deliver a superior health product with much greater value.  Medicare Advantage plans are also far easier starting points for even more comprehensive Medicare reforms.

Together, these Medicare structural reforms represent powerful savings to taxpayers.  But they will take some time to be realized.  Any changes to entitlements must be phased in over time so that younger seniors and workers can adjust their planning accordingly.  But we know that these structural changes will yield a very powerful check on uncontrolled Medicare spending.  For example, President Obama's own budget says that increasing means testing in Medicare results in a $16 billion annual savings in 2025 alone.  This number will get bigger and bigger as time goes on.

What is the incentive of Congressional Democrats and President Obama to agree to structural Medicare entitlement reform?  House Republicans will offer in exchange a permanent repeal of the "Sustainable Growth Rate," or SGR.  Under SGR, Medicare reimbursements to doctors is threatened to be cut by about 25% starting this year.  I've written far more about SGR here.

There's just one problem with SGR--it's a fake, phony spending cut.  Congress has delayed its implementation 17 times since 2003.  Congress will no doubt delay the SGR spending cut (via a "doc fix") another 17 times in the years to come.

Critics of this swap claim that the 17 doc fix delays were accompanied by spending cut offsets, so we should continue to use doc fix for leverage.  The first problem with that thinking is that many of the spending cuts were gimmicky.  The second problem is that large structural changes to Medicare are a FAR bigger prize.  Over time, trillions of dollars of Medicare's unfunded debt liabilities will be saved with this plan.  All we will have surrendered in return is a theoretical, never-gonna-happen spending cut of far smaller size.

Even Medicare's own actuaries--whose job it is to accurately forecast the costs of Medicare--think SGR is not going to accomplish what it sets out to do. All SGR actually does is create a gravy train for lobbyists and political fundraisers to enact the next "doc fix."  Removing it would stop Medicare from cooking the books on its true costs, and would take away a huge amount of political corruption in the health care sector.  Conservatives should hate SGR, and view its replacement with large structural Medicare reforms as a win-win of the highest order.

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ATR Supports H.R. 1104, the "Fair Treatment for All Donations Act"

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Posted by Ryan Ellis on Thursday, March 12th, 2015, 5:48 PM PERMALINK


Congressman Peter Roskam (R-Ill.) recently introduced H.R. 1104, the "Fair Treatment for All Donations Act."  ATR strongly endorses this legislation, and urges all Members of Congress to vote for and otherwise support it.

H.R. 1104 would prevent the IRS from assessing gift tax on contributions to certain non-profit organizations.  Americans for Tax Reform and most other free market groups are organized under Section 501(c)(4) of the Internal Revenue Code, and are therefore affected.

The IRS has, in the past, sought to tax donors to politically-selected non-profit groups on the conservative side of the spectrum.  The mechanism to do so has been a perverse enforcement of the federal gift tax.  H.R. 1104 precludes this tactic in the future.

Under federal gift tax rules, a gift giver must file a gift tax return and pay any applicable taxes for any gift of at least $14,000 to any one person over the course of a year.  The intention behind this is to prevent wealthy taxpayers from divesting their estate before they die, and before that estate is potentially subject to the death tax.  The gift tax was never intended to affect voluntary donations to non-profit groups.

The IRS has tried to assert that 501(c)(4) groups are "persons" under the tax code, and therefore any donations to them in excess of $14,000 should trigger tax consequences to the donor. No serious tax expert would say that this interpretation holds water, but it was nonetheless asserted by the IRS as recently as 2011.

It was clear then that the IRS was seeking to pervert the gift tax and use it as an intimidation device against potential donors to conservative non-profits.  This was happening at the same time as Lois Lerner was denying conservative and Tea Party non-profits the ability to organize and get tax status, so it's clear the gift tax gamesmanship was part and parcel of the same conspiracy against the conservative movement by the IRS.

The gift tax arrow needs to be permanently removed from the IRS' political quiver. H.R. 1104 would do just that.  The IRS should not be used as a political tool by any president, from either party.

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