Ryan Ellis

ATR Expresses Disappointment in<br> H.R. 4213, the "Tax Extenders Act of 2009"

Posted by Ryan Ellis on Tuesday, December 8th, 2009, 6:30 PM PERMALINK

Americans for Tax Reform president Grover Norquist today sent the following letter to House Ways and Means Chairman Charlie Rangel (D-N.Y.):


On behalf of Americans for Tax Reform, I wanted to express my disappointment in H.R. 4213, the “Tax Extenders Act of 2009.”  In particular, this bill continues a bad tax practice which has been characteristic of your reign as Chairman of Ways and Means: namely, temporarily extending current tax law and “paying for it” with new, permanent tax increases.

Every year or two, Congress “extends” tax provisions which are scheduled to expire.  Congress only lets these provisions threaten to expire to create a “must-pass” bill.  This bill often becomes a vehicle for controversial legislation.  While unseemly, this “train leaving the station” tactic has been used by many Congresses controlled by both Republicans and Democrats.

What makes this tactic distasteful in recent years has been the Democrat leadership’s attempt to legislate permanent new tax hikes merely to extend current tax law.  The new tax hikes are permanent, while the extended tax law is only one or two years.  Over time, the accumulation of these new and permanent tax hikes results in very large increases in the overall net tax burden.

H.R. 4213 has one new tax increase that will hit hardest on charities, university endowments, and defined benefit pension plans.  The bill taxes capital gains earned by investment partnership managers not as capital gains (which is what they are), but as ordinary income.  This raises the tax rate on this “carried interest” in an investment partnership from 15 percent today to 35 percent in 2010 and 39.6 percent in 2011.  Managers of investment partnerships will demand a bigger profit share to compensate for these higher taxes.  That reduces the profit remaining for the limited partners—who are most often charities, university endowments, and defined benefit pension plans.

This bill is anti-taxpayer.  Requiring taxpayers to give Uncle Sam more money just to keep current tax rules in place is akin to paying the mob not to smash your windows in.

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Obama Tax Panel to Create "Public Option"<br> Boondoggle in Tax Return Preparation

Posted by Ryan Ellis on Monday, December 7th, 2009, 5:36 PM PERMALINK

There's a lot of talk in Washington these days about a so-called "public option" in healthcare.  It would be a bad thing, because it would create a taxpayer-subsidized competitor to private sector insurance companies.  Most people suspect that, over time, this subsidization would incent people to enroll with the "public option" over private providers.

The "public option," therefore, is simply single-payer health insurance with an additional step to make it less obvious.

It might surprise you that the Obama Administration is looking to do something similar with, of all things, tax preparation.  Former Federal Reserve Chairman Paul Volcker is heading up a commission to reform both the tax code and tax administration.  The final report was due out this month, but has been delayed until after the holidays.

It's widely expected that a new "public option" for tax preparation will be included in the recommendations.  Like its health insurance cousin, a tax-prep public plan would eventually cripple the private sector tax preparation industry.

Why should you care?  Well, if the IRS (or another government agency) is preparing your tax return, all the many gray areas of a return would be ruled in favor of the government (that is, in favor of higher taxes).  Think of it like a football officiating crew hired by the home team.  Would you want to play on that field?

As we get closer to the release date, ATR will have a "Fact of the Day" on why private tax preparation is good for taxpayers, and why a government-run tax prep regime would be a stealth tax increase.

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Comprehensive List of Marriage Penalties<br> In House and Senate Healthcare Bill

Posted by Ryan Ellis on Monday, December 7th, 2009, 4:30 PM PERMALINK

It's not often you see good, solid policy analysis coming out of a Congressional campaign.  A happy and notable exception is this study by Allen Quist, a candidate for Congress in the first district of Minnesota.

He's put together a comprehensive list of all the marriage penalties in the Senate health bill.  You can read the full list on his website.  Suffice it to say, there is a huge incentive in these bills to co-habitate rather than get married.  There is also a huge incentive to try to make less than 400 percent of the federal poverty line.

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ATR Will Rate Any and All Votes To Kill the Death Tax

Posted by Ryan Ellis on Thursday, December 3rd, 2009, 12:36 PM PERMALINK

This afternoon, the House will be voting on a bill to permanently create a death tax with a 45 percent rate and a $3.5 million exemption.  This bill has many challenges, and will not be supported by Americans for Tax Reform.

The House Republicans will be offering an alternative to kill the death tax permanently.  ATR is proud to support and endorse this effort, and will be key-voting in favor of full and permanent death tax repeal  in our annual “Hero of the Taxpayer” awards.

Should the House GOP not prevail in their push for full and permanent death tax repeal, they may next attempt to extend the scheduled 2010 temporary repeal of the death tax for a longer period.  ATR would be proud to support a temporary extension of 2010’s “no death tax” rules should permanent repeal be off the table.  We would urge all members to support it, and will be key-voting in favor of such a vote in our annual “Hero of the Taxpayer” awards.



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Five Job Killers That Won't Be Discussed<br> At the White House "Jobs Summit"

Posted by Ryan Ellis on Thursday, December 3rd, 2009, 6:00 AM PERMALINK

The White House today is hosting a “jobs summit” which is meant to discuss how to prevent further job losses (nearly 3 million since the stimulus passed).
“Employers are hesitant to create jobs because of looming threats on the horizon—threats caused by the policies pursued by President Obama, Speaker Nancy Pelosi, and Leader Harry Reid,” said ATR President Grover Norquist.  “Job losses will continue and future job creation will be impeded until at least some of these dangers are removed:”

Looming tax hikes.  On New Years Day 2011, just thirteen months from now, job creators will see a tidal wave of new taxes.  The tax rate at which two-thirds of small business profits are taxed will rise from 35 percent to 39.6 percent.  Start-up firms looking to attract investment will see the capital gains tax rise from 15 to 20 percent.  Family farms and small businesses will see a death tax with a 55 percent top rate and a paltry $1 million exemption. How can businesses think about expanding in this tax environment?

Government-controlled healthcare.  The House and Senate are debating healthcare bills which put even more taxes on small businesses (the House bill creates a new “surtax” on them), and all employers (if they don’t purchase expensive health insurance for their employees).  With the fate of government-controlled healthcare up in the air, and the possibility of new mandates and taxes, who would take on more employees?

Forced unionization. Under the card check bill, entrepreneurs looking to expand their businesses and hire new employees will have to evaluate if they are bringing in a union organizer.  The unions will be allowed to bring government arbitrators to force businesses into binding contracts that determine wages, benefits, pension plans, etc. Approximately 600,000 jobs would be lost in the first year alone.

Energy taxes and regulations. Climate change legislation is quite possibly the single greatest threat to jobs today. If passed, the increased taxes, costs, and regulations will drive jobs out of this country at a staggering pace. Even if you consider the “green jobs” that proponents claim will be created, The Heritage Foundation found that 1,145,000 net jobs would be lost per year because of the Waxman-Markey bill.

Protectionism. While protectionist measures are often enacted for the purpose of shielding domestic industries from "unfair trade practices," all indications are that they instead punish the multiple industries that rely on imports for their material inputs such as steel and raw materials.  When input costs increase as a result of a rise in import tariffs, industries must cut costs elsewhere, the most likely being labor costs, meaning jobs.  This was the case in 2002 when an increase in the price of steel tariffs resulted in 200,000 American jobs lost.

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Baucus Lies About Tax Hikes in Senate Health Bill

Posted by Ryan Ellis, John Kartch on Wednesday, December 2nd, 2009, 10:23 AM PERMALINK

Speaking on the U.S. Senate floor on Monday, Max Baucus falsely claimed that the health bill under consideration does not raise taxes:

“I have also heard it argued that health care reform will raise taxes.  That, too, is false. In fact, health care reform will provide billions of dollars in tax relief to help American families and small businesses afford quality health insurance—tax cuts.  The Joint Tax Committee—again bipartisan and which serves both the House and the Senate—tells us, for example, that our bill would provide $40 billion in the tax cuts in the year 2017 alone—$40 billion in tax cuts in the year 2017.”
In fact, the net tax increase (that is, taking into account the tax cuts Baucus mentions) in 2017 alone is a staggering $132.5 billion. Over the first decade of the tax increases taking effect, the net tax increase easily exceeds $1 trillion. 
“Senator Baucus needs to explain how a ten-year, trillion-dollar net tax increase is actually a tax cut,” said Grover Norquist, president of Americans for Tax Reform.
The official tax score for the bill is provided by the Joint Tax Committee (JCT) and the Congressional Budget Office (CBO). In 2017 alone, they report a net tax hike of $132.5 billion – not a tax cut as Sen. Baucus claims. Over the ten-year scoring window, they report a net tax hike of $857.9 billion.
Americans for Tax Reform (ATR) has compiled a comprehensive list of all the tax increases in the Senate health bill. (To view the complete list, click here) Among other things, the bill raises taxes on current health insurance plans, families lacking health insurance, and small employers.
“After Senator Baucus is through actually reading the official tax score, he might want to read ATR’s list detailing the eighteen separate tax increases in this bill,” said Norquist.

Click here for a printable PDF of this document


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ATR Supports Full Repeal of Death Tax

Posted by Ryan Ellis on Monday, November 30th, 2009, 2:56 PM PERMALINK

ATR sent the following letter today to Congress (read full version):


This week, the U.S. House of Representatives is scheduled to vote on H.R. 4154, a bill which would create a permanent death tax structure with a top rate of 45 percent and an exemption level of $3.5 million.

H.R. 4154 is a tragic departure from years of Congressional intent to kill the death tax.  Rather than bury the death tax in a mere 31 days (as is called for under current law), this bill would create a new 45 percent rate in 2010 and into the future.

H.R. 4154 fails to index the death tax for inflation.  By setting the exemption at the 2009 level of $3.5 million and failing to index to CPI, more and more households, small businesses, and family farms will find themselves with a death tax liability.  The same is true of the death tax brackets—the top rate will apply to taxable estate sizes over $1.5 million.  Assuming historical inflation, these death tax levels will be cut in half in real terms with every passing generation (20 to 25 years).  This “death tax generational bracket creep” harkens back to the stagflation and savings erosion of the 1970s.

H.R. 4154 would leave the United States with the third-highest death tax rate in the developed world.  According to a 2007 study by the American Council for Capital Formation, only South Korea and Japan would have a higher top death tax rate than the U.S.  In fact, half of the developed countries in their survey have no death tax whatsoever.  In a world of increasingly-mobile capital, having one of the highest death tax rates in the world simply makes no sense.

H.R. 4154 would leave in place the most unpopular tax among U.S. voters.  Polls consistently have shown for nearly two decades that between 67 and 75 percent of likely voters favor full and permanent repeal of the death tax.  This is remarkable considering that only a small percentage of estates will ever be liable for the tax.  Any Congressman voting for H.R. 4154 would find themselves in a decided minority.

Americans for Tax Reform remains committed to fully and permanently repealing the death tax.  We stand willing to support legislation which does so.

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Senate Health Bill Raises Taxes<br> On Special Needs Kids and Their Families

Posted by Ryan Ellis on Friday, November 20th, 2009, 2:01 PM PERMALINK

  • There are 18 separate tax hikes in the Reid-Obama healthcare bill.  One of them caps the amount that can be deferred in Flexible Spending Accounts (FSAs) at $2500 per year (a similar provision was included in the Pelosi-Obama health bill and written about by Congressman Cathy McMorris-Rogers, R-Was., for National Review Online).  There is currently no limit to how much can be saved, though all monies must be used by the end of the year.  Employers may put a cap in place for their employees, but this would put a cap in federal tax law for the first time.  According to the Employee Benefit Research Institute (EBRI), 30 million American families use an FSA. 
  • For most people, the $2500 cap won’t be noticed.  FSAs tend to be used for things like small deductibles, co-payments, eyeglasses, over-the-counter medicines, and laser eye surgery.  The amount deferred in the typical FSA is probably much less than $2500 today 
  • There is one group of FSA owners for whom this new cap will be particularly-cruel and onerous: parents of special needs children.  There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education.  Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. 
  • Under tax rules, FSA dollars can be used to pay for this type of special needs education.  According to IRS Publication 502, Medical Expenses:

    You can include in medical expenses fees you pay on a doctor's recommendation for a child's tutoring by a teacher who is specially trained and qualified to work with children who have learning disabilities caused by mental or physical impairments, including nervous system disorders.

    You can include in medical expenses the cost (tuition, meals, and lodging) of attending a school that furnishes special education to help a child to overcome learning disabilities. A doctor must recommend that the child attend the school. Overcoming the learning disabilities must be a principal reason for attending the school, and any ordinary education received must be incidental to the special education provided. Special education include teaching Braille to a visually impaired person; teaching lip reading to a hearing-impaired person, or giving remedial language training to correct a condition caused by a birth defect.

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How Does the Reid-Obama Health Bill<br> Raise Taxes on Your Current Health Plan?

Posted by Ryan Ellis on Thursday, November 19th, 2009, 6:23 PM PERMALINK

Many people have heard that the Reid-Obama government healthcare bill will raise taxes.  What you might not realize is that many of the tax hikes raise taxes on the health insurance you already have today—endangering the health security of you and your family.  Here’s how:

Excise Tax on Comprehensive Health Insurance Plans (Page 1979/Sec. 9001/$149.1 bil): Starting in 2013, new 40 percent excise tax on “Cadillac” health insurance plans ($8500 single/$23,000 family).  Higher threshold ($9850 single/$26,000 family) for early retirees and high-risk professions.  CPI +1 percentage point indexed.  From 2013-2015, the 17 highest-cost states are 120% of this level. 

Employer Reporting of Health Insurance Costs on W-2 (Page 1996/Sec. 9002/Min$): Preamble to taxing health benefits on individual tax returns.

Medicine Cabinet Tax (Page 1997/Sec. 9003/$5 bil): No longer allowable to use health savings account (HSA), flexible spending account (FSA), or health reimbursement arrangement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin)

HSA Withdrawal Tax Hike (Page 1998/Sec. 9004/$1.3 bil): Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

FSA Cap (“Special Needs Children Tax”) (Page 1999/Sec. 9005/$14.6 bil): Imposes cap on FSAs of $2500 (now unlimited).  Will most hurt families of special-needs children, who tend to use outsized FSA deferrals.

Tax on Innovator Medicine Companies (“Miracle Cures Tax”) (Page 2010/Sec. 9008/$22.2 bil): $2.3 billion annual tax on the industry imposed relative to share of sales made that year.

Tax on Medical Devices Like Prosthetic Limbs, Wheelchairs, and Pacemakers (Page 2020/Sec. 9009/$19.3 bil): $2 billion annual tax on the industry imposed relative to shares of sales made that year.  Exempts items retailing for <$100.

Tax on Health Insurance Premiums (Page 2026/Sec. 9010/$60.4 bil): $6.7 billion annual tax on the industry imposed relative to health insurance premiums collected that year.

Eliminate tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D (“Retiree Rx Tax”) (Page 2034/Sec. 9012/$5.4 bil).  Will make employer-provided Rx coverage for retirees less available.

Raise “Haircut” for Medical Itemized Deduction from 7.5% to 10% of AGI (Page 2034/Sec. 9013/$15.2 bil): Waived for 65+ taxpayers in 2013-2016 only.  Will make it more difficult for working families to deduct medical expenses on their tax return.

Tax on Cosmetic Medical Procedures (“Botox Tax”) (Page 2045/Sec. 9017/$5.8 bil): New 5% excise tax on elective cosmetic surgery to be paid by the surgery patient

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Senate Health Bill Breaks<br> Obama's $250,000 Tax Promise

Posted by Ryan Ellis on Wednesday, November 18th, 2009, 10:11 PM PERMALINK

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Over and over again, President Obama has promised not to raise “any form” of taxes on families making less than $250,000 per year.  Yet, the U.S. Senate is getting ready to consider a government healthcare bill which does just that.  Here’s how:

Health Insurance Mandate Taxes on Working Families

Individual Mandate Tax (Page 324/Sec. 1501/$8 bil): Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax according to the following schedule (capped at 8 percent of income):

  Single Single +1 Single +2 <
2014 $95 $190 $285
2015 $350 $700 $1050
2016, etc. $750 $1500 $2250

Exemptions for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes, and hardship cases (determined by HHS).

Employer Mandate Tax (Page 348/Sec. 1513/$28 bil):  If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $750 for all full-time employees.  Applies to all employers with 50 or more employees.

If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer).

Small business owners pay their taxes on their owners’ personal tax returns.  Since this provision does not exempt business owners making less than $250,000 per year, this employer mandate tax will violate President Obama’s promise in some cases.

Tax Hikes on Healthcare Spending Accounts
Medicine Cabinet Tax (Page 1997/Sec. 9003/$5 bil): No longer allowable to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin)

HSA Withdrawal Tax Hike (Page 1998/Sec. 9004/$1.3 bil): Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

FSA Cap (Page 1999/Sec. 9005/$14.6 bil): Imposes cap on FSAs of $2500 (now unlimited).

Tax Hikes on Medical Spending for Those Making Less Than $250,000

Raise “Haircut” for Medical Itemized Deduction from 7.5% to 10% of AGI (Page 2034/Sec. 9013/$15.2 bil): Waived for 65+ taxpayers in 2013-2016 only

Tax on Cosmetic Medical Procedures (Page 2045/Sec. 9017/$5.8 bil): New 5% excise tax on elective cosmetic surgery to be paid by the surgery patient

If President Obama is serious about his tax pledge, he should immediately renounce the bill.


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