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Ryan Ellis

100 Years of the Federal Income Tax: Then and Now


Posted by Ryan Ellis on Friday, October 4th, 2013, 12:30 PM PERMALINK


On this date 100 years ago, President Woodrow Wilson signed into law the Revenue Act of 1913. Let’s take a look at how the income tax became the raw deal it is today::

View PDF here.

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Cory Booker's Tax Increase Plan


Posted by Ryan Ellis on Thursday, September 26th, 2013, 6:17 PM PERMALINK


BookerFail.org already did a great write-up of the Booker tax plan earlier today, so I won't repeat the good work they've done there.  I would just add four thoughts:

The Booker plan is a net tax hike of $500 billion to $1 trillion.  BookerFail demonstrated that the gross tax increases in the plan total some $1.5 trillion over the next decade.  Giving Booker credit for his corporate income tax rate cuts and other tax relief lowers the impact, but it's still a massive net tax hike.  Using a back of the envelope calculation, we'd estimate the net burden at more than $500 billion but less than $1 trillion over ten years.

The Booker plan is a straight rip-off from the Obama 2012 re-election campaign.  Reading the proposal would give tax experts flashbacks to this February 2012 campaign document, or even this more recent dust-off of the same.  Call it "tax reform by copy and paste."  And you thought most politicians were lazy.

The plan would still leave New Jersey employers paying the highest income tax rate in the developed world (almost).  The plan touts a cut in the federal corporate income tax rate from 35% to 28%.  A 28% federal rate doesn’t get you anywhere, though, if you’re looking to help international competition. 

New Jersey’s corporate rate is 9%, so you would still have a combined marginal rate of 34.5%, even after accounting for the deductibility of the state tax on federal returns.  Compare that to the developed nation average, which is under 25%.  New Jersey employers would still be paying the highest tax rate in the developed world, except for outlier country Japan (who has a 37% rate).  

New Jersey incorporated employers would still face a higher marginal income tax rate than major global competitors Canada, Mexico, the U.K., France, and Germany.

The plan raises taxes on New Jersey partnerships, Subchapter-S corporations, LLCs, and other startups.  Booker has no plan to lower the tax rate for unincorporated small businesses in New Jersey.  That rate easily approaches 50% (federal-state combined).  Why does Booker want to lower rates for giant multinational companies (and even here, not enough to make a difference), but not for Main Street New Jersey small and mid-sized employers?  Does he not know how the tax system is set up for employers?

According to the IRS, New Jersey is home to over 600,000 sole proprietors, and nearly 300,000 owners of partnerships and S-corporations.  These 900,000 New Jersey business owners won't get rate relief under the plan, but they will pay all the tax increases.  That's not fair.

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ATR Supports H.R. 3077, the "TELE-MED Act"


Posted by Ryan Ellis on Monday, September 23rd, 2013, 3:19 PM PERMALINK


ATR supports H.R. 3077, the "TELE-MED Act," sponsored by Congressman Devin Nunes (R-Calif.)  This legislation advances a common-sense update to Medicare rules which should inject more competition into the program, make it work more efficiently for taxpayers, and give a wider range of services to Medicare beneficiaries.

H.R. 3077 would permit Medicare patients to receive care from doctors across state lines, using consultations on the Internet, by telephone, etc.  As long as a doctor is licensed in his home state, he will be able to provide care and consulting to patients living in other states.

While a small improvement, this is exactly the type of consumer-driven change Medicare needs.  Patients should not be restricted by antiquated rules into seeking out care within only an arbitrary political boundary.  In the 21st century, those boundaries don't mean a whole lot in most areas of business, and they should not be determinative in Medicare, either. 

It would surprise most people that Medicare patients are not free to contract across state lines today, and there's no good reason why seniors shouldn't be able to do so going forward.

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ATR Supports H.R. 3093, the "Union Bailout Prevention Act"


Posted by Ryan Ellis on Friday, September 20th, 2013, 4:36 PM PERMALINK


ATR is proud to support H.R. 3093, the "Union Bailout Prevention Act," sponsored by Congressman Diane Black (R-Tenn.) 

The bill would prevent the Obama Administration from granting an Obamacare waiver to Big Labor.  Under the law, union-negotiated health insurance plans cannot benefit from the premium tax credits contained in Obamacare.  Big Labor would like a waiver to change that.

Where were the unions when they had a chance to stop Obamcare?  Answer--they supported its passage.  To seek a sweetheart deal now is not acceptable.  They helped make this bed, and they should have to sleep in it along with the rest of us.

H.R. 3093 makes it abundantly-clear that unions are to get no special treatment from this administration when it comes to Obamacare.  If the unions want to help us repeal the law, they are welcome to join us.

All Congressmen who want to make sure there are no more Obamacare waivers--especially for those who supported the law's passage--should co-sponsor H.R. 3093.

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ATR Supports the "American Health Care Reform Act"


Posted by Ryan Ellis on Tuesday, September 17th, 2013, 4:13 PM PERMALINK


Americans for Tax Reform today sent a letter to Congressman Phil Roe (R-Tenn.) supporting his new bill, the "American Health Care Reform Act."  Congressman Roe is the head of the Republican Study Committee's health care task force.  A copy of the letter can be found here.

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19 Free Market Groups Support Blackburn-Flake Obamacare Delay Legislation


Posted by Ryan Ellis on Friday, September 13th, 2013, 12:02 PM PERMALINK


A number of free market groups today threw their weight behind legislation to delay the (upcoming) worst parts of Obamacare for one year, and to suspend all tax increases in Obamacare for one year.

The legislation has been introduced in the House by Congressman Marsha Blackburn (R-Tenn.) as H.R. 2809.  In the other body, Senator Jeff Flake (R-Ariz.) has companion legislation, S. 1490.

Delayed provisions would include: the individual and employer mandates; the Medicaid expansion; the Obamacare exchanges, and the dozens of new powers Obamacare gives to the IRS.

Suspended taxes (there are 20 new or higher taxes in Obamacare) include: the 3.8 percent surtax on savers and investors; tax hikes on HSAs and FSAs; the "medicine cabinet tax"; the "high medical bills tax"; the medical device tax, and a host of others.

Full text of the letter can be found here.

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Tecchies

As a company offering IT support Blackburn in the UK, I ask what do you think of medicine cabinet tax?


ATR Supports Tax Equity for Cannabis Dispensary Employers


Posted by Ryan Ellis on Thursday, September 12th, 2013, 9:56 AM PERMALINK


It's a basic principle of taxation that the code should not pick winners and losers or discriminate unfairly against certain classes of taxpayers. 

That principle is being violated today for a newly legalized industry--cannabis dispensaries.  Unlike any other business type in the country, these firms and these firms alone are not free to deduct "ordinary and necessary" business expenses like wages, equipment, and rent.  H.R. 2240 fixes this quirk of tax law and restores fairness for these employers.

ATR today released a study explaining this issue and the policy solution for it.  ATR also sent a letter to Capitol Hill urging co-sponsorship of H.R. 2240.

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Are Credit Unions an Example of Bad Tax Policy?


Posted by Ryan Ellis on Thursday, September 5th, 2013, 3:15 PM PERMALINK


This week in Politico, a food fight broke out with banks tossing some volleys at credit unions.  The banks claim that credit unions are the beneficiaries of unfair tax treatment, and that this tax treatment should be eliminated as part of comprehensive tax reform.  Are they correct?

How are credit unions taxed?  Credit unions, unlike banks, are not set up as for-profit entities.  They are organized in specific areas, or for specific workforces, etc. as a type of non-profit.  There are 7000 credit unions with just under 100 million members.  Because they are non-profit, credit unions don't face entity level taxation.

So does that mean credit unions escape taxation?  No.  Credit unions plow their earnings back as benefits to members. That means credit union members get higher interest paid to them on savings deposits, and lower interest rates quoted to them for mortgages, car loans, and other debt.

In turn, the members end up paying more taxes on the interest received, and lose out on deductions for mortgage interest and business loans compared to their banking neighbors.  The net effect for federal coffers is pretty close to a wash.

In a way, credit unions are to flow-through businesses (partnerships, S-corporations, etc.) as banks are to C-corporations. 

So the question is not whether or not taxes get paid, but merely the incidence.  Banks face tax incidence primarily at the source level.  Credit unions face taxation primarily at the customer level.  It's simply two different business models with two different ways of imposing taxes.

How much does the government say it loses in taxes by not taxing credit unions at the entity level?  According to the "tax expenditure" report cited in the news article, this is about $2 billion per year.

That's probably over-stating it.  Almost certainly, the government is not counting the higher-than-bank-customer taxes paid by credit union members for the reasons stated above.

But even ignoring this, $2 billion is simply not a large tax item.  The context is that there are $1.2 trillion (with a "t") in annual tax preference items.  It's a small fraction of a percent of what's at play.

Why did such a small and arguably policy-correct tax item end up in the press?  Simple.  Businesses in Washington, DC like to publicly throw each other under the bus to gain a perceived advantage.  That's clearly what banks are doing here.

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ATR Supports H.R. 2927, the "No Taxation Without Verification Act"


Posted by Ryan Ellis on Friday, August 2nd, 2013, 4:56 PM PERMALINK


ATR is very supportive of H.R. 2927, the "No Taxation Without Verification Act," sponsored by Cong. Gus Bilirakis (R-Fl).  All Members of Congress should co-sponsor this common sense legislation.

The bill provides a very simple protection for taxpayers: no tax or fee (or hike in taxes) can be implemented until the Treasury Secretary can certify with 100 percent no-fraud assurance that those applying for Obamacare exchange subsidies are accurately reporting their employer status, employee income level, and health care status.

In July 2013, the Obama Administration announced that those applying for Obamacare exchange subsidies would be doing so on "the honor system."  This means that someone, innocently or not, could receive a much bigger exchange subsidy than they are entitled to.  The "honor system" would accept as given answers to questions like: "does your employer offer qualifying, affordable health insurance at work?"; "what is your income level?"; and various questions about health status.

Should the exchange subsidy be bigger than what it should have been, the taxpayer could be on the hook for paying back the difference to the IRS.  In the case of a taxpayer who made an honest mistake or was bullied into signing up by an Obamacare "navigator," this burden will be doubly-unfair. 

H.R. 2927 prevents all this.  It would effectively stop the rushed "honor system" exchange subsidy in its tracks.  Unless and until taxpayers are protected from fraudulent or merely errant claims being made, they should not fear that their tax dollars are being used badly.  H.R. 2927 is a good step toward delaying the "not ready for prime time" Obamacare law.

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25 Conservative Leaders Support Getting IRS Out of Obamacare


Posted by Ryan Ellis on Thursday, August 1st, 2013, 6:00 AM PERMALINK


22 leaders of free market groups sent the following open letter (full PDF) to the House of Representatives today:


Dear Congressmen:


We, the undersigned organizations and free market leaders write in united support of House efforts this week to get the IRS out of Obamacare.
 
The House will consider a measure on Friday sponsored by Congressman Tom Price (R-Ga.) to remove the IRS from any role in the implementation of the Obamacare law.  
 
It’s a basic belief of most Americans that patients, families, and doctors—not IRS bureaucrats--should be making health care decisions.  While this has always been the case, its importance has been heightened in recent months by the uncovered political targeting by the IRS of Tea Party and other free market groups.  The IRS should not be anywhere near people’s medical decisions until this black cloud of political scandal has been lifted.
 
Unfortunately, the GAO reports that the IRS has no fewer than 47 powers to implement Obamacare.  That’s 47 too many.  Allowing the IRS to enforce Obamacare is opening up the door to more abuse, more targeting, and more harassment of American citizens.  The myriad of new taxes the IRS will impose under the guise of health care reform will destroy jobs, stifle economic growth, and impede medical innovation in this country.
 
With Obamacare coming fully online in 2014, now is the time to stop the IRS from becoming a full partner in our families’ healthcare decisions.  House efforts to prevent this from happening are welcome and all Members of Congress should support these efforts.
 


Sincerely,

Grover Norquist, Americans for Tax Reform
Dean Clancy, Freedom Works
Al Cardenas, American Conservative Union
Amy Kremer, Tea Party Express
Jenny Beth Martin, Tea Party Patriots
Heather Higgins, Independent Womens’ Voice
Steven J. Duffield, Crossroads GPS
Brandon Arnold, National Taxpayers Union
Colin Hanna, Let Freedom Ring
Jim Martin, 60 Plus Association
Grace-Marie Turner, Galen Institute
Phil Kerpen, American Commitment
Penny Nance, Concerned Women for America
Sally Pipes, Pacific Research Institute
Ken Hoagland, Restore America’s Voice
John Tate, Campaign for Liberty
Peter Ferrara, National Center for Policy Analysis
Ari Winkour, Harbour League
Gregory T. Angelo, Log Cabin Republicans
Mark Schiller, MD, Doctor-Patient Medical Association
Betsy McCaughey, Ph.D, author of Beating Obamacare
David Williams, Taxpayers Protection Alliance
Brian Baker, Ending Spending
David Wallace, Restore America’s Mission
Kathryn Serkes, Take Back Washington

(Signatures are for information purposes only).

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