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Ryan Ellis

Tonight's Press Conference: Five Questions for Obama


Posted by Ryan Ellis on Tuesday, March 24th, 2009, 5:55 PM PERMALINK


Americans for Tax Reform suggests the following five questions be put to President Obama during his press conference tonight:

1. Which of the tax increases in your budget will create jobs?  Is it raising the small business tax rate?  Is it imposing over a trillion dollars of new taxes on American energy?  Is it raising the capital gains and dividends tax on our nest eggs?  Why do any of these things to our economy?
 
2. Secretary Geithner came out with a plan for the government to help buy up toxic assets. What gives you confidence that Geithner can do this considering what just happened with the AIG bailout?
 
3. By expanding government to record levels, your budget crowds out private sector investment. How does this contribute to economic growth or create jobs?
 
4. Labor unions are still making a push for the so-called "card check" bill that would also impose binding arbitration in collective bargaining. Do you think a recession is the time to change the rules in favor of Big Labor?
 
5. What's the highest marginal tax rate any American should have to pay?  Many polls say that most Americans believe that figure is 25 percent. What do you think?

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ATR Urges "No" Vote on<br> H.R. 1596, AIG/Geithner Bailout Bill


Posted by Ryan Ellis on Thursday, March 19th, 2009, 12:10 PM PERMALINK


ATR STATEMENT ON DEMOCRAT POLITICAL PLOY TO
COVER UP SECRETARY GEITHNER’S
AIG BAILOUT SCANDAL


***LEGISLATIVE VOTE ALERT***


Americans for Tax Reform remains STRONGLY OPPOSED to H.R. 1596, the Rangel-Pelosi bill to tax AIG bonuses in order to deflect blame from Secretary Geithner’s failed mismanagement of Treasury funds. 

Secretary Geithner and the White House promised taxpayers that every penny of their latest bailout would be well-spent.  AIG has received $170 billion in taxpayer money, and recently announced that it was granting $165 million in bonuses for AIG executives.

It was wrong for President Obama to put as head of the Treasury Department someone who didn’t pay all his taxes.  It was wrong for Congress to vote to give taxpayer money to bail out failing companies.  It was wrong for Chris Dodd to carve out a special deal for his friends and donors at AIG.  It was wrong of Geithner to hand out funds without any protection for taxpayers (such as the Geithner AIG bonus scandal).

The Democrats in Congress are now trying to cover up their expensive mistakes, and to protect Obama, Dodd and Geithner (who made these bad decisions).

The Democrat ploy to cover up and detract from the Obama/Geithner/AIG scandal is to pass a bill of attainder, probably unconstitutional, to pretend to recoup perhaps one-tenth of one percent of the $160 billion they have given AIG.


ATR urges Members of Congress who care about taxpayers to vote “no” on this ploy.  The Democrat leadership is bringing this cover-up vote under “suspension,” which means it requires a two-thirds vote.  Unlike most House votes, a pro-taxpayer minority can actually stop this measure.

ATR urges all Members to vote “no,” to demand that Geithner resign, and that Congress enact real legislation forbidding future bailouts and specifically banning AIG from receiving further funds.

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AIG Bonuses Are Reason to End<br> All Bailouts, Past and Future


Posted by Ryan Ellis on Wednesday, March 18th, 2009, 4:12 PM PERMALINK


Americans for Tax Reform, a grassroots policy activist organization opposed to any and all tax hikes,  today announced their opposition to the proposed "AIG Bonuses" excise tax.

In recent days, bailout-recipient AIG has come under fire for going ahead with bonus payments to executives and other employees.  The criticism has been that companies that receive bailout money funded by taxpayers should be sharing the pain that taxpayers are facing.

"Let's be clear---the bailout should have never happened, no matter who is benefitting,  No more bailout money should be paid.  Any monies that are set to go out should be immediately-rescinded," said ATR President Grover Norquist.  "But two wrongs don't make a right.  A tax increase does not 'make up for' a bad decision on spending.  If politicians decide that taxes need to be raised on AIG executives, they should at least have the decency to cut taxes somewhere else."

This tax increase--which to date has been written behind closed doors and with no input from the public or policymakers--would take the form of an excise tax hike on executive compensation packages.  Going forward, the mechanisms used in this bill might serve as a precedent for populist tax increases on other companies' executive pay--even companies that never received a dime of bailout money.

"If the politicians who want to raise taxes felt confident that they were doing the right thing, why wouldn't they do this in the light of day?  What are they afraid of?" continued Norquist.  "President Obama has said that any bill he signs should be publicly-available for five days.  This tax increase isn't publicly-available now.  It's clear that this secret tax increase is merely a smokescreen to cover up the failed policies of bailouts and waste."

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How President Obama Can Fix<br> Small Businesses, Not Provide Band-Aids


Posted by Ryan Ellis on Tuesday, March 17th, 2009, 1:29 PM PERMALINK


On Monday, the Obama Administration announced a series of government-focused solutions for America’s small business sector.  Unfortunately, none of them involve long-term ideas to incentivize small businesses to be created or hire more employees.

Below are ten ideas President Obama could get started on right away to help America’s struggling small business sector...

1. Remove the looming tax hike on most small business profits.  Since small businesses pay their income taxes on their owners’ tax returns, increasing personal income tax rates is a tax hike on small business profits.  In fact, at least $2 out of every $3 in small business profits is earned in households making at least $200,000 per year.  So the Pelosi-Reid-Obama plan to raise the top two tax rates is a direct tax hike on the lion’s share of small business profits.  It’s like a Sword of Damocles hanging over the heads of small business owners

2. Cut the top marginal tax rate.  Since most small business profits are taxed in the top two brackets, these tax brackets should be cut, not raised.  A good principal should be that nobody should have to pay more than 25% of their income in taxes.  Any rates higher than this should be cut down to 25%.  This would be an immediate cut for small businesses, and would remove the current rate structure’s bias against future small business profits.  Firms with fewer than 100 employees account for over one-third of employment in America.  Cutting this tax rate will put more people to work

3. Cut the self-employment tax rate.  Small businesses organized as sole proprietorships or general partnerships must pay two layers of tax—the income tax, and a “self-employment tax” (which is equivalent to the employer plus the employee “shares” of the FICA tax).  As a result of the interaction of these two parallel tax structures, growing small businesses often face higher marginal income tax rates than established small businesses.  This is unfair, and imposes ridiculously-high marginal tax rates on modest business profits.  The self-employment tax should be cut in half to a flat rate of 7.65% (1.45% after the Social Security wage base is exceeded), the same rate faced by the employee’s “share” of FICA

4. Allow full business expensing.  Small businesses are already allowed to expense business purchases today, but only up to $250,000 in assets purchased (there are also other limitations).  Any asset purchases not eligible for expensing must be slowly-deducted, or depreciated, over many years.  For small business owners, a tax cut delayed is a tax cut denied. The cap on small business expensing should be lifted, and all other limitations removed.  This will incentivize small businesses to invest more in growing their firms
   
5. Uncap small business contributions to retirement plans.  It’s no secret that America is facing a retirement savings crisis.  The looming threat of Social Security’s bankruptcy conspires with a halved stock market and a low savings rate to foil our retirement safety.  One easy solution to help turn things around would be to uncap the amount that small businesses could contribute to owner and employee retirement plans.  Anything contributed should be deductible against both income and self-employment tax.  There should be no contribution limits at all.  Now more than ever, America needs to hyper-charge retirement savings

6. Create a small business health care tax credit, and allow businesses to shop for health insurance across state lines.  Small businesses currently get a tax deduction for health insurance paid, and even this is limited to only an income tax deduction for the owner.  Convert this deduction into a dollar-for-dollar credit.  Let small businesses reduce their tax burden by how much they spend on health insurance premiums, health cost reimbursement, and health savings account (HSA) contributions.  Furthermore, allow small businesses to get the best deal possible for their employees by letting them purchase health insurance across state lines

7. Create a “standard deduction” for a business owner’s home office.  The IRS Office of Taxpayer Advocate has said that millions of small business owners entitled to take a deduction for a home office fail to do so.  They recommend the creation of a “standard deduction” for qualifying home offices, to relieve entrepreneurs of needless recordkeeping.  Various sources have proposed a $2500 standard deduction for this as reasonable

8. Allow small businesses to use the same “fringe benefits” that large corporations get. Small businesses owners cannot take advantage of the same “fringe benefits” (e.g., commuting passes) that large corporations can use.  Leveling the playing field for small business owners would incentivize small business creation

9. Restore full deductibility of business meals.  In a misguided effort to get rid of the mythical “three martini lunch,” Congress has limited the deduction for business meals to 50%.  This arbitrary limit hurts small business owners, who don’t have boardrooms or clubs, but often do business at the lunch counter.  Businesses should be able to deduct all legitimate business costs, no matter where it’s done from

10. Remove limits on business use of automobiles.  Business owners often can’t take full advantage of the business use of their cars, thanks to “luxury” limits on cars worth more than about $8000.  There are also limits on car lease deductions.  Lifting the cap on business use of cars would make the whole system more transparent and common-sense.

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Treasury Secretary Geithner on Small Business Tax Hikes


Posted by Ryan Ellis on Thursday, March 12th, 2009, 3:34 PM PERMALINK


Treasury Secretary Tim Geithner testified today before the Senate Budget Committee.  Most of the proceedings focused on the Obama tax hike.  Of particular interest was the hemming and hawing Geithner did on the impact that the Obama tax hike will have on small businesses.

Here's what Geithner had to say in his prepared testimony:

The President’s Budget includes tax provisions to help small businesses. It recognizes that many small businesses are operated as sole proprietorships or through partnerships and other flowthrough entities, and leaves the individual income tax rates at which these small businesses are taxed unchanged in 2009 and 2010. By extending the current rate structure for families earning less than $250,000 after 2010, it ensures that 97% of small businesses will receive additional tax relief at that time or see their rates remain unchanged.

A few thoughts here:

  1. It's good that Geither recognizes that small businesses are organized as sole proprietorships, partnerships, and S-corporations.  He should further recognize that more than $2 out of every $3 in profit earned by these businesses will be hit by his administration's tax rate hikes 
  2. It's good that Geithner acknowledges that small business owners pay taxes on their business' profits personally.  So, raising tax rates on most of this profit can't be a good thing, can it?
  3. He claims that 97% of small businesses won't be affected by these rate hikes.  First of all, that might be a little high (I think the number is closer to 85%), but I won't quibble over the fact that most small businesses won't face higher tax rates.  That completely and totally misses the point, though.  Two out of three dollars of small business profits will pay these higher tax rates.  This tax increase is a tax increase on the small business sector
  4. As long as we're talking numbers, I have another one for Secretary Geithner.  According to the Census Bureau, 35% of American workers--42 million people--are employed in firms with fewer than 100 employees.  These firms are no doubt the same ones that will face a tax hike under Obama

To re-emphasize, the top small business tax rate will go from 37.9% to 42.5%.  If the Obama Democrat primary campaign tax plan goes through (uncapping the Social Security taxable wage base), this rate will further climb to 54.9%.  This would be the highest tax rate on the small business sector since the Carter Administration.

Why does is make sense to focus a tax increase directly on most small business income and the employers of a large percentage of Americans?  The answer is that it doesn't. 

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Schumer Gets It Right on Small Biz Lending:<br> Even a Broken Clock Is Right Twice a Day


Posted by Ryan Ellis on Wednesday, March 11th, 2009, 2:45 PM PERMALINK


Of all people, Senator Chuck Schumer (D-NY) has introduced a common-sense, pro-growth bill that will help small business owners.

I'll let you read that again to let the uniqueness of that statement sink in.

According to Politico, the bill would uncap the amount that credit unions can lend to small businesses.  

Schumer intends to introduce, as early as this week, legislation that would eliminate altogether the statutory limit on the volume of business loans America’s 8,000 credit unions can make.

“Our focus must be on increasing the lending to small businesses, which are the lifeblood of our economy,” Schumer said in a statement, citing an estimate from the Credit Union National Association that lifting the business-lending cap would lead credit unions to loan as much as $10 billion in the first year.

Not only can small businesses not find new loans, Schumer said, they “are being strangled by having existing lines of credit pulled. A threat like this to small businesses could upend the livelihood of millions of workers and be catastrophic for the larger economy.”

Well, we'll give credit where credit is due.  Great job, senator.

 

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OMB Director Orszag Nearly Guarantees<br> Health Care "Reform" Will Be a Tax Hike


Posted by Ryan Ellis on Tuesday, March 10th, 2009, 4:06 PM PERMALINK


 

White House Office of Management and Budget Director Peter Orzsag testified before the Senate Finance Committee today, and tacitly endorsed a massive tax increase to pay for socialized health care:

OMB Director Orszag today said a healthcare overhaul needs to be budget neutral over five to 10 years, what he described as the medium term. "You have to invest to get savings later, but again, given our medium-term fiscal trajectory, we think the best way to move forward is to invest in a deficit neutral budget," Orszag said.

In Washington, "budget neutral" is a code word for "tax increase."

If that leaves you scratching your head, maybe this example will help:

You find yourself sitting on a government that eats up 20% of the economic pie.  Taxes eat up the same amount of the pie.  You decide to grow government spending to 22% of the pie.  So, you raise taxes to 22% of the pie.

This is what "budget neutral" means.  It means that you increase taxes at the same pace as you're increasing spending.  Sure, it could also mean cutting spending somewhere else, but that's never the case in actuality.

In this case, health care spending could be increased by hundreds of billions of dollars per year simply by removing the tax exclusion for employer-provided health care.  If Pelosi-Reid-Obama were to force through this massive tax increase to pay for Hillarycare 2.0, this would be "budget neutral."  It would also be a massive tax hike and spending increase.

 

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The Obama Trillion-Dollar Tax Hike and<br> America's Charitable Sector


Posted by Ryan Ellis on Monday, March 9th, 2009, 11:56 AM PERMALINK


One of the most controversial aspects of the Obama trillion-dollar tax hike is the effect that it will have on America's charities.  America is built on a concept of "civil society."  We don't expect government institutions to be the primary provider of care for those in need.  We expect charities to do that.  The Obama tax hike takes aim directly at charities, just at a time when America needs them the most.

Where charities currently stand.  In 2006 (the latest year for which the IRS has data), families donated $187 billion to charities.  Corporations donated another $16 billion.  Foundations, trusts, and estates contributed $131 billion more.  Charitable contributions are tax-deductible, and face very few restrictions in current tax law.  According to the Office of Management and Budget, all these charitable contributions cut federal taxes by $58 billion every year

The Obama Trillion-Dollar Tax Hike's Double Assault on Charities

  • The Obama trillion-dollar tax hike brings back the itemized deduction phaseout (Pease) in 2011 for married couples making $250,000 and single people making $200,000.  Nearly all itemized deductions will have to be reduced by 3% of the extent that income exceeds this level.  So, a married couple making $1,000,000 will see their itemized deductions (including charitable contributions) reduced by ($1,000,000-$250,000)*.03, or $22,500.  The Pease limit can only reduce itemized deductions by 80%
     
  • The Obama trillion-dollar tax hike also creates a new limit above and beyond Pease.  No matter what tax rate you fall into, your itemized deductions (including charitable contributions) cannot benefit you any more than if you found yourself in the 28 percent bracket.  Returning to our $1,000,000 taxpayer, he finds himself in Obama's new, higher 39.6 percent bracket (up from today's 35 percent, incidentally).  If he gives an additional $1000 to charity, it won't reduce his income tax burden by $396, as one might expect.  Rather, his income taxes would only go down by $280

How will this assault on charitable giving change things in America?

Suppose families decide, on the aggregate, that they will give one percent less to charity as a result of this limitation.  For every 1 percent decline in household charitable giving, that's nearly $2 billion less given to charity.  The impact could be much greater if families decide to keep more of their money, rather than give it away.  That's $2 billion that's not available for churches, shelters, and other worthy causes.

And all this because Obama wanted to "spread the wealth."  The true victims of this tax increase will be America's poor.  Potentially, they could be left to choose between no help at all, and a bureaucratic government handout.  This should be seen as part of the larger Obama-Pelosi-Reid plan to get rid of civil society and have all altruism funded by the government.
 

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Geithner Looking at Wrong Target<br> on Obama's Small Business Tax Hikes


Posted by Ryan Ellis on Friday, March 6th, 2009, 1:24 PM PERMALINK


Treasury Secretary Tim Geither, echoing President Obama, has repeatedly said that their trillion-dollar tax hike won't be that harmful to small business, since relatively-few small business owners will be affected.

That's absolutely true, and absolutely misses the point.

Geither, et al, are looking at the wrong measurement of the Obama tax hike's impact on the small business sector of the economy.

Consider what Geither today said in National Journal's "Congress Daily AM"

"Now, I just want to pause here for one second," Geithner told the House Budget Committee Thursday, his third appearance on Capitol Hill in three days. "Those proposed changes in tax rates would apply to only 2 to 3 percent of small-business owners across the country, only 2 to 3 percent. Ninety-five percent of small-business owners ... have incomes below that threshold of $250,000."

It might surprise some to learn that ATR agrees with this statement.  It's consistent with a reasonable interpretation of IRS data.

However, it completely and totally misses the key point: the Obama tax hike will raise the tax rate on $2 out of every $3 in small business profits.  Fully two-thirds of small business profits (and thus the small business sector of the economy) pay taxes in households Obama wants to raise taxes on.  Small businesses pay taxes on their owner's 1040 forms.

Breaking it down further, it's $0.40 out of every $1.00 in sole proprietor profits.  It's $0.90 out of every dollar of business partnership and S-corporation profits.

So how is this possible?  How can the Obama tax hike apply to a relative handful of small business owners, but at the same time to the lion's share of small business profits?

Simple--the few small business owners that Obama is hiking taxes on also happen to be the ones generating most of the small business profits in America.

When the Obama tax hike takes money out of the small business sector, it will cost jobs and shrink investment.  According to the Census Bureau, firms with fewer than 100 workers employ 43 million Americans, or over one-third of everyone working in the United States. 

The fact is, it's the successful small businesses that Obama and Geither want to raise taxes on who employ these tens of millions of American workers.

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Obama Raises Taxes on Two-Thirds<br> of Small Business Profits


Posted by Ryan Ellis on Thursday, March 5th, 2009, 12:44 PM PERMALINK


The Obama budget plan was released in February of 2009.  For the next several weeks, Congress will be debating this flawed, trillion-dollar tax increase budget.  Americans for Tax Reform will be looking at how the Obama trillion dollar budget impacts Americans in various ways.

Today, we look at small businesses.   

 

  • There are 5.9 million small employers in the United States (defined by the Census Bureau as firms employing 99 or fewer employees).  Three out of ten Americans workers get their paycheck from these firms

 

  • In addition, there are over 20 million businesses that have no employees at all.  These are largely sole proprietors and other professionals

 

  • What these business owners and business employers have in common is that they all pay taxes on their owner’s 1040 personal tax form

 

  • According to the IRS, $2 out of $3 in small business profit occurs in households making at least $200,000 per year—the same families that the Obama budget would raise taxes on

 

  • By raising the top tax rates from 33/35 percent to 36/39.6 percent, the Obama budget raises the tax rate on $2 out of every $3 in small business profit.  Breaking it down further, it raises the tax rate on 40 percent of sole proprietor profit and 90 percent of S-corporation and partnership profits

     
  • In addition, the Obama budget brings back the death tax (in a footnote, no less).  Rather than the death tax going away in 2010, it’s locked in at its current-year level.  Forevermore, family farms and small businesses would have to plan around a 45 percent death tax rate.  The exemption would be $3.5 million ($7 million for married couples), but there’s no inflation adjustment for this.  Small businesses either need to hire expensive estate lawyers, or choose between paying the death tax and selling the family business
     

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