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Ryan Ellis

The Pelosi-Obama-Reid 'Tax Cut' Is Largely Just Spending


Posted by Ryan Ellis on Monday, January 26th, 2009, 12:15 PM PERMALINK


• The Pelosi-Obama-Reid regime likes to say they’re giving “tax cuts” to “hundreds of millions of American families.” The method of choice is “refundable tax credits.” Under their plan, even those with $0 income tax liability would receive a check from the government. Thanks to income eligibility phase-outs, many of the recipients of refundable tax credits are low- and moderate-income families with little or no income tax liability;

• According to the IRS, 46 million of the 138 million tax returns filed (33 percent) have no income tax liability. Yet these 46 million households would still be able to receive refundable credits, despite having zero income tax liability;1

• Pelosi-Obama-Reid often respond that these families have payroll tax (Social Security and Medicare tax, otherwise known as “FICA”) liabilities, so refundable credits are meant to “refund” these taxes;

Citing payroll taxes is a willful intent to mislead. Under current tax rules, the refundable Earned Income Credit and Additional Child Tax Credit already remove both income and payroll tax liability for 15 million filers (or 11 percent of families). These people neither have an income tax liability nor a payroll tax liability, yet would be getting a “tax cut” under Pelosi-Obama-Reid;2

• For some taxpayers, a refundable credit may reduce federal income tax owed. For others, it may be totally free money. For still others, it might zero out tax liability, with the rest being free money. The point is that all refundable credits are tax cuts for some, but free money for most. Congressional Democrats’ official tax scorekeeper, the Joint Tax Committee, calls the spending parts of refundable credits “outlay effects” and the tax cut parts “revenue effects.” Thus, even JCT admits that refundable credits are largely spending;

So the next time Pelosi-Obama-Reid touts a big tax cut, ask how much of it is actually just spending money on people who don’t pay taxes.

For more information, contact Ryan Ellis at ATR by emailing him at rellis@atr.org

1 Internal Revenue Service. “Statistics of Income.” Tax Year 2006, Table 2.
2 Data obtained by Joint Tax Committee via GOP Staff of House Ways and Means Committee

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ATR Supports Economic Growth and Middle Class Relief Act of 2009


Posted by Ryan Ellis on Tuesday, January 13th, 2009, 12:15 PM PERMALINK


The Honorable Tom Price
U.S. House of Representatives
Washington, DC 20515

Dear Congressman Price:

Congratulations on your introduction this week of the “Economic Recovery and Middle Class Relief Act of 2009.” Unlike other so-called “stimulus” ideas supported by the Pelosi-Obama-Reid troika, the ideas contained in your bill set the stage for strong growth in 2009 and permanently after that.

Among the strongest elements of your bill are:

Cutting the personal tax brackets by 5 percent across the board permanently, harkening back to the Reagan vision for growth. Your plan makes sure that what the taxpayer gains with one hand he doesn’t lose with the other in repealing the alternative minimum tax (AMT)

Cutting the near-highest in the world corporate income tax rate from 35 to 25 percent, and allowing all companies to fully-expense machinery and equipment in the year of purchase

Making permanent the 15 percent capital gains and dividends tax rate, cutting the corporate capital gains rate from 35 percent to 15 percent, and ending the capital gains tax on inflation

Your bill should be the conservative alternative to trillion-dollar bailouts and massive spreading of wealth.

Sincerely,

Grover Norquist
GGN:rle

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ATR May Rate a Vote AGAINST The House Rules Package


Posted by Ryan Ellis on Tuesday, January 6th, 2009, 12:15 PM PERMALINK


Today, the U.S. House of Representatives will be voting on the rules of the chamber for the 111th Congress. Usually a routine affair, the Congressional Democrat Majority is using the formality of a rules vote to make it easier to raise taxes, and make it harder for minority Republicans to oppose tax hikes.

Because the Rules of the House will make it more difficult to oppose tax hikes and support tax cuts, ATR may rate a vote against adopting the rules in our annual “Hero of the Taxpayer” Congressional scorecard.

The rules changes will have direct consequences for the American taxpayer. Among other things, they’ll make it harder to cut taxes. Under existing rules, if Democrats bring a bill to the floor that includes a tax increase, Republicans could motion to send the bill back to committee and strike the tax hike, but the Majority’s rules package takes this option away. As families and small businesses struggle during these difficult economic times, shouldn’t Congress be working to cut their taxes, not raise them?

For more information, contact Ryan Ellis at ATR by emailing him at rellis@atr.org

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ATR to Dem Congressmen: Show Independence, and Vote Against Nancy Pelosi's Rules Package


Posted by Ryan Ellis on Tuesday, January 6th, 2009, 12:10 PM PERMALINK


Dear Congressman:

This past fall, you were elected by the voters of your district to represent their values—not those of the San Francisco voters who elected Speaker Nancy Pelosi. Many of you promised your constituents that you would be different, and not simply a yes-man for Speaker Pelosi.

Today, you have your first opportunity to assert your independence from the Speaker’s San Francisco values. The House will soon be voting on the rules for the 111th Congress. If you want to make it easier to raise taxes on
families and small businesses, I would urge you to support this rules package. If, however, you want to make it easier to cut taxes and prevent tax hikes, I would strongly urge you to vote against Nancy Pelosi’s rigged House rules.

Dozens of House Democrats call themselves “Blue Dogs” or “New Democrats,” by which they mean that they consider themselves to be more for limited government and lower taxes than mainstream Democrats. In the 110th Congress, Blue Dogs voted with Speaker Pelosi again and again for more government spending and higher taxes. This rules vote is their latest chance, and first of the new Congress, to assert real independence from Nancy Pelosi’s San Francisco values and Chicago machine tactics.

Sincerely,

Grover Norquist
GGN:rle

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ATR Supports H.R. 7298, Doubling Small Business Expensing and Creating An Auto Bailout Alternative


Posted by Ryan Ellis on Thursday, November 20th, 2008, 12:15 PM PERMALINK


The Honorable Doug Lamborn
U.S. House of Representatives
Washington, DC 20515

Dear Congressman Lamborn:

On behalf of Americans for Tax Reform, I am pleased to support H.R. 7298, a common sense tax cut bill which you recently introduced.

Your bill cuts taxes in two ways, both of which are timely and relevant to our current economic instability:

1. It doubles and makes permanent “small business expensing.” Your bill doubles the small business expensing limit to $500,000, and allows businesses with up to $1,000,000 in asset purchases to benefit from full expensing. The alternative for many small businesses is long and complex depreciation, which is a tax disincentive to investment and growth.

2. It creates a $10,000 tax deduction for purchasing an automobilemanufactured in the United States. To hear the mainstream media, Big Labor, and Congressional Democrats tell it, the “U.S. auto industry” is confined to three companies in Detroit. In fact, America has a robust domestic manufacturing sector in autos. Toyota and Honda plants, which tend to reside in right-to-work states and are free from union pillaging, are booming. This provision moves the conversation away from bailing out a few unionized auto companies which failed to negotiate aggressively with the UAW, and toward a pro-taxpayer, free market solution.

I look forward to the debate on H.R. 7298.

Sincerely,

Grover Norquist
GGN:rle

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Grover Norquist's Letter to Treasury Requesting the Full $700 billion in Bailout Money to Give to Am


Posted by Ryan Ellis on Monday, November 17th, 2008, 12:15 PM PERMALINK


Mr. Neel Kashkari
Interim Assistant Secretary for Financial Stability
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Dear Secretary Kashkari:

I write today to formally request $700 billion from the TARP Capital Purchase Program. Since unionized auto companies, state and local governments, and certain credit card companies are applying, I thought I should, as well. Attached you will find the two-page application which I downloaded from www.treas.gov.

I am fully aware that some $125 billion has already been allocated as of October 29, 2008. However, given that the federal government has the full weight of the army, the FBI, etc. behind it, I am confident that you can re-appropriate this money from the likes of Wells Fargo (or their successor companies, if the current over-regulatory and over-taxing economic climate has caused them to go under).

I have a plan for this $700 billion which should be just what’s needed to get the American economy going. Since the money came from the taxpayers in the first place, I propose giving it back to them. With $700 billion in TARP funding, ATR would facilitate the following tax cuts:

Cut the corporate income tax rate from 35% to 15%, giving us one of the lowest corporate income tax rates in the developed world. We currently have the second-highest rate in the world (behind only Japan). This new 15% rate would give us the third-lowest rate in the world (ahead of only Ireland and Iceland). It would put us well below the Euro-zone average rate of 25%. Companies would be dying to set up shop in the United States. Estimated JCT cost: $170 billion1

Eliminate the capital gains and dividends tax. These rates are currently 15%, but actually represent a double-tax on corporate profits. When combined with the new, lower 15% rate on corporate income, capital costs would be at their lowest levels in nearly a century. Tax something less, and get more of it. This would also be an improvement over a suggested change we have made to the Treasury for years—allow taxpayers to index the cost basis of their capital assets to inflation (something which Treasury has the unilateral authority to do and which would be the equivalent of a 50% cut in the capital gains tax rate). Estimated JCT cost: $35 billion2

Cut the top personal income tax rate from 35% to a flat 15%. This would give the U.S. the lowest personal income tax rate in the developed world. Estimated JCT score: $235 billion3

Kill the death tax. Almost nothing is more capital-killing for small businesses and family farms than the estate, gift, and generation-skipping transfer taxes. Estimated JCT score: $24 billion4

Allow companies to fully-expense capital assets purchased the first year. Under current law, businesses and other taxpayers must usually “depreciate,” or slowly-deduct, capital asset purchases the first year. This capital-boosting proposal would allow taxpayers to deduct 100% of the purchase price from their taxes in year one. Estimated JCT score: $240 billion5

Put all that together, and you arrive at almost exactly $700 billion. It’s safe to say that allocating $700 billion this year toward these tax reduction goals would do much for economic growth. But there’s more that can be done that doesn’t require any more resources:

• Ensure that there is full transparency in the TARP program by putting every TARP transaction and contract online for everyone to see. Disclose potential conflicts of interest with TARP-oversight staff.

• Allow companies to repatriate foreign profits to the U.S. without having to pay a double tax. The last time Congress allowed this in 2005, over $300 billion was repatriated, boosting GDP 2%.
I look forward to receiving the money. Please consult my staff for any ACH transfer information your people may need.

Sincerely,

Grover Norquist
GGN:rle

1 Assumes current CIT revenue of 2% of $15 trillion GDP. Static score reduction of 57% to account for rate reduction from 35% to 15%
2 Based on 2006 IRS data (Table 3.4 SOI): http://www.irs.gov/pub/irs-soi/06in34tr.xls
3 Based on IRS data (score is the difference between actual 2006 ordinary modified taxable income at a 15% flat tax rate and actual 2006 ordinary income tax generated)
4 Sum total of estate, gift, and generation-skipping transfer tax receipts from 2004 http://www.irs.gov/pub/irs-soi/04es02yd.xls
5 Assumes gross domestic private investment of $2 trillion. Assumes 15% flat tax rate. Assumes current-law depreciation rate of 20% annually. Current law revenue loss minus full expensing revenue loss is the result. http://bea.gov/national/nipaweb/TableView.asp?SelectedTable=122&Freq=Year&FirstYear=2006&LastYear=2007

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ATR Calls for Strict Scrutiny of TARP Expenditures


Posted by Ryan Ellis on Tuesday, November 4th, 2008, 12:15 PM PERMALINK


The Honorable Henry Paulson
Secretary of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Dear Secretary Paulson:

In October, Congress passed the “Emergency Economic Stabilization Act” in order to give Treasury authority to purchase assets adversely affected by recent market turmoil. The public policy rationale behind this was to have the government intervene where there was a clear problem in existing private markets, and where systemic industry collapse appeared imminent.

That principle is in danger of not being followed in the area of credit enhancement.

Legacy bond insurers made poor investment decisions which left them open to an imprudent amount of risk. However, there is no systemic risk in the industry. This is evidenced by WL Ross investing in Assured Guaranty, Berkshire Hathaway starting BHAC, and Macquarie-Citadel launching MIAC. The problem is not in the credit enhancement industry in general—rather, it’s limited to a few legacy bond insurers who should face normal market correction—not a bailout. Furthermore, despite the drop-off of many of the legacy bond insurers, credit enhancement still exists as state and local governments have simply shifted to other forms of credit enhancement (including letters of credit).

Hundreds of billions of taxpayer dollars are at stake in the “Troubled Asset Recovery Program” (TARP). It’s vital that no taxpayer funds be used to bail out companies when the downside risk of failure is something less than systemic market collapse. Giving money to a company merely so it will not fail (and not to prevent a larger problem from resulting) falls short of the strict scrutiny that should be applied to TARP expenditures.

The public policy rationale behind TARP is itself controversial. Broadening
the application of TARP to bail out failing companies in healthy markets is
unacceptable from a taxpayer perspective.

Sincerely,

Grover Norquist
GGN:rle

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The Four Horsemen of the Financial Apocalypse


Posted by Ryan Ellis on Monday, September 29th, 2008, 12:00 PM PERMALINK


No matter what one thinks of the financial bailout package, we ought to at least agree how we got here. Below are the real actors behind the mortgage panic of 2008:

 
Government-sponsored enterprises (GSEs). Fannie Mae, et al, bears a large share of the responsibility. By purchasing mortgages, repackaging them into securities, and selling them on the open market, mortgage lenders were encouraged to issue riskier and larger mortgages. They could then shift the risk to the GSEs by selling the mortgage to them. As of this year, the GSEs owned or securitized half of the $12 trillion mortgage debt market. Exacerbating the GSE risk is the Clinton-era rule which said that the GSEs only needed to retain capital equal to 2.5% of mortgages assumed (it’s 10% for other financial institutions). When the GSEs had no one to whom they could shift the hot potato, the house of cards came crashing down. According to opensecrets.org, the GSEs have contributed over $1.5 million to federal candidates this yearNearly 60% of that money went to Democrats.
 
Easy money from the Federal Reserve. On January 3, 2001, the Federal Reserve cut the federal funds rate by fifty basis points, to 6.00%. They continued to do so until the rate hit a bottom of 1.00% on June 25, 2003. This also had an effect on mortgages. According to Freddie Mac, the average rate for a thirty-year fixed rate mortgage fell from a peak of 8.52% in May 2000 to a nadir of 5.23% in June 2003. As a result, households with less income could afford bigger and more expensive houses.
 
As an example, someone paying a $2000 per month mortgage in May 2000 would be able to afford a house worth about $282,000. That same $2000 payment in June 2003 would get our homeowner a house worth about $460,000.
 
Many of these homebuyers, moreover, didn’t get conventional 30-year mortgages. Because lending was so cheap, banks were offering adjustable-rate mortgages, “balloon” options, and no-money-down at closing.  The banks shifted their risks to the GSEs. When the Federal Reserve started raising the federal funds rate, mortgage rates climbed back up (they’re currently hovering around 6 percent), some of the ARMs matured, and households found themselves unable to as easily make these payments.
 
Did the Federal Reserve need to cut rates this low “for the economy?” Not if one believes in low inflation as a necessary precursor of economic growth. The price of gold, which is a good indicator of future inflation trends, has grown from about $250 per oz. in 2001 to $900 per oz. today. That’s a gain of 260% in just over seven years.
 
Community Reinvestment Act (CRA). This legislation, first passed in 1977, gave federal regulators the power to encourage banks to issue loans to high-risk households and small businesses. It was ramped up in the Clinton Administration, who along with groups like ACORN, jaw-boned banks into issuing riskier and riskier loans to poor households. Efforts by the Bush Administration to rein in CRA bureaucratic zealousness met with charges of racism and elitism by Congressional Democrats and left wing activist groups.
 
Mark-to-market accounting rules. This refers to an accounting practice that forces a balance sheet to value an asset at its current market price (that is, what it could be sold for at the time). The Federal Accounting Standards Board (FASB) issued Statement 157 on November 15, 2007, which required this accounting practice for all financial firms. Some securities holding devalued mortgages still retained underlying value, but could not be sold because there were no buyers. As a result, mark-to-market required the firms to value the securities at or near $0. If, however, the firms were allowed to value the assets at something closer to book value, their balance sheet positions would improve. Mark-to-market is an arbitrarily-restrictive accounting practice that should be scrapped for assets like securities which generate current income. Doing this alone would solve much of the problem. The SEC relies on FASB in an advisory role, but could overrule it in giving guidance to company accounting practices.

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