Ryan Ellis

Surtax to Pay for Government Medicine<br> Is a Taxpayer Protection Pledge Violation

Posted by Ryan Ellis on Monday, July 13th, 2009, 11:31 AM PERMALINK

On Friday, House Ways and Means Committee Chairman Charlie Rangel (D-NY) announced a new tax increase to pay for government-controlled health care. Under the plan, taxpayers making as little as $280,000 per year will see a surtax of between 1% and 3% of adjusted gross income. 

This “surtax” is merely a thinly-veiled way to raise the top marginal tax rate.  A 3% surtax on married couples making $1 million or more would raise the top marginal tax rate in 2011 to 42.6%, up from 35% today.

Raising income taxes at all, and marginal tax rates in particular, is a clear and unambiguous violation of the Taxpayer Protection Pledge.  This Pledge has been made by 172 Congressmen and 34 Senators to their constituents and the American people.  They promised not to raise income taxes or marginal income tax rates.

The news is worse for small business owners.  Small business profits face taxation on their owners’ 1040 forms.  Two-thirds of small business profits pay taxes in households making at least $250,000 per year.  Thus, this marginal tax rate increase is a tax hike on $2 out of every $3 small business dollars.

This marginal tax hike will affect small employers and their employees.  One-third of Americans work in firms with 2 to 100 employees.  These small businesses, which must have profits to employ workers, will face these marginal tax rate hikes.  The cost will be born out in lower wages and less jobs.

Why raise taxes on job-creating small businesses in the middle of a deep recession with 10% unemployment?  It makes no sense to do this economically.  When Medicare payroll taxes and state income taxes are added to the mix, a small employer could easily face marginal tax rates approaching 50%, which would be the highest level since the stagflation 1970s.

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Health Care Tax Hike Trial Balloon of the Week: Tax Hike on Small Business

Posted by Ryan Ellis on Tuesday, July 7th, 2009, 11:07 AM PERMALINK

Proponents of government-run health care have a problem—they can’t pay for their trillion-dollar plan. So, they want to raise your taxes. Every week, there’s a new tax hike floated—a VAT, a soda tax, taxing your health care benefits, and taxing your charitable contributions to name just a few.

This week, House Ways and Means Chairman Charlie Rangel (D-NY) dusted an old idea off the shelf, a plan he proposed two years ago. He would like to impose a “surtax” (a disguised marginal income tax rate hike) on those making more than $250,000 per year.
This would mean that the top income tax rate would climb well over 40 percent.  That would hit small businesses the hardest of all. Why is that?
  • Small businesses pay taxes on their owners’ 1040s
  • Two out of every three dollars of small business profits has tax paid in this top personal tax rate
  • There are 28 million sole proprietors, business partners, and Subchapter-S corporation owners in America. Most of the profits generated by these companies will face a higher marginal tax rate
  • One-third of Americans work for businesses with fewer than 100 employees. When these successful small businesses have to pay higher taxes, they will cut wages and lay people off
No matter which way you slice it, you can’t raise taxes on “the rich” without having most of that burden fall on small business. They, in turn, will shed jobs or even close up shop.
All for the sake of health care with the efficiency of the Post Office and the customer service of the DMV. 

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Left Continues to Telegraph VAT Strategy

Posted by Ryan Ellis on Tuesday, June 30th, 2009, 5:13 PM PERMALINK

You can't say they didn't warn us.  The latest indication that a value-added tax (VAT) is on the table comes in today's Wall Street Journal by former Clinton Administration Deputy Treasury Secretary Roger Altman:

We all know the recent and bitter history of tax struggles in Washington, let alone Mr. Obama's pledge to exempt those earning less than $250,000 from higher income taxes. This suggests that, possibly next year, Congress will seriously consider a value-added tax (VAT). A bipartisan deficit reduction commission, structured like the one on Social Security headed by Alan Greenspan in 1982, may be necessary to create sufficient support for a VAT or other new taxes.

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Talking About Cutting Healthcare Costs?<br> Drug Industry Is Actually Doing It

Posted by Ryan Ellis on Thursday, June 25th, 2009, 5:24 PM PERMALINK

There's a lot of fast and loose numbers thrown around in Washington these days when it comes to health care.  It seems like every other day, President Obama and health industry leaders are pulling some "magic asterisk" out of the air, and claiming to have "cut" real health dollars.  When you get past the headline, you find it's more fluff than substance.

Until now.

This week, PhRMA announced that they would be cutting name-brand drug prices in half for many seniors.  Under Medicare "Part D," seniors face heavily subsidized drug coverage for the first few thousand dollars in annual drug spending, and when they have a very large prescription drug bill.  However, there is a coverage gap in between those two subsidies that many have called the "donut hole."  In this "donut hole," seniors are left to pick up the tab for their medicines.  It's in this coverage gap that PhRMA is cutting drug prices in half.

Notice what you don't see there.  You don't see a government bureaucrat "negotiating" with drug companies.  You don't see a price control bill passed by Congress.  What you do see is an industry doing well by doing good.  They know that happy customers are consistent customers, and there is a perceived customer relations issue with this coverage gap. So, like any group of companies, they are making their customers feel better about buying their product.

Now, suppose the government had stormed in and demanded this.  At that point, PhRMA would have to protect the interests of member companies and shareholders, and would need an adversarial stance against the federal "negotiators."  Seniors would have ended up with a far worse deal.

There's nothing wrong with our healthcare system that can't be solved by the government just getting out of the way.

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ATR Supports "Health Care Freedom Act"

Posted by Ryan Ellis on Monday, June 22nd, 2009, 3:22 PM PERMALINK

The following letter was sent from Grover Norquist to Senator Jim DeMint (R-SC) today.  The pdf version can be read here:


Congratulations on your introduction of the “Health Care Freedom Act” this week.  This will likely be the best free-market alternative to government health care offered this Congress, and I would encourage all senators to co-sponsor this excellent legislation.

The Health Care Freedom Act raises taxes on no one, and cuts taxes for millions of Americans.  While leaving all current tax relief related to health insurance alone, it creates a new tax credit for individuals to purchase health insurance on their own.  Individuals not covered by an employer, government, or other third party health insurance plan could use an advanceable and refundable tax credit of $5000 ($2000 single) to offset health costs.  In addition, health savings account (HSA) dollars would be eligible to be used to purchase health insurance premiums.

The Health Care Freedom Act gives all Americans the tools they need to purchase health insurance as empowered consumers with options.  Families would be free to purchase health insurance offered in any state, not just the one in which they reside (which they are limited to under current law).  States would be block-granted money to create viable insurance options for those with pre-existing conditions.  The cost of care will be kept low by putting a hard cap on non-economic damages in medical malpractice lawsuits.  Finally, the price of health care services for the first time will be made available to any patient wanting to shop around for the best care.

The Health Care Freedom Act represents a bold new vision of free market health reform.  It would ensure 22.5 million Americans who currently lack insurance. Its tax cuts are fully-offset with spending restraint, so it won’t create new government debt.

For the first time, free market conservatives have a bill they can proudly say they are for when fighting against government medicine this year.

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Charlie Rangel Looking at a VAT<br> to Pay for Government Health Care Plan

Posted by Ryan Ellis on Tuesday, June 16th, 2009, 7:42 PM PERMALINK

House Ways and Means Chairman Charlie Rangel (D-NY) today became the latest Beltway politician to float a value-added tax (VAT) as an additional tax to pay for health care (link requires subscription):

Among the revenue options appears to be a value-added tax, or a levy on each stage in the development of a product and bringing it to market. "It's a point of discussion," said Ways and Means Select Revenue Measures Subcommittee Chairman Richard Neal, D-Mass. "To say there's any consensus would be misleading," he said.

Rangel would not say whether he favored that approach, only that "it's been put on the table." He said his preference was not important relative to that of panel members and the Caucus.

President Bill Clinton floated a value-added tax to fund his healthcare overhaul effort in 1993, but it landed with a thud in Congress. The tax is considered among the most regressive because it falls heaviest on the poor.

Estimates by the Tax Policy Center put the revenue gained at as much as $50 billion annually from a mere 1 percent VAT, however, and backers argue the health coverage gained will offset higher consumer costs.

The retail industry opposes a VAT, arguing it will further depress auto and home sales and prolong the recession. National Retail Federation tax counsel Rachelle Bernstein called it "the absolute wrong thing to do in this troubled economy."

Rep. Allyson Schwartz, D-Pa., said, "I do have some concerns about creating a new tax," particularly on necessities like food and clothing, although she said there was some support on the panel for a new tax on sugary sodas. She said there was less support for increasing alcohol taxes.

Rep. Sander Levin, D-Mich., said he disliked the idea of a VAT. "I think at this point everything's on the table, including some bad ideas -- and that's one of them," he said.

You might recall that President Obama floated the idea over the Memorial Day recess.

It's coming...

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ATR Supports H.R. 690,<br> "MOBILE Cell Phone Act of 2009"

Posted by Ryan Ellis on Monday, June 15th, 2009, 2:43 PM PERMALINK

PDF version of this letter

The Honorable Sam Johnson
U.S. House of Representatives
Washington, DC 20515

Dear Congressman:   

On behalf of Americans for Tax Reform, I express my strong support for H.R. 690, the “Modernize Our Bookkeeping In the Law for Employee's (MOBILE) Cell Phone Act of 2009.”  I would urge all Members of Congress to co-sponsor and support this common sense modernization of our tax code.

Congress has chosen to list several items in the tax code as “listed property.”  These items—most namely computers and automobiles—can be provided by an employer, but the employee must disclose any personal use of the items, and pay taxes on what is essentially an in-kind wage.

When Congress added on cell phones as listed property in 1989—some twenty years ago—these products were very different than they are today.  Bulky, cumbersome, and expensive, they more resembled a modern laptop than a modern Blackberry.  The per-employee cost of office coffee is likely higher today than the per-employee cost of a cell phone personal device.

Put simply, the intent of Congress (to limit a lucrative fringe benefit given to high-flying executives) is painfully out of date.  No one today views iPhones, Blackberries, or other personal electronic devices as “luxuries.”  Rather, they are an inexpensive and convenient way for employees to be in 24-hour contact with work.  Any personal use of these devices—a line which gets grayer every year—is not significant, and not worth the extensive recordkeeping and meddlesome tax payments of the listed property rules.

The House passed a bill last year that would remove cell phones from listed property, and the Joint Tax Committee scored this tax relief at a mere $237 million over ten years.  For the nuisance and enforcement costs this provision creates, everyone involved should view the “cost” as little more than a rounding error, and your bill as a common-sense update of the original intent of Congress two decades ago.

Grover G. Norquist

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Obama's PAYGO Plan Means<br> Automatic Tax Hikes

Posted by Ryan Ellis on Wednesday, June 10th, 2009, 3:37 PM PERMALINK

President Obama yesterday submitted a plan for PAYGO to return.  Under his plan, the Administration would track all tax and entitlement spending throughout the year.  At the end of the year, if the net effect of all tax and entitlement legislation increased the deficit over the next decade, there would be an across-the-board cut in entitlement spending.

Sounds ok, right?  Not really.  This is a trap, and Obama, et al are hoping that well-meaning limited government conservatives will walk right into it.

Congress would never, ever let there be an indiscriminate, across-the-board entitlement spending cut.  In order to avoid this scenario, Congress will always raise taxes at least as much as they increase entitlement spending. 

In other words, this PAYGO proposal would give a built in excuse to raise the short- and long-term cost of government AND practically require Congress to raise taxes to "pay for" it.  And we can forget about cutting taxes anytime soon.  We would need to either raise taxes somewhere else, or do the politically-unthinkable (cut entitlement spending).

It's kind of like the Doomsday Device from Dr. Strangelove.  Only in this case, the inevitable outcome of action would not be nuclear war, but something almost as bad--a tax increase.

Maybe the motto should be, "how I learned to stop worrying and love tax hikes."

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Cost of Hiring a Federal Bureaucrat<br> Getting More Expensive for Taxpayers

Posted by Ryan Ellis on Wednesday, June 10th, 2009, 3:13 PM PERMALINK

The cost of hiring and retaining a federal bureaucrat may be going up for taxpayers.

This week, the U.S. House of Representatives passed H.R. 626, the "Federal Employees Paid Parental Leave Act." This bill would give federal employees up to four weeks of paid (that is, by taxpayers) parental leave for the birth or adoption of a child.

How generous of Congress with our money.

What this bill would do (and it has yet to pass the Senate) is to increase the cost of hiring a federal bureaucrat.  Based on my calculations from May, it costs between $2 million and $11 million to hire a federal employee for a working career.  Isn't that enough?  How much more do taxpayers need to pay for each federal bureaucrat?

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Double-Taxing U.S. Firms on Foreign Profits<br> Would Cost Economy 2.2 Million Jobs

Posted by Ryan Ellis on Monday, June 8th, 2009, 4:55 PM PERMALINK

A repeal of the rules governing the way the United States taxes the foreign earnings of U.S. companies could have dramatically adverse effects on U.S. jobs and investment and leave U.S. companies less competitive in global markets, according to a new economic report released today.

report, authored by Robert J. Shapiro, a former Clinton Administration economic official, and Aparna Mathur, a Research Fellow at the American Enterprise Institute, found that as many as 2.2 million American jobs could be affected by a repeal, or effective repeal, of  "tax deferral."

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