Ryan Ellis

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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Obama's Trillion Dollar Tax Hike: Breaking Down the Numbers

Posted by Ryan Ellis on Tuesday, March 3rd, 2009, 3:45 PM PERMALINK

Last week, President Barack Obama submitted his first budget to Capitol Hill, and it's a whammy: nearly $1 trillion in tax increases.  Now that we've had some time to digest it, we've been able to break down how it raises taxes on the family energy bill, small businesses, family farms, your retirement nest egg, housing, charitable contributions, and nearly all large U.S. employers.

If you're getting the idea that this trillion dollar tax hike is on you, you'd be correct.


  • Last week, President Obama sent a tax-increase budget to Capitol Hill. Even by his own (disputed) baseline, he’s raising net income taxes by about $1 trillion over the next decade
  • Obama’s budget claims that it cuts taxes for families by $770 billion. Yet, the same document admits that fully $326 billion—nearly half—is in fact new spending, not tax cuts
  • The budget raises the top two income tax brackets from 33 percent and 35 percent to 36 percent and 39.6 percent, respectively. These are the tax rates in which $2 out of every $3 in small business profit is taxed. That includes 90 percent of the profits from partnerships and Subchapter S corporations, and 40 percent of the profits from sole proprietorships.  This small business tax hike alone is $339 billion
  • The Obama budget imposes a “cap and trade” tax of $646 billion. Every American family will pay this tax in the form of higher gasoline, heating, and electric bills
  • That’s not the only way this budget raises taxes on energy-consuming American families. The deduction for U.S. energy manufacturers is repealed. “Superfund” (a slush fund tax for the EPA) makes a comeback. Energy companies will see an overnight tax hike on their inventories of oil and other fuels.   Incredibly, there’s even an excise tax imposed on forty percent of the energy mined right here at home, in the Gulf of Mexico. These tax hikes add another $109 billion to American energy costs
  • Rather than dying a merciful death in 2010, as is scheduled under current law, the death tax continues indefinitely with a top rate of 45 percent and an exemption of $3.5 million ($7 million married couples). Small businesses and family farms will have to worry about seeing the undertaker and the IRS auditor on the same day
  • The Obama budget raises taxes on investors in several ways. The capital gains tax is hiked from 15 percent to 20 percent. The dividends tax is raised from 15 percent to 20 percent. Capital gains earned by investment partnership managers are taxed as high as 39.6 percent. At a time when the stock market wealth has nearly been cut in half, why is Obama proposing a $142 billion tax hike on the stock market?
  • U.S. companies will be forced to pay corporate taxes twice on international profits—once in the country they earn them in, and again here. This $210 billion tax hike will push jobs and capital out of our borders
  • By reinstating the “Pease” itemized deduction phase-out, and putting a 28 percent cap on the dollar value of itemized deductions, the Obama budget will hurt charitable contributions, raise the cost of housing, and make it even more expensive to live in high-tax states like New York, New Jersey, Connecticut, Maryland, Illinois, and California. This tax hike is worth $318 billion.

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The State of the American Taxpayer

Posted by Ryan Ellis on Tuesday, February 24th, 2009, 4:45 PM PERMALINK

President Barack Obama will deliver his first message to Congress tonight. One thing you might not hear a lot about is the “State of the American Taxpayer.” Consider the following:

  • Total taxes—federal, state, and local—cost every single American $13,000 per year. That’s money that’s not available for retirement, college savings, or opening a small business
  • If taxes were raised to pay for the trillion dollar spending and debt bill Pelosi-Reid-Obama just passed, they would have to go up by over $3000 for every man, woman, and child in America. How’s that for “stimulus?”
  • The federal tax rate on most small business profits is now 37.9 percent. Obama has said he wants this rate to go up to at least 42.5 percent in 2011. If his plan to raise the Social Security payroll tax rate goes through, this rate could reach a Jimmy Carter-level of 54.9 percent. Seven out of every ten dollars in small business profits in America pay this “small business tax rate”
  • The federal tax rate on capital gains is scheduled to rise in 2011 from 15 percent to 20 percent. On dividends, the rate will rise from 15 percent to 39.6 percent. At a time when Americans’ nest eggs have dwindled, now is not the time to raise taxes on savings
  • The death tax is currently 45 percent. Next year, it’s scheduled to die a peaceful death and go away completely. Under current law, the death tax of 55 percent on all estates worth $1 million or more is scheduled to snap back into place in 2011.  Is now the time to make Americans visit the undertaker and the IRS on the same day?
“President Obama’s speech tonight will be about one thing and one thing only—higher taxes,” said ATR President Grover Norquist. “Pelosi-Obama-Reid will deny up and down that they are raising your taxes, but they will. They won’t cut spending, and they won’t tolerate big deficits. The only thing left to do is go after taxpayers.”


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ATR Supports DeMint American Plan Alternative to Reid-Obama-Baucus Trillion Dollar Spending Plan

Posted by Ryan Ellis on Monday, February 9th, 2009, 5:19 PM PERMALINK

The Honorable Jim DeMint
United States Senate
Washington, DC 20510

Dear Senator DeMint:

On behalf of Americans for Tax Reform, I am pleased to endorse your
“American Option” as the best Senate GOP alternative to the Reid-
Obama-Baucus trillion dollar spending plan.

The “American Option” is a series of pro-taxpayer initiatives, including:

Cutting the small business tax rate from 35 to 25 percent, and reducing
income tax brackets to only three (10, 15, and 25 percent)

Cutting the anti-competitive corporate rate from 35 percent (the
second-highest in the developed world) to 25 percent (more in line
with the average rate of our European competitors)

Locking in the 15 percent rate for capital gains and dividends, which
will boost share prices for the 50 million “investor class” families

These, along with the other tax cut proposals in the “American Plan,” will
increase economic growth in 2009 and permanently. America will become a
magnet for capital, and the resulting wealth creation and job growth will
restore our prosperity.

I would encourage all Senators to support your “American Plan” amendment
this week.


Grover Norquist

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ATR Urges Senators to Oppose Budgetary Grand Compromise Because of Automatic Tax Hikes

Posted by Ryan Ellis on Monday, February 2nd, 2009, 12:16 PM PERMALINK

Dear Senator:

In a Washington Post article from February 2, 2009 (“Democrats Set High Goal of Sweeping Fiscal Reform as Senate Opens Stimulus Debate, Sacrifices Become More Urgent”), it’s speculated that now might be the time for bipartisan, long-term fiscal compromise. In the 110th Congress, the model for this compromise was S. 15, the “Stop Over Spending Act of 2007,” sponsored by Senator Judd Gregg (R-NH) and twenty-six of his colleagues. S. 15 was and remains a fatally-flawed bill which will guarantee an annual income tax increase.

S. 15 would require the President to transmit to Congress for an up-or-down vote a list of spending cuts and tax increases. It would create a point of order against raising income tax rates, but that’s cold comfort for those who see S. 15 as little more than a series of annual income tax hikes.

Some may object that the tax hikes recommended by the President must be “targeted.” However, Section 1021(g)(9)(A) defines “targeted” as “any revenue provision that has the practical effect of providing more favorable tax treatment to a particular taxpayer or limited group of taxpayers when compared with other similarly situated taxpayers.” In the real world of Washington politics and budget fights, this language could be used to justify virtually any income tax increase.

In addition, Section 212(b)(4) of S. 15 provides extra money ($1.885 billion over three years) to the IRS for an “enhanced tax enforcement initiative” to confront the socalled “tax gap.” In fact, this money would be used to intimidate taxpayers into making tax planning assumptions consistently in favor of the tax collector. Going after the “tax gap” is not a way to improve compliance, which is already very high. It’s a way to intimidate taxpayers into waiving their legitimate tax positions when dealing with the IRS, and thereby increase tax revenue through the back door.

Thirty-four United States Senators from both parties have signed the Taxpayer Protection Pledge to their constituents and the American people. In so doing, they promise to “oppose any net reduction or elimination of deductions and credits, unless matched dollar-for-dollar by reducing marginal income tax rates.” Support of S. 15 or any similar “grand compromise” is inconsistent with the Taxpayer Protection Pledge signed by these 34 senators.


Grover Norquist

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A Look at Daschle's Voting Record on Taxes

Posted by Ryan Ellis on Monday, February 2nd, 2009, 12:15 PM PERMALINK

A consistent vote against taxpayers

WASHINGTON, D.C.—A look back at the voting record of Health and Human Services Secretary-designate and former Sen. Tom Daschle (D-SD) shows a lifetime average score of just 7% on Americans for Tax Reform’s annual Congressional Scorecard. The Scorecard is comprised of the top votes of concern to taxpayers in a given legislative year.

Daschle was a consistent vote against tax cuts as well as a consistent vote for tax hikes, including the following “highlights”:

• In 2004, Daschle voted against keeping the Internet free of all sales taxes.

• In 2003, Daschle voted against reducing the capital gains and dividend rates to 15%.

• In 2003, Daschle voted against permanently killing the Death Tax.

• In 2002, Daschle voted against permanently killing the Death Tax.

• In 2001, Daschle voted against cutting income tax rates for all taxpayers, ending the marriage penalty, doubling the child tax credit, and killing the Death Tax.

• In 2000, Daschle voted against ending the marriage penalty, killing the Death Tax, and a gas tax cut for consumers.

• In 1999 Daschle voted against expanding Medical Savings Accounts despite endorsing the concept less than a decade earlier.

• In 1999 Daschle voted against an across-the-board 10% income tax cut, a capital gains tax cut, and killing the Death Tax.

• In 1998, Daschle voted against ending the marriage penalty and against tax-free education savings accounts for children.

• In 1997, Daschle voted against the creation of the Roth IRA.

• In 1995, Daschle voted against a constitutional amendment that would have required a supermajority to raise taxes.

• In 1993, Daschle voted for the Clinton income tax increase.

Tom Daschle, like Leona Helmsley, believes only ‘the little people’ should pay taxes,” said Grover Norquist, president of Americans for Tax Reform. “He thinks he’s too important for that, and he gives the word ‘hypocrisy’ a bad odor.”

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ATR Encourages Senate to Include Repatriation In Tax Bill

Posted by Ryan Ellis on Thursday, January 29th, 2009, 4:26 PM PERMALINK

The Honorable John Ensign
United States Senate
Washington, DC 20510

The Honorable Barbara Boxer
United States Senate
Washington, DC 20510

Dear Senators Ensign and Boxer:

Recent reports have indicated that the U.S. Senate may consider including a repatriation provision in tax legislation being considered next week. I would highly encourage you to use this option, as it’s a win-win for everyone involved.

The “American Jobs Creation Act of 2004” allowed companies to repatriate foreign earnings at a flat rate of 5.25% for 2005 only (under normal tax rules, companies would have to pay up to a 35 percent foreign and U.S. combined tax rate). The results were astounding. $312 billion was repatriated, resulting in nearly $18 billion in new corporate income tax revenue. The Joint Committee on Taxation predicted that less than $3 billion in new revenue would be generated during the repatriation year—a six-fold difference.

It’s important to note that most, if not all, of these foreign earnings would never have been repatriated and reinvested in the U.S. Rather than filling up pension balances, giving workers raises, and bolstering 401(k) and IRA balances, this $312 billion would be sitting in foreign bank accounts. They were a one-time shot-in-the arm to GDP of over 2.5%. Federal coffers saw tax dollars they otherwise would not have seen.

Once again, Congress has the opportunity to use repatriation to inject much-needed and non-inflationary capital into the United States. According to Decision Economics, $545 billion is sitting overseas today, ready to be repatriated. If even half of that money was returned to this country, it would represent a one-time boost equivalent to 2 percent of GDP. Hundreds of billions of dollars would be available to lend, pay down debt, restructure, and (most importantly from a taxpayer perspective) avoid any potential government bailouts.

Repatriation, though, should be the rule and not the exception. The United States is the only country in the world that tries to tax the worldwide income of its companies, and has set up complex deductions and credits as a result. A simple, territorial system similar to repatriation would be a pro-taxpayer and modern tax reform step.


Grover Norquist

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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.


Grover Norquist

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