Ryan Ellis

ATR Supports Rubio-Griffin Legislation to Prevent Insurance Company Bailouts

Posted by Ryan Ellis on Friday, January 24th, 2014, 5:00 PM PERMALINK

ATR is supportive of an important new bill introduced by Senator Marco Rubio (R-Florida) and Congressman Tim Griffin (R-Ark.)  S. 1726/H.R. 3541 would strip out of Obamacare an impending bailout of health insurance companies who will lose money in Obamacare exchanges.

Under the Obamacare law, "risk corridors" are created for participating insurance companies.  In this scheme, an insurance company which expends more than anticipated on Obamacare insurance claims will receive a bailout of up to 80 percent of their loss amount.  This bailout is intended to be funded by competing insurance companies who spent less than expected, but the bailout of insurance companies ultimately comes out of taxpayers' wallets.

Since very few Americans are actually signing up for Obamacare plans, it's very likely that most participating insurance companies will find themselves eligible for this bailout toward the end of 2014.  If Congress does nothing, insurance companies will receive a taxpayer-financed corporate bailout because the Obamacare system is broken and cannot be fixed.

That cannot be allowed to happen.  S. 1726  and H.R. 3541 would prevent this bailout of health insurance companies.  They are the ones that colluded with the Obama Administration to saddle the country with Obamacare, and they should be full partners in its losses.

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H.R. 7, the "No Taxpayer Funding for Abortion Act" is Not a Tax Hike

Posted by Ryan Ellis on Friday, January 24th, 2014, 12:10 PM PERMALINK

The U.S. House of Representatives will soon consider H.R. 7, the "No Taxpayer Funding for Abortion Act."  This bill has been scored by the Congressional Budget Office (CBO) as having a negligible effect on both tax revenues and direct spending.  That is, any effects the bill may have are so minor and small that they cannot be measured and should be discounted.

Some have claimed in the past that this legislation was a net tax increase, CBO and JCT scores notwithstanding.  ATR corrected those accusations back in 2011.  The analysis made then still stands today--this legislation is not a net tax increase, and has no interaction whatsoever with the Taxpayer Protection Pledge.

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Broad Conservative Movement Support for Obamacare Patient Protections

Posted by Ryan Ellis on Friday, January 10th, 2014, 6:00 AM PERMALINK

A joint letter from 21 conservative movement leaders has been sent to the U.S. House of Representatives supportive of their efforts this week to better protect Americans forced into Obamacare exchanges.  A PDF of the letter can be found here.  Highlights of the letter include:

"Today, the U.S. House of Representatives will be considering two ideas which would protect millions of Americans now forced to purchase health insurance in Obamacare exchanges.  The policy ideas behind these initiatives are not only positive—they are things which the American people should expect their government to be doing as a matter of course...

"The first measure would require the Department of Health and Human Services (HHS) to report within two business days to any American if their personal information has been stolen or unlawfully accessed through an Obamacare exchange... 

"The second measure requires the HHS secretary to provide detailed weekly reports to the American people about the enrollment success of Healthcare.gov...

"Most Americans would be shocked to learn that this level of protection and transparency is not already happening in a project the size and scope of Obamacare.  It is our hope that House efforts today will correct this injustice."

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CRS Says Marginal Tax Rates Don't Matter...Again

Posted by Ryan Ellis on Tuesday, January 7th, 2014, 3:29 PM PERMALINK

The Congressional Research Service (CRS) is supposed to be a non-ideological, fact-based research crack staff for House and Senate offices.  Besides being completely non-transparent with the public who pays taxes for them, however, CRS has started to show a decided liberal bias in the area of tax policy.

Back in September 2012 (you know, right before an election of some importance), CRS issued a study in which they maintained that raising or lowering marginal income tax rates had no effect on economic performance.  The Heritage Foundation's Curtis Dubay had this to say at the time:

The CRS report presents a slew of periods between 1945 and 2010 comparing the top marginal income tax rates and capital gains rates with economic growth rates. From these correlations the author concludes that lower rates do not correlate with stronger economic growth.

In fact, these stylistic correlations prove nothing. In short, the economy is more complicated than this simplistic approach can acknowledge. For the analysis to prove anything, it needed to account for countless other economic and policy factors, many specific to a given period, and determine how those factors influenced economic growth in the period in question. With this as background, the analysis would then have to isolate the effect lower rates had on growth.

CRS, and many others that argue against lower tax rates, mislead when they make such flimsy correlations because they fail to disclose that no two time periods are the same. Comparing 1950 to 2010 just on tax rates is ludicrous. The world and tax policy are entirely different in those timeframes. If CRS tried to account for all the differences, and then determine how tax rates influenced growth, it would find a different and more accurate answer: that lower rates encourage growth.

Well, apparently CRS is at it again.  They have re-released the report, and those who have read it tell me it makes the same points using the same methodological flaws.  I can't read it because it's firewalled, but there's a Tax Analysts writeup here (subscription required).

Curtis made another good point in his 2012 analysis which bears repeating here: marginal income tax rate change is one of the few areas in which the Left thinks taxes don't influence behavior.  The same people who think raising and lowering the capital gains tax rate has no impact on stock prices are the ones who tout the incentive-altering effects of carbon taxes, Tobin taxes, cigarette taxes, soda taxes, plastic bag taxes, etc.

So which is it?  Do taxes change behavior, or do they not?

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ATR Supports Protecting Americans from Obamacare Security Breaches

Posted by Ryan Ellis on Friday, January 3rd, 2014, 1:27 PM PERMALINK

ATR is supportive of efforts by the U.S. House of Representatives next week to protect Americans from personal data security leaks resulting from Obamacare website failures.

Reportedly, the House's bill will bring together the best ideas that members have had on the issue.  One of the better ideas has been introduced by Congressman Gus Bilirakis (R-Florida).  H.R. 3795, the "One Hour Notification Act of 2013" (aka the "OH No Act of 2013") would require the Department of Health and Human Services to notify any American of an Obamacare-related breach in their personal information, and it requires this to be done within one hour of the breach.  In addition, HHS must also notify relevant Congressional committees and produce an annual report.

Information can be stolen in an instant, and the American people deserve to know if their personal identification information is made available to unscrupulous hackers.  The Obama administration has insisted that the flawed healthcare.gov website remain active and mandatory, so they should also be required to come clean when that website fails to protect basic health consumer information.

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ATR Analysis of Budget Proposal

Posted by Ryan Ellis, Mattie Duppler on Wednesday, December 11th, 2013, 2:38 PM PERMALINK

Below is Americans for Tax Reform’s analysis of the Bipartisan Budget Act of 2013 (BBA13). We are deeply troubled by both the increase in the TSA user fee and the temporary relaxing of the spending caps for 2014 and 2015, but we are pleased by the permanent, large, long-term spending cuts contained in the legislation.

Long-Term Government Spending

Over the long term budget horizon, BBA13 is a large net spending cut.  Long-term numbers are not available, but the spending cuts included in the plan are permanent and mandatory.  It would take an act of Congress to amend them.  Meanwhile, the spending increases in the bill are limited to 2014 and 2015 only, leaving the 2016-2021 sequester budget caps unchanged. 

BBA13 does not set up an annual “patch” or “cliff” or give an excuse for Congress to re-adjudicate these cuts every year or two.  The 2014-2015 divergence from the discretionary spending caps’ trend line was a one-time event not repeated in the window.  The cuts to pay for this anomaly, however, are permanent and will reduce government spending by many times more than the small spending increases in 2014 and 2015.  BBA13 is a short-term discretionary spending increase dwarfed in size by a long-run mandatory spending cut.

Continuing Successful Spending Caps

There are also new sequester budget caps in 2022 and 2023 that didn’t exist before. This secures $22 billion in additional spending restraint. The sequester has netted the only real year-over-year reduction in outlays in the modern era, and extending them for as long as possible is a proven way to continue to rein in spending.

TSA Ticket Fee

By far, the worst element of BBA13 is the per-ticket airline fee hike that goes to the Transportation Security Agency (TSA.)  The TSA is a bloated, unionized government agency which should be privatized.  The TSA should not receive a special portion of money from every airplane ticket sold. 

ATR supports repealing the entire TSA ticket fee permanently, and replacing it with permanent spending cuts elsewhere.  ATR supports fully privatizing the TSA, which currently costs taxpayers $8 billion per year.

BBA13, however, structures the TSA ticket fee not as a tax, but as an offsetting receipt to pay for TSA “services.”  In so doing, this fee straddles the line between a tax increase and a user fee without technically crossing into tax hike territory – nevertheless, it should be replaced with spending cuts.  The provision is scored by CBO as a spending cut in the form of an offsetting receipt and has been since TSA was first created by Congress.

This is a very, very bad way to write legislation.  CBO’s scoring methodology here is gimmicky, and it does not hold up to strict scrutiny as a serious policy initiative. 

ATR is strongly opposed to this provision of BBA13, and urges Congress to replace it with permanent spending cuts elsewhere.

Government Employee Pensions

Federal employees currently receive both a 401(k) style pension and a defined benefit pension.  They have to contribute a percentage of their salary toward this defined benefit pension.  BBA13 increases this by 1.3 percentage points of salary for employees hired after January 1, 2014 (and who have not worked for the federal government for more than five years previously). 

This will take years to phase in, since it applies only to new employees.  However, once it is completed, it should save taxpayers $2 to $3 billion per year in today’s dollars by having government employees contribute more towards their own pension plan.

Military Pensions

When someone serves 20 years in the military, they get an immediate pension equal to 50 percent of their military annual salary.  Under current law, this pension amount increases with inflation annually.  Under BBA13, it would only increase at inflation-minus-one percentage point.  Upon retirement age (62), the veteran is held harmless by having their pension going forward plussed-up and their full COLA restored from there. 

This should save taxpayers about $1-2 billion per year in today’s dollars in perpetuity.


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ATR Supports Permanent End to Annual Medicare Doctor Bailout

Posted by Ryan Ellis on Monday, December 9th, 2013, 4:07 PM PERMALINK

If there’s one issue in Congress where taxpayers have been held over a barrel for years, it’s the annual patch to Medicare’s sustainable growth rate formula (SGR), universally known as “doc fix.”

More than a decade ago, Congress decided it would be a good idea to cut the rate at which Medicare reimburses doctors for services.  While this spending cut would be welcome, it’s been delayed again and again and again.  In fact, Congress has prevented this spending cut from moving forward a ridiculous seventeen times since 2002.  Most of the time, Congress simply moves the effective date of the cuts forward a year, and then does so again the next year.  “Doc fix” routinely attracts supermajorities (even of conservatives) in each chamber of Congress.

This is more than just harmless legislative inefficiency.  Because CBO must assume that doc fix will happen on time, Congress has used the toothless threat of the provider cuts to mask other spending.  According to Medicare's own trustees, SGR is a budget gimmick that hides the true cost of entitlements and their impact on the economy.  The very fact of SGR's existence forces government actuaries to report that Medicare is a much healthier long-term program than it actually is.  As a result, the urgency to reform Medicare is far less than if the accounting was more honest.

It’s a rigged con game that leaves taxpayers footing the bill for even higher spending after the annual “doc fix shakedown.”  Because everyone in Congress knows that doc fix is a train that’s moving down the tracks and will not be stopped, lobbyists line up to attach their favorite earmarks and deals to the annual legislation.  Doc fix is like a ship that attracts barnacles that hop along for the ride.

Thankfully, Congress seems to be in a mood to get rid of the annual doc fix con job once and for all.  Legislation being considered by the House Energy and Commerce Committee, House Ways and Means Committee, and Senate Finance Committee would call off the never-gonna-happen spending cut once and for all.  There are still many details to be worked out (including spending cut offsets), but the process moving forward is an important one for taxpayers.

In return for more certainty, doctors would be reimbursed based on quality of care rather than the current ATM-like “fee for service” method.  The current reimbursement method pays doctors more simply for doing more tests and services, whether they are useful to the patient or not.  Doctors instead should be incented to provide higher quality and coordinated care to patients and rewarded when costs are kept down.  Instead of paying for “volume” the system should pay for “value.”

Some will tell you that this permanent solution would appear to spend more money, but that’s based on a fantasyland baseline where Congress would ever let the planned spending cuts happen.  Congress has never let these spending cuts happen in any of the last dozen years, and it never will.  If we can concede that simple reality and take taxpayers out of the mugging zone every December, we’ll all be better off.  Congress is either going to spend the money in costly annual doc fixes which result in other spending and budget gimmicks, or they’re going to remove the whole phony setup once and for all.

We vote for getting this issue settled so taxpayers can focus on cutting spending rather than being cowed into annual bailouts for doctors.  It’s better for taxpayers and for patients.

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ATR Supports H.R. 3420, the "Truth in Obamacare Advertising Act of 2013"

Posted by Ryan Ellis on Friday, December 6th, 2013, 2:34 PM PERMALINK

Congressman Jack Kingston (R-Ga.) has introduced H.R. 3420, the "Truth in Obamacare Advertising Act of 2013."  It requires any Obamacare advertisement or educational promotion which is paid for with taxpayer dollars to include the following disclaimer:

"The Congressional Budget Office estimates that Obamacare will cost taxpayers $1.76 trillion over a decade."

If taxpayers are forced by the administration to pay for propaganda ads to buttress the failing Obamacare law, the least they should be able to expect is that the full cost of that law is disclosed in those ads.  That isn't too much to ask.

ATR urges all Congressmen to co-sponsor this common sense bill.

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Baucus Cost Recovery Draft Opposite of Real Tax Reform

Posted by Ryan Ellis on Thursday, November 21st, 2013, 5:21 PM PERMALINK

Senator Max Baucus (D-Mont.) today released his cost recovery tax reform draft.  In short, it would create a regime where business investments are never fully accounted for and capital investment takes a massive hit.  When capital investment suffers, so does everything else in an economy: wage growth, job creation, and growing nest eggs.

The conservative answer on cost recovery questions is very simple: all business inputs (including business investment purchases) should be eligible for immediate first-year expensing.  It should not matter whether a business buys a pencil, pays a wage, acquires a building, or purchases a computer.  All of those represent cash flow expenditures of the business, and should be deducted out of the business’ tax base the year they are spent.  This sane and common sense tax treatment is common to all major tax reform plans, including but not limited to: the flat tax, the FAIR Tax, the USA Tax, the Bradford-x Tax, the progressive consumption tax, and all kinds of value-added taxes (VATs).  This basic consumption-base, business cash-flow arrangement is the norm in academic tax literature.  Bizarre alternatives are only found in Washington, DC political back rooms.

Before getting into the many problems with the Baucus draft, there are three areas where it gets it right:

Small business expensing.  The draft makes “Section 179” permanent at $1 million of assets invested (with a phaseout between $2 million and $3 million of assets deployed).  That’s a very good change to the tax code that’s long overdue.

Treasury updates of cost recovery speed.  The Treasury Department is given power to update cost recovery periods to account for changing economic conditions.  This is a power they had under the 1986 Tax Reform Act, but Congress stripped them of it 2 years later.  This would allow a more pro-growth administration to speed up cost recovery, for example.

Deduction of inventory costs.  For taxpayers using the cash method of accounting, inventory costs would be deductible.  This is a big step in the right direction of a business cash flow model (unfortunately overwhelmed by what is done on depreciation and amortization).

Below are the major problems with the Baucus cost recovery draft:

Depreciation that never ends.  Emulating the tax treatment of business assets seen in European tax plans (which would explain how Senator Baucus got the idea from Senator John Kerry, a known Europhile), the Baucus draft would end the current depreciation rules for business tangible property.

Under current law, when a business purchases an asset, it usually must be slowly-deducted (“depreciated”) over several years.  The draft replaces this with a new four-tiered system of “asset pooling.”  Under asset pooling, businesses keep track of different classes of assets on their books.  The pool is increased by new asset purchases, and decreased by assets taken out of service and the deduction regime described below.  The asset pools can claim a deduction every year that ranges from 38 percent down to 5 percent of the value of the pool.

To use a common business purchase, computers are in “Pool 1,” which allows for a 38 percent deduction of the pool’s value every year.  Each year, a company can claim a deduction equal to 38 percent of their cost basis in all the computers they own (less any prior year deductions they have already claimed).

Hopefully, the problem here is obvious.  The company can only deduct 38 percent of each new computer’s purchase in the first year, and only 38 percent of the old computers’ remaining value (which declines every year, but never to zero).  The older computers’ cost is never recovered in full before obsolescence assuming the company continues to make capital investments.   It’s a dog chasing its tail.


A company purchases a computer in Year A for $1000.  This is a “Pool 1” asset, so a deduction is taken at a 0.38 rate.  This $380 deduction reduces Pool 1’s value to $620.

In Year B, the company purchases another $1000 computer.  This is added to the pool’s value, which increases to $1620.  A 0.38 rate deduction is claimed on this, or $616.  This reduces the pool’s value to $1004.

In Year C, the company purchases yet another $1000 computer.  This is added to the pool’s value, which increases to $2004.  A 0.38 rate deduction is claimed on this, or $762.  This reduces the pool’s value to $1242.

The real estate that time forgot.  There’s one area where the Baucus draft retains depreciation--real estate investments.  Under current law, real estate is depreciated over 330 months (27.5 years) for residential real estate, 468 months (39 years) for non-residential real estate, and 480 months (40 years) for overseas property and property subject to the corporate AMT.

The Baucus draft replaces all of these with a new and arbitrary 516 month (43 year) property depreciation for real estate.  This means that real estate purchased for business use faces a ridiculous amount of time before the cost is ever recovered—and thanks to inflation, the real cost is not anywhere near recovered.

Lifetime cap on business use of personal vehicle.  The draft imposes a $45,000 lifetime cap on depreciation deductions for business use of a personal vehicle.  This is a big tax increase on small business owners who use their cars a lot for business (think realtors, salesmen and even clergy).

“Mad Men haircut.”  The draft imposes an arbitrary restriction on advertising expenses.  Half of an annual expense can be deducted in the year paid, with the remaining half ratably amortized over 60 months (5 years).  For companies that advertise regularly, this means they effectively can never catch up.

Why advertising?  Why not business travel?  Why not supplies?  Picking on one ordinary and necessary business expense is arbitrary and a clear case of the tax code picking winners and losers.

Higher taxes on research and experimentation, and on energy.  The draft requires research and experimentation expenses, intangible drilling costs, and other energy extraction costs to be amortized over 60 months (5 years).  This would have a devastating impact on America’s energy production, which in turn will make energy more expensive for working families.

Other intangibles are forced to be amortized over 240 months (20 years), up from today’s 180 months (15 years).

LIFO repeal.  Under the draft, the “last in, first out” method of accounting for inventory is repealed.  Going forward, all inventory must be done in a “first in, first out” (FIFO) manner.  However, companies will have to pay taxes on their “LIFO inventory” (the aggregate net annual advantage in claiming LIFO instead of FIFO for the life of the business).  Businesses have eight years to pay this tax.

This is very unfair.  Some companies are decades old, and have been claiming LIFO that whole time (in accordance with tax law).  To retroactively repeal that legal tax treatment now is unfair, and is a retroactive tax increase.  The LIFO tax does not reflect actual income today, and is nothing more than a pure power grab. 

Green energy tax credits given a pass.  In the “Unaddressed Issues and Requests for Comment” section, the committee staff say that they haven’t made a decision on what to do with green energy tax credits set to expire at the end of 2013.  This just shows how backwards the committee’s work has been.  They are considering potentially making these ridiculous tax credits permanent, while arbitrarily increasing taxes on productive energy companies and manufacturers.

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A Tale of Two Repatriation Proposals

Posted by Ryan Ellis on Thursday, November 21st, 2013, 2:06 PM PERMALINK

All week, Senate Finance Committee Chairman Max Baucus' (D-Mont.) staff have been releasing discussion drafts on tax reform.  The international discussion draft contains an interesting provision that invites a comparison with recent tax history.  The draft proposes:

Earnings of foreign subsidiaries from periods before the effective date of the proposal that have not been subject to U.S. tax are subject to a one-time tax at a reduced rate of, for example, 20%, payable over eight years

Here's what this means: let's say you're a large, multi-national company that has lots of business done overseas.  You've invested there, earned profits there, and paid taxes to those foreign governments.  For most of the world's companies, that's the end of the story--after all, what remains is after-tax dollars. 

But what Chairman Baucus proposes is for the IRS to take another 20 percent of this money--money which has already and appropriately faced taxation in the country where you earned it.  It's true that this second layer of taxation could be paid over eight years, but that's hardly the point.

There is likely well over $1 trillion in after-tax earnings sitting overseas today.  One big reason companies don't bring this money back to the U.S. is because they would have to pay taxes on the difference between the U.S. rate (over 39 percent when states are included), and whatever rate they already paid overseas (the OECD average is just under 25 percent).

Slapping a 20 percent tax rate on this money is a huge cash grab by Washington.  It would be a tax increase of over $200 billion, payable over the next eight years.  This, in turn, would mean less money for companies to spend on creating jobs, investing in new plant and equipment, funding pension plans, etc.

Contrast this to a successful "repatriation" regime, the one which occurred in 2005. For that one year only, companies could voluntarily bring after-tax overseas earnings back to the United States and face an IRS double-tax no higher than 5.25 percent.  With this positive incentive, about $320 billion was brought back, resulting in a pro-growth cash windfall to the Treasury of about $17 billion.  This money was used for things like paying down debt, funding pensions, and deployment of new investment.

That's the model that tax reform should use, not a greedy cash grab by Washington.

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