Texas Lawmakers Take on The Reviled Margin Tax

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Posted by Sven Werner, Patrick Gleason on Friday, March 20th, 2015, 4:16 PM PERMALINK

Despite being more progressive from a tax policy standpoint than most states, Texas still has a major flaw in its tax code: a gross receipts tax on employers known as the margin tax. The Texas margin tax is complex, unnecessary and keeps small and mid-size businesses from creating jobs. It even applies to companies who don’t make a profit. The good news is lawmakers are working to fix this problem during the 2015 legislative session. Two bills that would reduce the margin tax’s burden on Texas employers, Senate Bill 7 & Senate Bill 8, were approved by the Texas Senate Finance Committee this week.

SB 7 would, if signed into law, reduce the margin tax by 15 percent. SB8 would raise the exemption from $1 million to $4 million and exempt businesses that owe less than $1,000. While either of these bills would be better than passing nothing, cutting the tax rate is better approach than raising the exemption. The best outcome would be to put the margin tax on a path to elimination. There are six bills pending in the Texas Senate that would ultimately do away with the margin tax.

Texas is currently ranked as the 10th best business tax climate on the non-partisan Tax Foundation’s annual index. By getting rid of the margin tax, Texas would improve to the 3rd best business tax climate in the nation. A Texas Public Policy Foundation Report found that, based on dynamic econometric models, repealing the margin tax would lead to the creation of 129, 200 jobs in the first five years after its elimination.

It’s wise for Texas legislators to use the 2015 legislative session to improve their tax code as much as possible. Other states are working to cut taxes this session, even states with relatively competitive tax codes. One example is Tennessee. Like Texas, Tennessee does not tax worker paychecks. However, Tennessee does tax dividend income. Even though Tennessee has a lower state and local tax burden than Texas and all but three other states Tennessee lawmakers are planning to approve legislation this year to phase out their tax on investment income. With other states working hard to make themselves as attractive as possible to investment and job creation, Texas lawmakers cannot rest on their laurels.

Fortunately it looks like some form of margin tax relief will be approved this year. Texas Gov. Greg Abbott (R) recently declared that he “will reject any budget that does not include genuine tax relief for Texas employers and job creators.” A great way for legislators to send Gov. Abbott what he has requested is to pass legislation to end or at least significantly cut the margin tax.


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Stuart Seeger

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North Carolina Senators Propose Corporate Tax Relief

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Posted by Patrick M. Gleason on Friday, March 20th, 2015, 3:37 PM PERMALINK

North Carolina has received a lot of attention in recent years for the historic tax reform package approved there in 2013. This week, North Carolina senators introduced a proposal to build upon those reforms and make the state even more economically competitive.

On Wednesday, legislation was filed in the North Carolina senate that would cut the state corporate tax, which is currently 5%, to 4% in 2016, and 3% in 2017. The 2013 tax reform act brings the corporate rate down to 3%, but only if certain revenue targets are met. The bill filed this week, Senate Bill 338, would make sure that the corporate tax will go to 3% no matter what. This corporate tax reduction will increase the job-creating capacity of North Carolina employers and benefit the broader populace. The fact is that corporations don’t pay taxes, people do. Aside from the fact that the corporate tax is one of the most economically damaging forms of taxation, the burden of corporate taxes is borne by ordinary people in the form of reduced wages and shrunken 401Ks. This corporate tax cut would total $500 million per year once fully phased in. 

The senate plan would also change the formula under which the state corporate tax is calculated. The current formula is based on in-state payroll, property, and sales. The plan announced by Senate President Pro Tem Phil Berger this week moves the state corporate tax to a formula based only on in-state sales, commonly referred to as “single sales factor.” This is a good move from an economic standpoint, as the current formula penalizes companies that hire more workers or expand in-state operations. Moving to a single sales factor reduces this disincentive on in-state investment and payroll growth. It is for this very reason that lawmakers in neighboring Tennessee have introduced legislation year to move to a single sales factor corporate tax system.

Every state bordering North Carolina has a lower state and local tax burden. Legislators in South Carolina and Tennessee are moving to make their tax codes even more competitive by cutting income taxes this year. As such, it’s wise for North Carolina lawmakers to use the 2015 session allow individuals, families, and employers to keep more of their hard-earned income. The plan introduced in the North Carolina senate this week would do just that. 

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But who will build the roads? A case for privatization

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Posted by Sven Werner on Friday, March 20th, 2015, 1:05 PM PERMALINK

If a state owned road is closed, why not build your own? That’s exactly what English businessman Mike Watts did. But just how is that possible, without the government?

In August 2014 Watts built a private toll road across a field in a matter of 10 days after the government-controlled road was closed due to a mudslide. To avoid the 14 mile detour on government roads, people were ready to pay a small toll for using the road. Watts spent a total of around 300,000 pounds on the 365 meter road. In the two months, that his toll road was open, and the government road was closed, Watts nearly broke even on his investment. If the English government had been any slower in clearing the mudslide and repairing their road, Watts would have assuredly made a profit.

That the government and the government only, has the special knowledge and abilities to build roads is often a myth peddled by lawmakers and special interests when the suggestion of privatizing transportation comes up. But this is just a myth - one used by those afraid of budget efficiencies and innovation. 

Private toll roads already exist in the US. Former Indiana Gov. Mitch Daniels decided to lease Indiana’s toll road to private developers after Indiana had been losing money on it for years. Because private companies, opposed to the state, have an interest in efficiency and cutting wasteful spending, the private developers implemented electronic tolling. This investment in making the process more efficient led to saving more than 55% on toll collection. And that’s only one example how they figured out how to save money and make the toll road more cost effective.

France, in terms of privately run highways, takes it to a whole other level: 8000 kilometers of 11000 kilometers of highway are under by private concession. More than half of Italy’s highways are run by private companies who implemented electronic tolling in 1998 - unthinkable for state-run highways back then. The customers of the private run highways are billed by the distance they travel on the roads, maximizing the "user pays" philosophy many lawmakers seek when it comes to transportation funding.

These examples emphasize how drivers and taxpayers can benefit from private-run roads and how governments can work with private industry to ensure that transportation is truly funded on a "user pays" basis. 

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Mark Stevens

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Of course, the company that Mitch Daniels leased the Indiana Toll Road to has now gone bankrupt. I'm not sure that necessarily detracts from the strength of the author's argument, especially when one considers the deplorable condition of streets and roads throughout Indiana (especially in and around Indianapolis, the state's capitol).

The question, though, is why would private road construction companies have any interest in taking on the responsibilities associated with regular road maintenance and repair? They're already making a fortune from state and federal tax dollars flowing their way from government. In the long run, it seems, once these road construction companies do the math, they'll decide that it makes more financial sense for them to just keep raking in tax money in return for doing shoddy repair work. Little chance of these companies going bankrupt if they stick to their current model. And politicians won't lose the precious campaign donations they get from the road companies in return for the work the politicians send the companies' way.

In short, although the author's thesis is sound, it completely ignores the reality of the special relationship road companies and politicians share. That's a relationship that will take some strain to break. And, so far, it seems to be working too well for the parties involved.

ATR Supports Tax Simplification for Seniors

Posted by Ryan Ellis on Thursday, March 19th, 2015, 3:22 PM PERMALINK

Earlier this week, the “Senior Tax Simplification Act” was introduced in both the U.S. House of Representatives and U.S. Senate. Complying with the U.S. tax code costs Americans six billion hours and $168 billion each year.  This legislation will simplify tax compliance for those who need it most – our seniors. ATR supports this legislation and urges all Congressmen and Senators to vote for and otherwise support this bill.

H.R. 1397, introduced by Congressman John Fleming (R-La) and S. 716, introduced by Senator Marco Rubio (R-Fla) would instruct the IRS to create a new 1040 tax form specifically for senior citizens. The form would simplify the process of filing taxes and include information for the most common types of income reported by seniors - interest, dividends, capital gains, Social Security benefits, pension payments, IRA distributions, wages, and unemployment compensation.  

Each year, 21 million returns are filed in households where the primary taxpayer is over 65. The creation of a streamlined tax form will make life easier for these millions of households and lead to a more efficient system.
A similar form already exists for young taxpayers, the 1040-EZ. This form is used by almost 5 million households each year. Given the success of this form in simplifying the tax code for younger workers, there is no reason that seniors should not be given this same assistance.

The Senior Tax Implication Act will provide much needed clarity and grant seniors a more efficient and streamlined process.


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Jeb Bush Still Refuses to Rule Out Tax Hikes

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Posted by John Kartch on Thursday, March 19th, 2015, 12:34 PM PERMALINK

Jeb Bush has enthusiastically endorsed a "grand bargain" tax increase with Democrats, says his father's 1990 "Read My Lips" tax increase "created the spending restraint of the 90's," (false -- see details below) and refuses to sign the Taxpayer Protection Pledge to the American people.

And today, as reported in a piece by The Daily Beast's Tim Mak, the Jeb Bush camp refuses to even answer the question of whether Jeb will make any general statement promising not to raise taxes:

Pressed regarding Jeb Bush’s positions on taxes, his aides did not directly respond to a question about whether Jeb Bush might make a general promise to voters more broadly not to raise taxes.

Meanwhile, as governors, Scott Walker, Bobby Jindal, and Rick Perry have all signed — and kept — the Taxpayer Protection Pledge.  As Senators, Rand Paul, Ted Cruz, and Marco Rubio have all signed — and kept — the pledge.

As president, George W. Bush kept his tax promise to the American people.

George H.W. Bush, reflecting upon his "Read My Lips" tax hike, deemed it the greatest mistake of his presidency.

Regarding Jeb's claim that the 1990 Read My Lips tax hike created spending restraint, let's take a look at what actually happened:

The 1990 “Read My Lips” Budget Deal Scam

Starting in May of 1990, President George H.W. Bush huddled with Democrat House and Senate members at Andrews Air Force Base.

  • What was Promised: Congressional Democrats convinced a number of Republicans to join them in a bipartisan deal promising $2 in spending cuts for every $1 in tax increases. President Bush signed the deal on November 5, 1990.
  • What Actually Happened:  Every penny of the tax increases ($137 billion from 1991-1995) went through. Not only did the Democrats break their promise to cut spending below the CBO baseline by $274 billion—they actually spent $23 billion above CBO’s pre-budget deal spending baseline. Thirty-four House Republicans broke their own Taxpayer Protection Pledges and went along with this one-sided “deal.” As a result, Republicans lost eight seats in the 1990 Congressional midterms, and President Bush only received 38% of the vote in the 1992 Presidential election.

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We pay enough taxes! Here's an idea - stop spending and shut down the damn government! No more Bushes, no more Clintons!

Earl P. Holt III

Just like his stupid and gullible father. (The Bushes have betrayed conservatives more times than Richard III betrayed England and the House of York...)



The Grover Norquist Show: End the IRS Before it Ends Us

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Posted by Alexander Hendrie on Thursday, March 19th, 2015, 11:36 AM PERMALINK

In the latest edition of the Grover Norquist show, ATR President Grover Norquist previews the content in his upcoming book: End the IRS Before it Ends Us, out April 7.

Norquist discusses America’s history as a low tax nation starting in 1774, when the 13 colonies were paying just 1-2 percent of their income in taxes. Since then, both federal and state governments have consistently raised the tax burden on Americans through a complex web of tax hikes justified by emergencies, wars, and displacing other taxes.

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ATR Supports Debt and Taxation Transparency for Taxpayers

Posted by Ryan Ellis on Wednesday, March 18th, 2015, 4:43 PM PERMALINK

Senator John Cornyn (R-Texas) introduced S. 745, the “Debt and Taxation Transparency Act of 2015” (DTTA) earlier this week. ATR supports this legislation and urges all Senators to vote for and otherwise support this bill.

Since 2009, the national debt has increased by 70 percent. Taxpayers deserve to know how this unsustainable runaway spending could impact their standard of living and economic well-being.

S. 745 will provide taxpayers with a better understanding of how Washington’s reckless spending affects them.

Specifically, the DTTA ensures that taxpayers will receive a “taxpayer financial statement” which will provide taxpayers with a calculation of their share of the federal government’s financial obligations.

S.745 will provide other important information to taxpayers including a 30-year projection of the increase in federal income tax rates necessary to completely finance the current fiscal path of the federal government, without running a budget deficit, and an estimate of income & payroll tax liability to taxpayers under this 30 year projection.

In addition, DTTA will provide taxpayers with a summary of the most recent Financial Report of the United States, including the long-term fiscal position of the Federal Government.

Taxpayers deserve the truth from Washington about the state of federal finances. This legislation will provide taxpayers with a more complete picture of long-term fiscal conditions. ATR Supports the Debt and Taxation Transparency Act and urges all Senators to support this bill. 

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Pennsylvanians Facing Historic Tax Increases with Gov. Wolf's New Budget

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Posted by Sven Werner, Patrick Gleason on Wednesday, March 18th, 2015, 3:28 PM PERMALINK

Recently Pennsylvania Gov. Tom Wolf presented his first budget, which includes the largest state tax increase in Pennsylvania history. His budget proposal of $33.6 billion represents a 16 percent increase over last year’s budget.

This increase of the income tax rate would mean a $2.3 billion net increase for Pennsylvania's taxpayers.  According to his budget, the income tax rate will be raised by 20%, from 3.07% to 3.7%. This proposed income tax increase, were it to become law, would have a significant negative effect on Pennsylvania taxpayers.  For a household making $60,000, it would raise their state income tax bill from $1,842 to $2,220, or an increase of $378.

Gov. Wolf’s budget proposal is historic, and not in a good way, as his proposed $4.5 billion state tax increase would be the largest increase in Pennsylvania history. Gov. Wolf uses these tax increases to increase spending by $800 million.

Senate Majority Leader Jake Corman (R-Centre) has called out the problems with Gov. Wolf’s plan:

“You don’t raise $4.5 billion in taxes to increase spending by $800 million,” Senate Majority Leader Jake Corman, R-Centre, said after the governor gave his address Tuesday. “Come on. Let’s all deal in reality here.”

Not only will Pennsylvanians face an income tax increase, but also an increase of the sales tax from 6 to 6.6 percent. In addition, under Gov. Wolf’s budget, many goods that have been exempt from the sales tax would be taxed, include nursing care, parks, and textbooks. It’s ironic that Gov. Wolf wants to start taxing textbooks, when at the same time he increases spending on education.

Wolf’s proposed budget hurts the economy’s driving forces the hardest: small business owners

The National Federation of Independent Business calls “small business the biggest loser in governor’s proposed 2015-16 state budget.” According to IRS data, over 776,000 small businesses file under the individual income tax system and Gov. Wolf’s budget would leave them with less income to hire more workers, give raises to current workers, and invest in Pennsylvania. That IRS data only accounts for sole proprietors. Including the share of small businesses made up of S-Corps and partnerships, a couple hundred thousand more small businesses that file under the individual income tax system in Pennsylvania and would be adversely impacted by Gov. Wolf’s budget.

Elections have consequences. Pennsylvania taxpayers will likely face perennial tax hike threats from Gov. Wolf. Fortunately, the Republicans-controlled legislature is less inclined to drain more money from the private economy to increase government coffers.


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ATR Supports House 2016 Budget Proposal

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Posted by Alexander Hendrie, Jorge Marin on Tuesday, March 17th, 2015, 5:13 PM PERMALINK

Today, ATR President Grover Norquist released a letter in support of the US House of Representatives budget proposal for Fiscal Year 2016. This budget proposal puts forth a set of fiscally responsible solutions that balances the budget and reins in out of control federal spending by cutting trillions of dollars. At the same time the resolution preserves the landmark caps on spending which have kept government largess under control.

The budget proposal also calls for the full repeal of Obamacare, strengthening and securing Medicare and Medicaid, introducing lower and more competitive taxes, creating and protecting jobs and funding national security in a responsible way. See the full letter below:

Dear Chairmen Price:

On behalf of Americans for Tax Reform, I write in strong support of the recently released U.S. House of Representatives budget proposal. The budget blueprint authored by House Budget Committee Chairman Tom Price (R-GA) will ensure that Washington lives within its means by balancing the budget in less than ten years and cutting $5.5 trillion in federal spending.

The budget proposal calls for a fairer, simpler tax code, reforms struggling entitlement programs, clamps down on inefficient and ineffective government programs, and lays the groundwork for strong economic growth. The plan also empowers the states to make their own decisions by restoring the principle of federalism.

By keeping to the proposed reforms, Congress stands to secure America’s economic prospects, protect jobs, and accelerate economic development to levels which would be unattainable given the current spending policies. Lower, flatter taxes plus a competitive international tax regime would enshrine our place as the world’s number 1 destination for entrepreneurship. Simply put, asking taxpayers to pay $160 billion per year is an undue burden that we can do without.

Notably, the House budget repeals Obamacare in its entirety and reforms the health care system to increase access to affordable care and provide patients with better medical choices. Repealing Obamacare would eliminate numerous job killing regulations including the employer mandate and the individual mandate. In place of this complex system, the House budget prioritizes a patient-centered approach that gives power back to the individual.

Repealing Obamacare will also put a stop to the raiding of the Medicare trust fund. In turn, this will help secure and strengthen Medicare so the program can continue to provide retirees with the care that they deserve. The budget will also build a new premium support program for Medicare that will further empower seniors to make their own choices.

Finally, the budget implements improvements to Medicaid. Specifically, it repeals the Obamacare Medicaid expansion and grants increased flexibility to the states, which will allow the states the opportunity to build a strong and sustainable system of Medicaid that suits their needs.

The House Budget maintains the spending restrictions mandated in the Budget Control Act of 2011, ensuring the continuation of the savings from discretionary spending. In contrast to the White House budget, which ignores 2011 spending caps and raises spending through misleading promises, the House budget abides by federal law. The budget allocates funding to the DOD’s Overseas Contingency Operations (OCO) fund to meet the complex and dangerous global threats, balanced by cuts to mandatory spending.

It is important to keeps the caps in place that have stabilized federal spending since 2011 and will lead to $1.79 trillion in savings through 2021. You should be congratulated for proposing a more fiscally responsible solution despite the urging of some of his more reckless colleagues to break spending caps and undo years of fiscal restraint.

We urge the House Budget committee to support this bold pro-growth proposal. It returns power to states and localities while making great, positive strides in the tax code.


Grover G. Norquist
Americans for Tax Reform

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ATR Supports Legislation to Repeal the Death Tax

Posted by Ryan Ellis on Tuesday, March 17th, 2015, 3:52 PM PERMALINK

This month, the House Ways and Means Committee will consider H.R. 1105, the “Death Tax Repeal Act of 2015,” sponsored by Congressman Kevin Brady (R-Tex.). This legislation will put an end to the immoral practice of the federal government demanding hard-earned taxpayer money after a family loses a loved one. ATR supports this bill and urges all Members of Congress to support it.

H.R. 1105 will permanently kill the Death Tax. The Death Tax has a top federal rate of 40 percent on estates and the tax is a major reason that Americans are unable to pass along farms and small businesses to the next generation.

The Death Tax makes up a miniscule sliver of federal revenue and so repealing the tax will have an almost unnoticeable effect on the federal budget. In addition, a study by the Joint Economic Committee found that the Death Tax hurts economic growth and discourages savings and small business growth. 

The Death Tax places an unfair and unnecessary burden on American families in the event of a tragedy.  H.R. 1105 will repeal this ridiculous tax and help provide families peace of mind in a difficult time.

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