Tax Hikes Shouldn't Be Part of West Virginia Tax Reform

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Posted by Matthew Benzmiller on Monday, September 28th, 2015, 11:43 AM PERMALINK

For decades, the West Virginia legislature has budgeted without fiscal restraint or reforms. In 2014, for the first time since 1929, Republicans took control of the House of Delegates and state Senate. Confronted with an overspending problem, some legislators are considering a short-term fix, a tax increase.

Tax revenues are falling, the state budget has used the Rainy Day fund three years in a row, and there is an estimated outstanding $1 billion in repairs for upgrading roads and bridges. The solution that some West Virginia legislators have come up with is a cigarette tax hike on low and middle-income consumers.

Senate minority leader Jeff Kessler, D-Marshall, has criticized the cut in taxes that eliminated grocery taxes, phased out the business franchise tax, and the recent business tax reductions from 2006. Kessler proposed legislation last year that would have raised taxes on cigarettes.

“We need to start investing in our people. If that requires raising some taxes, then that’s the way to go,” Kessler said. According to a Gallup poll, “More than half of smokers earn less than $36,000 per year.” Even worse, over a third of smokers make less than $12,000 a year.

He claims, “things folks want — a qualified, skilled, educated and sober workforce; workforce participation; infrastructure and roads” are at stake if legislation to give tax cuts to big businesses are in the works.” Kessler claims he wants to help blue collar workers, but raising cigarette taxes will hurt those consumers most. 

Even more, cigarette tax hikes rarely meet revenue expectations. Of the 32 state tobacco tax increases that went into effect between 2009 and 2013, only three met or exceeded revenue projections. After cigarette tax hikes, consumers seek out alternative tobacco products that are less expensive or available across state borders in lower taxed states. 

58% of cigarettes smoked in New York, for example, are smuggled from out of the state, according to the Tax Foundation. This also results in decreased tax revenue. 

For decades, as the population has declined and West Virginia has failed to attract new businesses or taxpayers, the government has overspent instead of enacting pro-growth reforms. There absolutely is waste to cut from West Virginian spending but unfortunately there is very little accountability to the budget processes. The State Integrity Investigation gave West Virginia a D- in that category. Taxpayers have to pay for the feckless choices of their representatives according to Kessler’s philosophy on taxes.

“It [lowering taxes] hasn’t worked and no one can show me a place where it has.” Try Arizona, Florida, or Texas for examples Senator Kessler. The correlation between states with lower tax burdens and taxpayers and business migration is quite strong. From income to corporate tax reductions, states that let taxpayers keep more of their income are the bigger beneficiaries of those looking to leave less friendly states. Many governors and legislatures that understand that entrepreneurs bring growth have made their states competitive, tax-wise. It is an act of willingly ignorance for Kessler to deny this.

It’s time for the West Virginia government to get serious, cut spending, lower taxes, and stay out of the pockets of its citizens as much as possible. Some have suggested it may not be the right time for tax reform. In the case of West Virginia, this couldn’t be further from the truth.

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ATR Analysis of Donald Trump Tax Reform Plan

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Posted by Ryan Ellis on Monday, September 28th, 2015, 11:00 AM PERMALINK

GOP Presidential candidate Donald Trump released details of his tax reform plan today. It features a system with much lower tax rates than current law, and a broadened tax base for high income earners.

“Trump’s plan is certainly consistent with the Taxpayer Protection Pledge,” said Grover Norquist, president of Americans for Tax Reform. “Trump has said he opposes net tax hikes and has made clear that the real problem is spending. This plan is a reform, not a tax hike.”

The plan is not a tax cut, but is rather intended to be revenue neutral under a dynamic score.

Basic elements of the Trump tax plan include:

Carried interest: The plan "ends the current tax treatment of carried interest for speculative partnerships that do not grow businesses or create jobs and are not risking their own capital." Partnerships that do not speculate but rather buy hard assets for the long run will not face a tax increase – for example, private equity firms.

Private equity firms do not speculate, but rather grow businesses and create jobs. Most importantly, private equity partnerships risk their own capital, namely the capital provided by the pension funds, colleges, and charities which invest in them for long term investment returns. These types of investments are vital for workers with traditional pensions, for the colleges Americans send their children to, and for the charities they support.

The carried interest tax hike in the Trump plan is intended to only apply to the type of funds Trump has always said they would apply to: "hedge fund guys." Americans for Tax Reform opposes any change to the tax treatment of carried interest -- including those on hedge fund guys -- but is pleased that the usual target of this left wing ivory tower tax hike proposal--private equity partnerships -- is held harmless in the Trump plan. This is not the case, for example, in Governor Jeb Bush's plan.

As the rest of the GOP field prepares to release their tax plans, they should keep in mind the Left's long term goal to tax ALL capital gains as ordinary income. That's why this carried interest tax hike idea originated in the bowels of leftist academia, and is nearly universally supported by the progressive Left -- it's the camel's nose under the tent toward taxing all capital gains at ordinary rates. Republicans and conservatives should not give aid and comfort to this long term strategy.

ATR has detailed the case against carried interest tax hikes with op-eds in USA Today and Forbes.

Tax rates: Individual tax brackets of 0, 10, 20, and 25 percent (the top rate today is 39.6 percent). The "zero bracket" would apply to married couples' first $50,000 of income (half that for singles).

Capital gains and dividends: By repealing Obamacare's savings surtax, the capital gains and dividends rate is reduced from 23.8 percent today to 20 percent under the Trump plan.

It's also important to note that with a top ordinary income tax rate of 25 percent, the carried interest tax rate hike on "hedge fund guys" is fairly modest, rising from 23.8 percent today to 25 percent under the Trump plan. ATR opposes this tax increase.

Business tax rate: The tax rate on corporate and non-corporate businesses is 15 percent, down from 35 percent today for corporations and 39.6 percent for pass-through firms.

Death Tax: Repealed.

Alternative Minimum Tax (AMT): Repealed.

Marriage Penalty: Repealed.

The plan is intended to be revenue-neutral under a dynamic analysis. In order to make up the remaining lost revenue, the plan features the following major base broadeners:

Deduction phase out: All itemized deductions except for charitable contributions and mortgage interest will be subject to a steeper means-test phaseout than they face under current law.

Deemed repatriation and an end to deferral: An immediate "deemed repatriation" tax of 10 percent is assessed on the $2.5 trillion of U.S. company profits sitting overseas. Going forward, companies would no longer be able to defer U.S. double tax on profits earned overseas. 

According to the OECD, the U.S. business tax rate would fall from highest in the developed world to one of the lowest. When state rates are factored in, the U.S. would face the same tax rate as the United Kingdom, and lower tax rates than trading competitors China, Japan, Canada, Mexico, Germany, and France. We would be far below the developed nation average business marginal tax rate of 25 percent.

The loss of deferral is troubling, but two elements should be kept in mind. First, the new 15 percent tax rate is far lower than the double tax companies face today. Second, businesses will be able to credit against this 15 percent U.S. tax any foreign income tax they have already paid overseas. With one of the lowest tax rates in the developed world, it's very unlikely much if any double taxation will, in fact, occur.

Life insurance tax shelter repealed: Life insurance will no longer be tax-advantaged for high-income taxpayers

Business interest: This deduction will face a phased in cap.

Other deductions and credits: Tax breaks for high-income taxpayers and large firms will also be eliminated, but these are not specified.

No movement to full business expensing: The most disappointing part of the Trump plan is that the tax system would move no closer to full expensing of business fixed investment. Businesses would still be saddled with the complex, distorting, and growth-inhibiting "depreciation" regime where an asset is deducted over several or even many years. Far better would be to move to a full-expensing business cash flow model, where all business inputs including investments are deducted in the year spent. While this is somewhat ameliorated by the far lower tax rates, a lack of progress here is the plan's biggest drawback.

To hear more analysis of Donald Trump's tax plan, listen to the latest podcast of The Grover Norquist Show here.

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dont waste your time with these people, Greg probably doesnt pay his taxes anyways so I dont know what he is complaining about. plus, he just glassed over the whole "business tax rate" which makes USA more competitive and may give the twit a raise, that of course, if he has a job.


I don't think you're getting it…. the wealthy lose loopholes- and middle income earners pay zero or 10% depending on where you define the 'middle'….

Johnathan Pertolick

Hah, look at the cheap shots, and yet your comment is mired in utter ignorance

"he just glassed over the whole "business tax rate" which makes USA more competitive"

Fact: Most major corporations in America pay an effective 0% tax rate and almost no large business at all pays in excess of 5%.

You can be ignorant and pretend that our businesses pay 39% and thus need a break, but hopefully you're smart enough to recognize effective tax rates and realize that no American corporation pays more than 5%, with many of Forbes 100 paying ~0% tax.

IN-09 Update: Houchin, Waltz, Pfaff, and Hall Make Written Commitment to Oppose Higher Taxes

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Posted by Adam Radman on Monday, September 28th, 2015, 10:44 AM PERMALINK

Americans for Tax Reform would like to congratulate state Sen. Erin Houchin, state Sen. Brent Waltzformer radio show host Jim Pfaff, and businessman Robert Hall for signing the Taxpayer Protection Pledge in the race to replace Rep. Todd Young in Indiana's ninth congressional district. Rep. Young is vacating the seat to run for the U.S. Senate. By signing the Pledge, these candidates have made a written commitment to the voters of Indiana to oppose higher taxes.

Only Indiana Attorney General Greg Zoeller has have yet to sign The Taxpayer Protection Pledge in this race. ATR is in the process of reaching out to both campaigns.

The Cook Political Report (requires a subscription) and the Rothenberg/Gonzales Political Report rank this as a safe Republican seat; making the winner of the GOP primary the most likely winner of the general election. 

Indiana holds their primary on May 3, 2016 and ATR will continue to monitor this race and others across the country to help educate voters on what candidates have made the bold decision to sign the Pledge and what candidates have left the door open to higher taxes.

Politicians often run for office saying they won't raise taxes, but then quickly turn their backs on the taxpayer. The idea of the Pledge is simple enough: Make them put their no-new-taxes rhetoric in writing. Until you take tax increases firmly off the table, true and lasting spending restraint is impossible.​

Today the Taxpayer Protection Pledge is offered to every candidate for state and federal office and to all incumbents. Nearly 1,400 elected officials, from state representative to governor to US Senator, have signed the Pledge.

Please check out the Pledge database to see if your current elected officials have signed the Pledge.

Update: This blog post was updated to include Robert Hall as a Taxpayer Protection Pledge signer.

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The Grover Norquist Show: The Jeb Bush Tax Reform Plan

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Posted by Caroline Anderegg on Thursday, September 24th, 2015, 5:12 PM PERMALINK

In episode 32 of the Grover Norquist Show, ATR president Grover Norquist discusses presidential candidate Jeb Bush’s tax reform plan. He outlines the key factors in Bush’s “pro-growth, tax-cutting” reform plan. The strengths of the Bush tax plan are immediate business expensing, which would reduce the cost of new investment and simplify the tax code; lowering the corporate tax rate to be more competitive; and lowering the individual income tax rates to Reagan-era levels. The plan would put the country on track to achieve four percent economic growth. Listen in to the Grover Norquist Show below to find out the one shortfall in Bush Tax Reform Plan.

For more details on ATR’s initial response to Jeb’s tax plan click here

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Mayor Emanuel’s Tax Proposal Would Dig a Deeper Hole for Chicago

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Posted by Caroline Anderegg on Thursday, September 24th, 2015, 4:37 PM PERMALINK

Calling for the largest tax increase in the city’s history, Chicago Mayor Rahm Emanuel announced a plan on Tuesday that would phase in a $2.5 billion increase in taxes and fees over the next four years.

The breakdown of the tax hikes in the 2016 budget is as follows:

  • A property-tax hike reaching $543 million over four years
  • $45 million in property taxes to pay for capital projects at Chicago Public Schools, or CPS
  • $62 million from a new garbage-collection fee
  • $60 million from new fees on taxis and ridesharing services, such as Uber and Lyft
  • $13 million from higher building-permit fees
  • $1 million from a tax on e-cigarettes


Chicago is facing a $230 million overspending problem in the 2016 budget as well as an ominous $20 billion in unfunded pension liabilities. Not only would his ridiculous tax increases not even begin to fill the hole in the Chicago’s budget, but they will only serve to drive people out of the city to more favorable tax climates.

Prior to announcing the onerous tax hikes during his budget address, Mayor Emanuel said: “For the first time in more than a decade, more people and businesses are moving into Chicago than moving out.”

However, a detailed map of the state charting the taxpayer flight shows that Cook County has far and wide been the source of the greatest population and wealth losses for the state over the last 30 years.

As we reported, Illinois was the nation’s second biggest loser in terms of population and wealth in 2013. Nearly 69,000 people left the state that year, taking with them $3.8 billion in net adjusted gross income (AGI).

Taxpayers are unwilling to continue to shoulder the burden of the city’s mounting debts. The steadily increasing out-migration from the city over the last several years proves that if you raise taxes people will leave. When people leave, your tax base shrinks. Mayor Emanuel continues to ignore the fact that the flight from the Windy City means revenues will fall far short of what is projected or needed to fill the deficit.

What the city really needs are major pension and spending reforms, not higher taxes that will only burden Chicagoans and paper over the bleak financial situation facing the city. 

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I live in CA and we are in a horse race to see if we can pay more than Chicago. Whem you give Gov money they raise the pay and benefits of the gov employees, then the next year they are screaming for more from a bigger pie. and it goes on and on. Take sales taxes if you bought a newcar in 1960 the tax was 60 dollars today it would be 1800 dollars that is 30 times more but the cost of the car only went up 10 times

Netflix Users Win Big in Kentucky

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Posted by Dorothy Jetter on Thursday, September 24th, 2015, 3:35 PM PERMALINK

Netflix users in Kentucky have one less tax to worry about today.  The Kentucky Board of Tax Appeals recognized that streaming services are not taxable as “multichannel video programming services.”  
Stating that the board is bound by the words of the Kentucky legislature, the Board of Tax Appeals sided with Netflix in its decision.  The BTA explains, "The Board concludes that if streaming services fit within the Kentucky statute’s definition for “multichannel video programming,” then Netflix would be a provider of “multichannel video programming services” for purposes of Kentucky tax law, regardless of its status under federal law for regulatory purposes."
In the state of Kentucky, “cable services” must be transmitted by facilities owned by a “communications service provider.” Netflix, and other streaming services, do not use such services to provide content transmission.  The BTA concluded that because of this, Netflix does not provide taxable “cable services” and is not subject to such a levy.  
Taxation on streaming services has been a subject of controversy as of recent.  In the city of Chicago, the comptroller recently applied an “Amusement Tax” to online streaming services, including Netflix.  Several residents filed a lawsuit against the city regarding the tax increase, claiming that the streaming services do not fall under the services outlined in the “Amusement Tax.”  Hopefully, the city is able to fall in the footsteps of Kentucky and eliminate these unnecessary burdens on taxpayers.  


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Watchdog: CMS at Fault for Obamacare State Exchange Disasters

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Posted by Alexander Hendrie on Tuesday, September 22nd, 2015, 1:50 PM PERMALINK

The Centers for Medicare and Medicaid Services (CMS) failed to conduct sufficient oversight over state-based Obamacare exchanges prior to the 2014 enrollment period, according to a recently released report by the Government Accountability Office (GAO). Taxpayers gave over $5.5 billion in grants to all 50 states and DC to plan and construct exchanges, with the 17 states that proceeded to construct an exchange receiving almost $4.6 billion of that amount. Since then, these funds have largely been wasted by inept bureaucrats on systems that do not work.

As the report notes, state exchanges faced numerous problems during the 2014 enrollment period, beginning October 1, 2013 including:

  • Poor system performance and delays in addressing information security,
  • Partially completed software functionality,
  • Hardware problems
  • Enrollment errors causing long wait times and applications to get stuck in the system
  • Difficulties getting individuals’ identities verified through the systems,
  • The inability to easily make changes to individuals’ insurance coverage in response to events such as births or income changes.


Prior to launch, CMS was required to evaluate the operational readiness of each state exchange. But based on the abysmal performance of many state exchanges at launch, officials clearly failed to do their job.

In Oregon, officials were forced to install “dozens of extra fax lines” months after the launch date because the exchange website was unworkable. Key functionality in Vermont remains incomplete even today, and the system has been described as “hellish” by enrollees. In Maryland, there was zero accountability for the $190 million exchange and just four people could enroll on the first day. In Massachusetts, officials and contractors joked that their system was based on the idea that “users do testing." The poor performance of the exchange resulted in an estimated $1 billion in costs for the state.

In all likelihood, officials were aware of the issues facing these states before exchanges launched. According to GAO, CMS conducted reviews on 15 state-based exchanges in August and September of 2013. But as the report notes, these tests were insufficient and ineffective:

“CMS conditionally passed all of those states without fully ensuring that they had conducted all required system testing and demonstrated that their systems were ready for production.”

Even though these tests found multiple issues related to the functionality of state exchanges, CMS passed all states. GAO's report notes several examples where CMS found a state to have severe operational deficiencies ahead of launch, yet officials ultimately ignored these findings. GAO found documentation revealing that officials were aware that Maryland's exchange had 100 “outstanding high-priority defects” and almost 500 defects in total, while Massachusetts had reported 1,170 defects.

As the report concludes, these problems were so severe in four states (Massachusetts, Maryland, Nevada, and Oregon) that these exchanges had to rely on alternative ways to enroll customers during the first enrollment season.

Given that state exchanges received $4.6 billion in federal grant money, their poor performance is concerning to say the least.

While several exchanges have already defaulted back to the federal system, and many others have been characterized by severe operational problems and inept management, GAO reports that just over $1 million of the $4.6 billion of taxpayer money has been returned to the federal government.

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And zero CMS employees will be held accountable for same...

Failed State Exchanges Have Returned Just $1 Million to Taxpayers

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Posted by Mireille Olivo on Tuesday, September 22nd, 2015, 12:37 PM PERMALINK

The Centers for Medicare and Medicaid Services (CMS) failed to conduct sufficient oversight over state-based Obamacare exchanges, according to a recently released report by the Government Accountability Office (GAO). 

In total, CMS distributed $5.5 billion in grants to states to plan and construct exchanges, of which almost $4.6 billion went to 17 states that decided to construct an exchange. According to the GAO report, these states have returned just $1 million despite wasting billions of dollars on barely working, or failed healthcare exchanges.

Of note, Oregon has returned ZERO dollars to federal taxpayers according to GAO, despite the fact the state began shuttering its exchange last year, and has since moved back to the federal system. Oregon is now under investigation for alleged corruption and misuse of taxpayer dollars, and it appears that then-Governor John Kitzhaber put campaign consultants with zero IT or healthcare experience in charge of running the exchange with the sole focus of winning a tough election.

See how much each state exchange received, and has returned to the federal government below:


Grants Awarded

Amount Returned


































New Mexico



New York






Rhode Island












Source: GAO,

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The Grover Norquist Show: Obama’s Plan to Steal Your IRA

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Posted by Alexander Hendrie on Tuesday, September 22nd, 2015, 12:00 PM PERMALINK

In episode 33 of The Grover Norquist Show, ATR President Grover Norquist discusses the new “fiduciary rule” proposed by the Obama Department of Labor. This new regulation will shut out newer and younger investors from the world of Individual Retirement Accounts (IRAs) by imposing burdensome regulations on IRA companies such as restricting their ability to talk to prospective investors.

To listen to the podcast click here, or watch below.

For more information on the fiduciary rule click here.

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While I agree that these regulations would have the effect of inhibiting companies from offering, and individuals from contributing to, IRAs, I really don't like the overblown sensationalist title and characterization of this as "Steal[ing] your IRA", which brings to mind the confiscation of already contributed funds (which may come later; but, this isn't that).
The truth is bad enough. There's no need to reduce your credibility by misleading people.


This kind of absconding in all areas of personal finance would not be happening if we can reduce the size and scope of this government....we cannot afford this overblown government....

Charles Davis

True, but the headline did grab my attention and, with very little time to spend on governmental affairs, I'm here and I'm reading about it. Fight fire with fire. Media likes to sensationalize the news and ATR needs to step out from the shadows into main stream media.

ATR Supports Bill Repealing Obamacare's "Medicine Cabinet Tax"

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Posted by Alexander Hendrie on Monday, September 21st, 2015, 1:04 PM PERMALINK

Last week, the House Ways and Means Committee unanimously approved H.R. 1270, the “Restoring Access to Medication Act,” legislation introduced by Congresswoman Lynn Jenkins (R- Kan.) This legislation repeals a provision of Obamacare that restricts the ability of Americans to use Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and other tax-preferred accounts to purchase over-the-counter medication without a doctor’s note, an unnecessary, burdensome constraint that needlessly limits access to medicine. H.R. 1270 is a common-sense piece of legislation that will empower consumers by removing this unneeded regulation. ATR urges all members of Congress to support and vote for this legislation.

HSAs and FSAs allow individuals to set aside pre-tax dollars that they can later spend on their own healthcare expenses. These accounts encourage a consumer driven healthcare model that empowers American families and small businesses to make their own healthcare decisions, without government interference.

However under Obamacare, individuals are not able to use the tax benefits associated with HSAs or FSAs to purchase over-the-counter medications unless they have a prescription for this medication from a doctor. This regulation needlessly complicates the decision-making of millions of HSA and FSA users, creates an unnecessary bureaucratic burden for doctors, and restricts access to commonly used medication.

Simply put, it makes no sense to restrict the ability of millions of American families to use their hard-earned income to purchase commonly used medication. ATR supports the Restoring Access to Medication Act and urges all members of Congress to vote for this legislation.

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