House GOP Tax Blueprint Gives Families Tax Cuts, Higher Wages, and Simplicity
Opponents of the House Republican “Better Way” Tax Reform blueprint have falsely claimed the plan will increase costs for American families.
The critics say the border adjustability component of the cash-flow business tax will cost the average family $1,700 per year. But that is without acknowledging all the good the blueprint does. It’s a scare tactic. They are only looking at the border adjustment part of the plan in isolation without accounting for positive effects in the plan. Even then, it is not clear that they are accurately analyzing the impact of the border adjustable cash-flow tax.
Taken as a whole, the blueprint is a drastic net tax cut and implements numerous pro-growth policies. The plan cuts taxes for individuals across the board and implements reforms that will result in higher wages and more jobs due to stronger economic growth. The plan also drastically simplifies the enormously complex code.
Tax Cuts for Individuals
The blueprint reduces tax rates for American families across the board. It folds the existing seven tax brackets (10%, 15%, 25%, 28%, 33%, 35%, and 39.6%) into three brackets (12%, 25%, 33%).
It also doubles the standard deduction from $6,000 to $12,000 ($12,000 to $24,000 for families). This larger standard deduction means that individuals who go from the existing 10 percent bracket to the new 12 percent bracket will see a net tax increase. These changes mean lower taxes for ALL Americans.
Higher Wages for Families
The blueprint contains numerous pro-growth policies that increase wages for families. The plan drastically reduces taxes on businesses (42 percent for both small businesses and corporations) and replaces the confusing and arbitrary depreciation schedules with immediate, full business expensing for investments.
According to research by the Tax Foundation, the blueprint will increase after-tax income by nearly 9 percent, or close to $5,000 for the average family. The plan will also increase economic growth by 9.1 percent over the long-term and create an additional 1.7 million new jobs.
Drastic Simplification of the Code
Currently, the tax code is too complex for families to understand. The code is around 75,000 pages long, forcing taxpayers to waste more than 8.9 billion hours and $400 billion in annual compliance costs. Half of all individual taxpayers rely on a paid professional to file their taxes.
The blueprint will make it so easy to file taxes that it can be done on a postcard. Numerous changes are made to the code, including repeal of the Alternative Minimum Tax and the Death Tax, and the consolidation of existing family tax credits will reduce the need to itemize deductions for the majority of Americans and the need to devote time and resources to tax filing.
Border Adjustability Does not Increase Costs
It is not even clear that border adjustability will increase costs to the extent that critics claim. Economists on both the Left and the Right agree that the reforms in the plan will offset any increase in costs. The cash-flow business tax that replaces the existing corporate income tax incentivizes foreign and domestic investment in the U.S. because of its low rate and consumption base. In turn, this drives up demand for the dollar, which causes the currency to appreciate. A stronger U.S. dollar means more purchasing power for consumers buying foreign goods.
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New Study Shows Durbin Amendment is a Failure
Passed as part of the Dodd-Frank Act in 2010, the Durbin Amendment was touted as a measure to benefit America’s retail consumers. The goal of the Durbin Amendment was to reduce the costs of interchange fees that retail merchants pay for debit card transactions with the hope that those costs savings would be passed onto consumers. Roughly six years later however studies show consumer costs have not been reduced and also that retail merchants are less concerned with reduced fees and more with receiving benefits and flexibility in interchange transactions.
Most American consumers are likely not aware of the process that goes into debit card transactions with their local retail stores. In fact, most consumers likely are not aware of the Durbin Amendment and the interchange fees it sought to cap. Yet the process and costs of using debit cards is something that effects millions of Americans on a daily basis as well as the merchants with whom they are transacting.
To put it simply, interchange fees are the fees paid by retail merchants to financial institutions for the privilege of accepting debit card payments in their stores. As mentioned, Durbin set a cap on the interchange fees financial institutions were allowed to charge merchants for the privilege of processing debit transactions.
In passing Durbin, proponents claimed that not only would consumers see reduced prices in stores but that merchants’ themselves would prefer and benefit from reduced interchange fees. The problem with such claims by Durbin proponents though is neither has proven to be true since enactment.
According to a study by the Federal Reserve Bank of Richmond in conjunction with Javelin Strategy & Research, since enactment of the Durbin Amendment 75 percent of the merchants surveyed in the study reported no price reduction as a result of the regulation. In fact, of the merchants surveyed 23 percent had actually increased prices on consumers since Durbin passed.
As to the second claim, that merchants’ primary concern was on reducing interchange fees, new findings show the majority of small merchants are actually more concerned with preserving the benefits they receive from increased flexibility and choice in the partnerships they hold with financial institutions. This stems from the fact that the agreements merchants reach with financial institutions for debit card processing often provide the merchants with benefits that outweigh any reduction in fees they pay.
A new study released in April of this year by Javelin Strategy & Research found that for America’s small merchants, “value is a more significant factor than price when it comes to satisfaction with debit interchange fees and partnerships” with financial institutions.
That is to say merchants want more flexibility and options stemming from the benefits they receive from partnerships with financial institutions for processing, and when fees are capped under Durbin the benefits offered to merchants from such partnership agreements are diminished.
The April study surveyed 500 small merchants, those with annual sales between $250,000 and $10 million, and concluded that “small merchants want choice and flexibility more than low prices” on interchange fees paid. In fact, more than four in five merchants surveyed were satisfied with the transparency and value they get from their debit card payment processors and of the merchants who were not satisfied just one-quarter believe interchange fees hurt their profitability.
Even more revealing is that the study found over sixty percent of small merchants were unfamiliar with the details surrounding federal efforts to cap debit interchange fees under Durbin. Clearly the narrative from Durbin supporters that capping interchange fees would be a benefit and preference for merchants is mischaracterized and for the most part wholly misleading.
Thus over six years since enactment of the Durbin Amendment, the two driving justifications for enactment of price caps on interchange fees are proving false.
Small merchants not only prefer choice and flexibility in their partnerships with financial institutions, which are increased when prices are not capped, but prefer such benefits over reduced prices. Furthermore, the price savings consumers were supposedly guaranteed under Durbin have not come to fruition, and even worse a number of merchants have increased prices despite the Durbin price caps.
Lawmakers in the 115th Congress should keep in mind these two failed outcomes when considering Durbin Amendment repeal, and know that the benefits to consumers and merchants promised under Durbin have been an overwhelming failure.
Photo credit: Paul G
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Louisiana Needs Comprehensive Criminal Justice Reform
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104 Years of the Income Tax: Then and Now
As Americans finish yet another tax filing season, let’s take a look at the 104-year history of the income tax:
- In 1913 the top marginal income tax bracket was 7% -- today it is 39.6%.
- In 1913 the marginal income tax bracket range was 1% - 7%. Today the range is 10% - 39.6%.
- In 1913 there were 400 pages in the tax code. Today there are 74,608 pages in the code.
- In 1913 the family standard deduction was $98,425.45 in today’s dollars. The family standard deduction now is just $12,600.
- When the income tax started in 1913, only 358,000 Americans had to file a 1040. Today 148,606,578 Americans file 1040s.
"The American income tax is perhaps the most dramatic example of how government grows at the expense of liberty,"
said Grover Norquist, president of Americans for Tax Reform. "Slowly. Constantly. Inexorably."
Photo Credit: Chris Potter
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List of Tax Hikes Supported by Virginia Candidate for Lieutenant Governor Glenn Davis
In the contested race for the Republican nomination as Lieutenant Governor this year in Virginia, voters should beware: Delegate Glenn Davis has a history of raising taxes and growing government.
Here are just a few of the billions of dollars in tax hikes he has supported during his time as a Delegate to the General Assembly and City Council-member:
Sales Tax Hikes
Six Percent Sales Tax Increase Statewide (HB 2313, 2013);
Twenty Percent Sales Tax Increase in Northern Virginia and Hampton Roads (HB 2313, 2013);
Gas Tax Hikes
Statewide Gas Tax Increase (HB 2313, 2013);
Targeted Hampton Roads Gas Tax Increase (HB 2313, 2013);
Wholesale tax on motor fuels increased by additional 2.1 percent beyond statewide level for Hampton Roads;
Real Estate Tax Hikes
Northern Virginia Real Estate Recording Tax Increase (HB 2313, 2013);
15 cents per $100 of property value added to the real estate recording fee On real property where a deed, instrument, or writing is recorded;
Virginia Beach Real Estate Tax Increase (Virginia Beach’s 2013 City Budget);
6-cent tax rate increase tied to state funding on top of the city’s existing 89 cents per $100 of assessed value tax (Virginian-Pilot, 10/5/13);
Hotel Tax Hikes
Two Percent Hotel Occupancy Tax Increase (HB 2313, 2013);
Car Tax Hikes
Car Titling Tax Increase from 3 to 4.14 Percent (HB 2313, 2013);
Personal Property Tax Increase on Cars from $3.70 to $3.80 per $100 of Value (James Spore, Resource Management Plan, 2010);
New Internet Taxes
New Tax on Internet Purchases (HB 1501, 2017);
Davis filed legislation this year to tax internet sales, a move that could have raised taxes by more than $250 million a year (Fiscal Impact Statement, Department of Taxation).
But wait, there’s more. Delegate Glenn Davis supported Obamacare expansion in Virginia. When his colleagues were rejecting the misguided expansion of Medicaid for able-bodied adults, Davis was penning op-eds and spending his time arguing, “We take the money, or it goes someplace else.”
Delegate Glenn Davis is not a mainstream conservative. He's out-of-touch with the real needs of taxpayers.
Unlike the last Republican Lt. Governor, Davis refuses to sign the Taxpayer Protection Pledge, a written commitment to you, Virginia voters, to oppose even more tax increases. Can taxpayers trust Davis as the leader of the Virginia state Senate? On June 13th, you’ll have the chance to decide. Taxpayers deserve better.
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Oxfam Report is Wrong on the Problems of the Tax Code and Misses the Need for Reform
In its 2017 report on corporate taxation, Oxfam America uses numerous misleading or inaccurate statements to argue that U.S. businesses do not pay their fair share of taxes.
In page after page, the report misses the mark. It mixes effective tax rates and statutory tax rates to claim that businesses pay a rate far lower than they should.
The report also ignores the true reason that trillions of dollars of U.S. income is trapped overseas -- the U.S. has one of the most complex, internationally uncompetitive tax codes and double taxes income earned abroad. As a result, this money is unable to be reinvested back into the economy.
Businesses don’t pay taxes – people do, so any higher tax rate on businesses is passed onto employees, consumers, and investors. The problems with the U.S. tax code hurt American taxpayers through lower wages, fewer jobs, and stagnant economic growth.
Contrary to the claims of the report, the House Republican “Better Way” Tax Reform blueprint would reverse these trends. The plan, proposed by House Speaker Paul Ryan (R-Wis.) and Ways and Means Chairman Kevin Brady (R-Texas), makes numerous dramatic pro-growth changes that will increase income for taxpayers across the board, and give a booster shot to the U.S. economy.
U.S. Tax Rates Are High By Any Measure
The report claims that U.S. companies do not pay enough in taxes because they have an effective rate of just 25.9 percent even though the corporate rate is 35 percent. However, this analysis purposely compares effective tax rates with statutory marginal tax rates to make it appear as if companies are paying less in taxes than they are supposed to.
There is a clear distinction between statutory rates and effective rates. The statutory rate is specified in law and applies to business income before any deductions. In contrast, the effective rate is the percentage a business actually pays in income tax. The effective corporate tax rate is calculated after a business takes deductions – such as employee wages and benefits.
In almost every case, the effective rate is lower than the statutory rate for taxpayers. While the U.S. combined state/federal corporate rate for ALL U.S. corporations is 39.1 percent, the effective corporate tax rate is just 18.6 percent after deductions and credits.
By any measure, the U.S. rate is too high. The U.S. has the highest statutory rate amongst the major economies of the Group of 20, as noted by the Congressional Budget Office. Major competitors have rates ten or twenty points lower including Canada (26.3 percent), China (25 percent), and the United Kingdom (20 percent).
Even when using effective tax rates, the U.S. has the fourth highest rate in the world. At a rate of 18.6 the U.S. effective rate is higher than Germany (15.5 percent), Australia (10.4 percent), China (10 percent), and Canada (8.5 percent).
Trillions Trapped Overseas Due to Complex Worldwide System of Taxation
This U.S. competitiveness problem has only gotten worse in recent years as other countries have modernized their tax codes. Today, only six modern countries have this system, and more than a dozen have abolished it for the simpler, more competitive territorial system of taxation.
While the Oxfam report alleges that trillions are “stashed” overseas, this money is actually stranded because of the U.S. worldwide tax system. The second layer of tax stemming from the U.S. worldwide system impedes the ability of U.S. businesses to compete and means these trillions are in limbo, unable to be brought back to America to be reinvested in new jobs or higher wages or paid out to shareholders.
The solution to this problem should be simple – enact repatriation at a single digit rate as part of a transition to territoriality, so that businesses can bring back after tax income with the second layer of taxation.
This would end the lockout problem for good and give the U.S. economy a booster a strong boost as occurred when Congress enacted temporary repatriation in 2005. This repatriation allowed businesses to bring back double taxed income that had been deferred at a rate of 5.25 percent, resulting in $320 billion returning to the country that went to federal revenues, or was reinvested in the economy.
The Real Problem is the Outdated U.S. Tax Code
The Oxfam report misses that the fact that the many legal, yet self proclaimed "tax dodging" strategies are symptoms of a tax code that is overly complex and outdated. When it comes to globally tax competition, the U.S. is decades behind.
Since 2000, 32 of the 35 countries in the Organisation for Economic Development (OECD) have reduced their corporate rates. Today, only the U.S. and Chile have higher corporate tax rates than they did at the start of the century.
The winners here are not U.S. businesses, but foreign countries and corporations that benefit from new jobs, higher wages, economic growth, and revenue at the expense of American taxpayers and businesses.
Between 2004 and 2014, almost 50 American businesses left the country through an inversion. When these companies move their headquarters from the U.S. to a more competitive environment, they also take high paying jobs with them.
Similarly, the U.S. had a net loss of nearly $180 billion in assets that have been acquired by foreign competitors over the past decade, according to a report by Ernst and Young. The uncompetitive code means that foreign competitors are able to acquire assets at a far greater pace than American businesses. The report estimates that a corporate rate at the developed average of 25 percent would have resulted in U.S. businesses acquiring almost $600 billion in assets over the same period.
The House GOP Blueprint is Strongly Pro-Growth
Maintaining high tax rates and an uncompetitive system does not only hurt U.S. businesses; it is passed on to the entire economy. A 2006 CBO report found that roughly 70 percent of the corporate tax is borne by labor, while a report by scholars at the American Enterprise Institute find that every dollar increase in taxes decreases wages by two dollars.
Any proposal must involve changes to the tax code, not new rules that have already tried and failed.
One way to resolve the many problems with the U.S. tax code would be passing the House Republican “Better Way” Tax Reform Blueprint. Among the many pro-growth changes, the plan calls for a competitive 20 percent corporate rate, full territoriality, and immediate full business expensing.
Despite the fact that this plan is hugely pro-growth, the Oxfam report falsely claims that the blueprint would not fix the problems with the code, and would hurt consumers.
In reality, the plan increases wages, and offers a net tax cut for all American families. The new border-adjusted cash flow business tax would incentivize doing business in the U.S. by taxing based on where a good or service is consumed, rather than where the income is earned. This plan cuts taxes for all businesses by 42 percent, and dramatically decreases the complexity of the tax code. This competitive new system will put an end to the exodus of jobs and assets to foreign competitors.
Every developed country in the world has a border adjustable tax system except the U.S., which disadvantages American businesses operating overseas and offers a benefit to foreign competitors importing into the country.
While the border adjustable component of the plan raises one trillion in revenue over a decade, the plan is a net tax cut of more than two trillion dollars. In fact, according to an analysis by the Tax Foundation, this plan will increase wages by close to $5,000 per family, create 1.7 million full time jobs, and increase economic growth by 9 percent.
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Las Vegas EPA Caught Using Taxpayer Funds for 24-Hour Gym Memberships
Documents show government credit card charge for $14,799 for "Super Sport" 24-hour gym memberships for Vegas EPA employees
Newly obtained documents show the EPA’s Las Vegas office used a government purchase card to charge nearly $15,000 for 24-hour gym memberships for employees. Courtesy of U.S. taxpayers.
The documents show the EPA office on the campus of UNLV charged U.S. taxpayers $14,799.63 on April 11, 2016 for 37 “1 Year Super Sport” packages at 24 Hour Fitness, which touts its facilities as “the ultimate daily retreat” complete with “thousands of square feet of spectacular workout space, complete with premium gym equipment, unmatched amenities and some of the best studio classes around.”
This basketball court is part of the "spectacular workout space" offered at the EPA's preferred gym.
The Las Vegas EPA office made the purchase even though employees have access to the nearby state of the art 165,465-square foot fitness center on the UNLV campus. Local lifestyle magazine Vegas Seven named the UNLV facility as “Best Fitness Center” in the city and noted that it is “available not only to UNLV students but also Clark County residents.” The magazine praised the “large cardio center facing multiple television screens, a lap pool and spa, all kinds of weight machines, a 200-meter indoor running track, a four-court gym, and a café and juice bar.”
But this was apparently not good enough for the EPA.
According to the EPA Inspector General, this and several other agency purchases failed to comply with internal controls and procedures, “enough to warrant an audit because of noncompliance with existing controls.” The failures are documented here.
The EPA's preferred gym encourages clients to see the club as the "ultimate daily retreat."
“The corruption and waste in the EPA ends now,” said Americans for Tax Reform president Grover Norquist. “Those apologists who pretend that reducing waste and corruption in the EPA is an attack on Mother Earth stand exposed as the frauds they are. Ending corruption and self-enrichment is good for the environment and other living things.”
During his eight years in office President Barack Obama made the Environmental Protection Agency wholly unaccountable to American taxpayers. In doing so he fostered a culture of bureaucratic superiority within the agency such that EPA officials and employees were more concerned with reaping the newfound benefits of unchecked power and less about maintaining the integrity of their taxpayer funded activities, leading to historic levels of waste and abuse with taxpayers footing the bill.
The Las Vegas gym incident highlights the level of blatant disregard the EPA has for American taxpayers. It is representative of a culture of mismanagement from EPA officials in D.C. that has permeated federal and state operations.
The EPA’s actions in Nevada are only one example of myriad wasteful and improper employee actions that have been recorded ranging from drug use to timecard fraud. For instance, a senior EPA official was caught watching up to six hours of pornography on his government-issued computer during work hours, and had been doing so for almost four years during the Obama presidency. That official ironically received a number of performance awards during his time at the EPA.
The former Director of the EPA’s Office of Administration under Obama was caught selling jewelry and weight loss pills out of her office using her government e-mail account. That same employee hired 17 of her family members as paid interns, and paid her daughter, also an EPA employee, directly from her agency’s budget account. She was somehow given the Presidential Rank Award in 2010 under Obama for which she also awarded $35,000.
Spacious locker-rooms are just one of many "unmatched amenities" for EPA employees courtesy of their taxpayer funded "Super Sport" gym memberships.
The culture of mismanagement and unaccountability at the EPA, and resulting waste of taxpayer funds, was promulgated under Obama and allowed to fester throughout his tenure.
Since taking office President Trump and EPA Administrator Scott Pruitt have vowed to get the EPA back to its core mission, and rein in government overreach and wasteful spending.
ATR Urges DHS to Oppose Obama’s EB-5 “Midnight Rule”
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ATR Urges Colorado Lawmakers to Support Taxpayers' Right to Privacy
Americans for Tax Reform sent a letter to Colorado lawmakers last week urging them to support SB 17-238, legislation that seeks to protect Colorodo taxpayers’ right to privacy and freedom of association by amending the state’s anticompetitive “Tattletale Law.”
SB 17-238, if enacted, would repeal the Orwellian requirement that out-of-state businesses collect and remit the purchase history of Colorado residents to the Colorado Department of Revenue. The bill passed out of the Senate Finance Committee last week, and now heads to the Senate Committee on Appropriations for further consideration.
The letter ATR sent to Colorado legislators reads as follows:
March 31, 2017
To: Members of the Colorado Legislature
From: Americans for Tax Reform
RE: SB 17-238
Dear Members of the Colorado Legislature,
On behalf of Americans for Tax Reform and our supporters across Colorado, I write today urging you to support Senate Bill 17-238, which removes the requirement for businesses to tattle on the specifics of Coloradans purchases to state tax authorities.
Coloradans value their privacy, and the Colorado law requiring out-of-state retailers to report on Coloradans’ purchasing habits to the government is in gross violation of that privacy and our Freedom of Association.
The law, appropriately dubbed “the Tattletale Law,” forces businesses to turn over detailed information to state tax authorities relating to internet purchases, including: the retailer name, customer name, billing address, shipping address, and cost of purchase.
Privacy is key to our Freedom of Association. By tracking an individuals associations with retailers and addresses, and having no confidentiality requirements relating to the information collected, the law infringes on an individual’s ability to express him or her self, particularly when it comes to political, religious, or social preferences.
The Tattletale Law is Colorado’s attempt to get around the Supreme Court’s 1992 Quill v. North Dakota decision that prevents states from reaching across their own borders to regulate and tax other citizens.
SB 17-238 does not solve all the ills of the Tattletale Law. It still gives Colorado the opportunity to regulate business in other states, track consumers’ purchases and send consumers a report on their likely sales and use tax owed from transactions with that business. However, removing the requirement for out of state businesses to tattle to state tax authorities is a significant improvement on the intrusive law. As such, Americans for Tax Reform urges you to support SB 17-238.
If you have any questions, or if ATR can be of assistance, don’t hesitate to contact Patrick Gleason, State Affairs Director, or Katie McAuliffe, Federal Affairs Manager, at email@example.com, and 202-785-0266.
Grover G. Norquist
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ATR Statement in Support of AHCA Progress
ATR President Grover Norquist released the following statement following the House Rules Committee approval of the Palmer-Schweikert Amendment to the American Health Care Act (AHCA):
“The Palmer-Schweikert Amendment will help reduce premiums and move to a competitive health insurance market. This progress shows that consensus on enacting the House Republican Obamacare repeal and replace legislation is growing stronger.
“In all, the American Health Care Act is a $1 trillion tax cut and $1.2 trillion spending cut over the next decade. It's passage makes fundamental tax reform possible this year. The AHCA also block grants Medicaid and expands Health Savings Accounts. It’s a giant step forward in reforming our nation's health care system.”