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The Kansas Tax Cuts Are Not to Blame for Revenue Woes

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Posted by Will Upton on Thursday, October 2nd, 2014, 1:28 PM PERMALINK


Several pundits, including the New York Times's Paul Krugman, have made hay over Kansas’ “revenue shortfall” this past fiscal year, chalking it up to the historic 2012 and 2013 Kansas tax cuts. At first glance, one might suppose them correct. Indeed taxes were cut and revenue did fall. But their 30,000 foot view passes over the more likely culprit behind the $338 million revenue drop – a change in the federal capital gains rate, caused by President Obama’s forced expiration of some of the Bush tax cuts.
 
The Kansas tax reforms did not cause the revenue shortfall. According to the Kansas Department of Revenue (KDOR), the shortfall stands at about $338 million for FY 2014, which ended on June 30. Now, $103 million of that—nearly a third--can be squarely blamed on the Division on the Budget increasing its revenue estimate just months before the end of the fiscal year. In the beginning of April 2014, the Division on the Budget increased their revenue estimate from $235 million to $338 million, citing strong economic indicators. The revision occurred right before Division on the Budget realized that their revenue estimates for the year were off beyond what could be considered a standard deviation. If you subtract the $103 million revenue error and use the original revenue projection, the shortfall is only $235 million.
 
As ATR has argued—and backed with CBO data—in the past, the shortfall is mainly due to a shift in capital gains payments by taxpayers into the prior fiscal year to avoid higher rates caused by the expiration of some of the Bush tax cuts (namely the increase in capital gains tax). Several states experienced surplus revenue in 2012-2013 (Virginia, Connecticut, and New Jersey) but are now experiencing deviations from initial revenue estimates or downward revisions in state revenue for 2013-2014. In Connecticut, for example, Democrat Gov. Dan Malloy’s budget director blamed their $400 million decrease in projected revenue on the capital gains shift prompted by the Fiscal Cliff.
 
Josh Barro in the New York Time’s “The Upshot” argues that if you reduce taxes you will get less revenue. No one is arguing with this assertion, at least in the short term. In fact, KDOR agrees with Barro: “The initial estimate for FY 2014 is $5.464 billion, which is $704.8 million, or 11.4 percent, below the newly revised FY 2013 figure. Factors influencing this forecast in addition to the state of the economy include the fully annualized impact of the new state income tax law that is effective in tax year 2013….” For Barro and other critics, the shortfall is proof-positive that Brownback’s tax cuts have wrecked the Kansas economy, except that there is, again, plenty of evidence that the error has more to do with federal tax policy than state tax policy.
 
As noted above, the shortfall actually stands at about $235 million for this past year. Duane Goossen, a former Kansas Budget Director who served under three governors (one Republican, two Democrats), has estimated that the capital gains shift possibly cost Kansas $147 million in tax revenue: “If Kansans had claimed another $3 billion of income for 2013 and that income had been taxed at the upper rate of 4.9 percent (the highest rate in place for tax year 2013), at most $147 million would have been added to state income tax collections in FY 2014… Even $147 million in additional tax receipts... would not have stemmed the tide of our state's $712 million revenue drop.” 
 
A critic of the tax cuts, Goossen uses a gimmick to make the capital gains shift look minor by comparing it to year-to-year revenue (a much larger drop but one anticipated and factored into the revenue estimate by the Division of the Budget) as opposed to the estimating error as it stands. If compared to the past year’s shortfall, the capital gains shift caused by President Obama’s intransigence makes up roughly 62.5% of the revenue shortfall (using Goossen’s $147 million estimate).
 
Additionally, $10 million of the revenue shortfall can be attributed to a drop in Kansas’s excise tax collections in the first quarter of 2014. This coincides with the negative GDP growth experienced by U.S. during the same period. Negative growth suppresses consumption and would throw off excise tax revenue estimates.
 
In the end, the Kansas tax cuts may account for a net revenue deviation of about $78 million – or 1.5% of Kansas’s total revenue collections, projected to be $5,986,481,000 this past year. Anything below a deviation of 2% is something most states that have not enacted major tax reform experience on an annual basis. As to worries of a future shortfall and lost revenues, most responsible legislators in Kansas will tell you that there needs to be some spending restraint in the state and it is their intention to enact said restraint, avoiding any further revenue woes. In short, the Kansas revenue shortfall is little more than hyperventilating scare tactics. Don’t’ believe the fever-pitch hype.
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ATR's Grover Norquist Helps "Call Out Kay" (and more...)

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Posted by Zoe Crain on Thursday, October 2nd, 2014, 12:24 PM PERMALINK


A National Review op-ed, written by Erik Telford, highlighted redundant and expensive research conducted by the NIH and funded by taxpayer money.

So why the fears? Sadly, it appears that our tax dollars are largely to blame. As Mattie Duppler of the Cost of Government Center notes, data from the National Institutes of Health show that since 2000, nearly $170 million in grants has been doled out to fund research on BPA. Some of this money has been funneled through the NIH to anti-BPA causes.

Tony Capaccio of Bloomberg wrote a piece about the bipartisan push to have the Penatgon audited.

The Pentagon “should have to meet the same general principles of audit as every American taxpayer” who “must give the IRS numbers you stand behind, have receipts and face immediate financial consequences if you fail to meet the deadline,” said Rafael DeGennaro, director of the “Audit the Pentagon Coalition,” a group that says on its website it has bipartisan backing from lawmakers and advocates including Ralph Nader and Grover Norquist.

Americans for Tax Reform president Grover Norquist recently participated the “Call Out Kay” tour, as chronicled by Barnini Chakraborty of FoxNews.com.

Political parties, private donors and outside groups are pouring cash into the contest between Democratic Sen. Kay Hagan and Republican challenge Thom Tillis. With just a few weeks until Election Day, total midterm spending in the state has hit an estimated $228 million and is climbing still, with most going toward the Senate contest- putting North Carolina on course to be among the costliest midterms in history. That total is close to what all Democratic Senate candidates spent on their races a decade ago. 

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New TIGTA Report Reveals More IRS Incompetence

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Posted by Zoe Crain on Wednesday, October 1st, 2014, 4:23 PM PERMALINK


The newest victims of IRS incompetence are those requesting information under the Freedom of Information Act and Privacy Act, according to a new report from the Treasury Inspector General for Tax Administration (TIGTA.) The report revealed that the IRS is still rife with issues, including accidentally releasing confidential information and refusing to provide requested information.

As part of TIGTA’s recurring audits, the group seeks to ensure that the rights of taxpayers are protected. The reports both identify ongoing issues with the IRS’s interaction with information requesters, as well as making recommendations to the group, which are included in TIGTA’s semiannual reports to Congress.

This latest release specifically evaluated Freedom of Information Act/Privacy Act information requests, as well as those under IRC Section 6103. The results were the cherry on top of an objectively horrid year for the IRS, which included issues with non-profits, Congress, and now the taxpayers themselves.

In over 11% of surveyed Freedom of Information Act/Privacy Act cases, “taxpayer rights may have been violated because the IRS improperly withheld or failed to adequately search for and provide information to the requestors.” Whether this was due to missing hard drives or not still remains to be answered.

More concerning, 21% of FOIA/Privacy Act information requests “inadvertently” contained sensitive taxpayer information. This number was up from last year’s 16%.

When it comes to Internal Revenue Code Section 6103, which deals with “confidentiality and disclosure of returns and return information,” the IRS’s grade was equally dismal. 15% of information requests under this category were also missing information that the IRS had failed to sufficiently search for and provide.

All of these revelations fly in the face of the IRS’s “Taxpayer Bill of Rights,” which includes among its points, “privacy,” “confidentiality,” and “quality service.” Maybe their code should be rewritten to include the taxpayer’s right to shoddy information and released sensitive information.

Apparently, the IRS is too concerned with improperly targeting conservative media, or sending catty emails to actually fulfill the requirements of their jobs. 

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ATR's Patrick Gleason Highlights Issues with Municipal Broadband (and more...)

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Posted by Zoe Crain on Wednesday, October 1st, 2014, 2:01 PM PERMALINK


Americans for Tax Reform director of state affairs Patrick Gleason wrote an op-ed for Forbes detailing the issues with implementing municipal broadband.

The inherent problem with municipal broadband is that government entities are incapable of fairly competing in the free market, as they are taxpayer-backed and therefore able to charge less for a service than it actually costs. Private businesses cannot do this, as doing so would result in bankruptcy.

The costs of building out and maintaining broadband networks are considerable. It is not a fiscally sound use of scarce taxpayer dollars for governments to compete with billion dollar networks already in existence.

Townhall ran an article by Ky Sisson regarding a recently revealed scandal involving Democratic Kansas gubernatorial candidate, Paul Davis.

During Brownback’s first term, he supported substantial tax reform that reduced the top income tax rate by 25 percent, lowered the state sales tax, and did away with a tax on small business income. Though many liberal opponents disagreed with his approach, the advocacy group, Americans for Tax Reform praised Governor Brownback and said that the “tax cuts are working.”

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Like the Walking Dead, DSCC’s Bogus Claims about The Taxpayer Protection Pledge Won’t Die

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Posted by Adam Radman on Tuesday, September 30th, 2014, 2:50 PM PERMALINK


Iowa voters must be wondering if they are experiencing a case of déjà vu as the Democrat Senatorial Campaign Committee has revived a completely phony line of attack against GOP senate candidate Joni Ernst for making a written commitment to the people of Iowa to oppose tax hikes.

The claims in the TV ad have been rehashed every election cycle since 2010 and fact-checkers such as the Associated Press, Factcheck.org, and Politifact have all rated the claims FALSE.

The most recent fact check came August 5 when Politifact reviewed identical claims made by Leftwing Billionaire Tom Steyer’s NextGen Climate SuperPac and found them to be false:

Even though the ad is new, this claim -- that a person who signs the Americans for Tax Reform’s pledge is in favor of tax breaks that encourage outsourcing -- is not…

Ernst signed the Taxpayer Protection pledge, a promise promoted by Americans for Tax Reform, which is a broad vow to oppose all tax increases. It does not specify protecting tax loopholes for companies that have employees overseas.

We rate this claim False.

Factcheck.org had this to say in 2010 about the same attack used against a candidate four years ago, in a previous election cycle:

But we find the ad to be false. The pledge only protects corporations from an increase in taxation overall. It explicitly allows elimination of any specific tax deduction or credit if matched dollar-for-dollar by an overall cut in rates. And it says nothing about jobs.

The fact check continues:

 To characterize his opposition to raising taxes as protecting tax breaks that send jobs abroad is wrong. Any tax benefit can be eliminated and offset by a rate cut or by other benefits without raising taxes overall, and without violating the terms of that pledge. This attack ad is false.

Politifact came to the same conclusion as Factcheck.org in a separate race in 2010:

But the fact that someone signed the pledge doesn’t necessarily mean they are opposed to closing loopholes for off-shore companies.

Our friends at FactCheck.org have been knocking down this claim since April, when the DCCC ran a TV ad against a Republican House candidate in Hawaii. They recently debunked the same claim in an ad in the Massachusetts gubernatorial campaign.

Here’s the problem: The taxpayer pledge doesn’t prevent a signer from opposing any tax break as long as he or she finds a way to offset the resulting increase in taxes.

[The attack is] a huge leap of logic and it doesn’t prove Hurt supports the offshore loopholes. So we find the claim False.

It’s sad that the DSCC’s best line of attack against Ernst is to channel their inner-George Romero and once again resurrect this patently false monster.

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Grover Norquist Discusses Taxes and the Upcoming Election Cycle (and more...)

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Posted by Zoe Crain on Monday, September 29th, 2014, 11:42 AM PERMALINK


Todd Beamon of Newsmax wrote an article about tax reform’s place in this upcoming election cycle.

Grover Norquist, president of Americans for Tax Reform, explained that Republicans are not talking much about taxes this election season because the media has focused on so many other issues.

“Do I wish everybody would talk about taxes all day?” he asked Politico. “Yes, in the same way that ministers wish everybody would read the Bible all day.”

“But am I reasonably happy that the congregation has a Bible and knows what they’re doing? Yes.”

Politico’s Brian Faler interviewed Americans for Tax Reform president Grover Norquist about the media’s coverage of tax reform.

Grover Norquist, the influential head of Americans for Tax Reform, chalked up the lack of tax talk this year to the news media’s focus on other issues and rejected suggestions that Republicans’ enthusiasm for old-fashioned rate cuts has waned.

“Do I wish everybody would talk about taxes all day?” he asked. “Yes, in the same way that ministers wish everybody would read the Bible all day. But am I reasonably happy that the congregation has a Bible and knows what they’re doing? Yes.”

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Daily Media Spotlight for September 26, 2014

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Posted by Loren Long on Friday, September 26th, 2014, 5:10 PM PERMALINK


In an article from Statesville, North Carolina’s newspaper, titled “Norquist: Defeat Hagan, left-wing groups”, John Hamlin writes about Grover Norquist’s recent travels to North Carolina.

 “Grover Norquist, president of Americans for Tax Reform, says North Carolina is a make-or-break state if the Republicans hope to wrest control of the U.S. Senate in the Nov. 4 midterm elections.”

An article, “2014 Midterms: Nets Yawn at Dem Gaffes and Scandals, Tout GOP Problems”,  by Scott Whitlock from the Media Research Center points out that Grover Norquist, appearing on NBC, has been the only person on the network to mention Paul Davis’, Kansas’ Democratic gubernatorial candidate, stripper scandal.

“GROVER NORQUIST: The Democrat running for governor, Paul Davis, a week ago people thought might win, now because Politico did an expose on his lap dance with the naked lady in a strip club, he is not the kind of person that you can ask your sister to the vote for anymore.”

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Skyrocketing US Oil Production Keeps Gasoline Prices Down

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Posted by Cassandra Carroll on Friday, September 26th, 2014, 4:02 PM PERMALINK


Despite military and political turmoil in Libya, Iraq, and other major oil-producing countries, the US is producing enough oil to keep up with demand and keep prices down. The unrest in countries that are normally big producers of crude oil has caused a worldwide decrease in production of about 3 million barrels per day, but the US has made up for it and then some by producing about 4 million barrels every day, largely with the help of state- and privately-owned shale formations in North Dakota and Texas. Without this production, crude oil could cost up to $150 per barrel.

This is a significant step toward energy independence for the United States. There is much speculation as to whether the oil booms in North Dakota and Texas will continue or die out as quickly as they came, but what is clear is that the US will never have energy independence within the current administration that has steadily decreased production and exploration of oil and natural gas on federal lands (Between 2009 and 2013, production of natural gas on federal lands was reduced by 28 percent, and oil production was reduced by 6 percent) while drastically increasing the amount of time it takes to process applications for permits to drill.

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Grover Norquist Discusses Kansas Gubernatorial Race (and more...)

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Posted by Zoe Crain on Thursday, September 25th, 2014, 1:17 PM PERMALINK


Human Events ran an op-ed written by Grover Norquist, president of Americans for Tax Reform, regarding the importance of Kansas’s gubernatorial election.

The genius of Brownback’s 2013 legislation to abolish the income tax over time is that the law now states that each year that state revenue comes in above a two percent increase- and this happens in a normal period of modest growth- all the additional revenue is used to permanently reduce the state personal income tax. Beginning in 2019, after the first round of tax rate reductions are enacted, every year the personal income tax rates will fall until they hit zero. Then the corporate income tax rate will be brought down year by year to zero. Lastly, Kansas has a banking tax that will then be reduced to zero. The tax rates will ratchet down every year there is modest growth in state revenues. Kansas can- and now by law will- fund necessary government expenses out of the revenues from growth over time and use those to replace the personal and business income taxes.

Rachel Stoltzfoos of The Daily Caller wrote an article featuring Americans for Tax Reform president Grover Norquist’s take on the impact of Kansas Gov. Sam Brownback’s tax cuts.

“He’s actually governed well,” Norquist, founder of Americans for Tax Reform, told The Daily Caller News Foundation. “They’ve had strong growth.”

More people are moving into the state than are leaving, thousands of small businesses basically no longer have a corporate income tax, and future budgets will be stronger, he said, which are all steps in the right direction. “In the next ten years, a lot of money will come in through growth and that money will go back to taxpayers, not government unions,” he told The DCNF.

Americans for Tax Reform President Grover Norquist was interviewed for an article written by HNGN’s Taylor Tyler which delved into Kansas Gov. Sam Brownback’s campaign.

After tax reductions are enacted, personal income tax rates will fall every year until they hit zero, claims Norquist. “Then the corporate income tax rate will be reduced to zero,” along with the banking tax.

States that follow this plan will be able to “fund necessary government expenses out of the revenues from growth over time and use those to replace the personal and business income tax,” said Norquist, concluding, “if Sam Brownback wins in November watch for more governors who have his courage to challenge anti-reform Republicans in primaries and to phase out their state income taxes.”

James Kilgore of Counterpunch wrote a piece discussing recent conservative support for criminal justice reform.

To top it off, the right wing joined the “softer on crime” fray. Grover Norquist and Newt Gingrich sparked a conservative anti-imprisonment drift through their Right on Crime organization which decried the excessive use and cost of punishment. Then Rand Paul followed suit, standing shoulder to shoulder with Cory Booker to back a Redeem Act which would ease criminal penalties for juveniles. In the background a steady stream of popular advocacy combined with legislative and financial re-thinks appeared to be making major inroads into criminal justice orthodoxy. But last week, carceral optimism gave way to a much harsher reality. The Bureau of Justice’s annual statistical report on national prison population revealed that incarceration numbers were up for the first time since 2009. The rise was a mere 0.3% but even this slight uptick may have burst the bubble of the new paradigm.

John Gizzi of Newsmax wrote an article detailing a movement in Tennessee, supported by Americans for Tax Reform’s president Grover Norquist to keep the state from an enacting a state income tax.

“Basically, ‘Three’ is similar to constitutional bans on income taxes in other states, such as Florida,” Grover Norquist, president of Americans for Tax Reform, told Newsmax. “Although Tennessee has no income tax and Republicans hold super-majorities in both houses of the legislature, that will not always be the case.”

“You can’t always count on tradition to protect you. With the Democratic Party so left-wing, if it ever got into a position of political power- even for a short time- it is very possible Democrats could enact an income tax. So you’ve got to have this barrier to protect the taxpayer from the income tax.”

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Amid International Pressure, Ireland Standing Firm on "Sovereign Right"

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Posted by Alexander Hendrie on Thursday, September 25th, 2014, 1:11 PM PERMALINK


The Organization for Economic Cooperation and Development (OECD) released a plan last Tuesday that will "change the rules of the game" to prevent corporations from shifting profits between different countries. At the same time, Washington has said it plans to crackdown on firms relocating to lower tax jurisdictions.  

Both moves take aim at Ireland’s pro-business tax policy, which has attracted hundreds of foreign firms to the Emerald Isle and has been a key factor in Irish economic success. Ireland’s extremely competitive 12.5% corporate tax rate has directly created over 150,000 jobs in Ireland and is a major reason for Ireland’s economic growth reaching seven times the European average.

Irish policies have also seen the nation place highly amongst rankings measuring competitiveness. The 2013 International Property Rights Index (IPRI) ranked Ireland 13th for Legal & Political rights and 15th for Intellectual Property Rights (out of 131 countries). In a recent report released by the Tax Foundation, Ireland ranked second for tax competitiveness amongst OECD countries. The U.S. was ranked 32nd (out of 34 countries).

President Obama announced Monday that he would take new steps to punish firms that relocate offshore. This move would prevent corporations from moving to more competitive business environments such as Ireland by making the process more complex and costly.

In the past, President Obama has branded firms that leave the U.S. as "unpatriotic", however he remains unwilling to seriously consider the root of the problem – the high US corporate rate, which at 35% is almost triple Ireland’s rate and is one of the highest in the OECD.

Meanwhile, Director of Tax Policy for the OECD, Pascal Saint-Amans, took aim at Irish policy by suggesting Dublin could not defend its low tax rate without removing some of the more controversial provisions, and that changes to the current budget "make sense".

Despite pressure to water down its tax code, Dublin is standing firm.

On Sunday, Jobs Minister Richard Bruton publicly ruled out early changes to the tax system and reiterated that while Ireland will work with the OECD, it will not be pressured into reducing Ireland’s competitiveness. In separate comments, Anne Anderson, Irish Ambassador to the U.S. said that the 12.5% corporate tax rate that is crucial to Irish competitiveness will remain as a “sovereign right”.

While the decision against early changes to the tax code is good news, it appears inevitable that the OECD will force Ireland to modify its business policy. For its part, Dublin has indicated its willingness to compromise on the more controversial provisions once the OECD report is completed. However, given the recent economic success of the Emerald Isle, other countries including the U.S. should consider emulating Ireland rather than demonizing it. 

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