Top Five Reasons Rhode Island Should Oppose Carbon Tax

Share on Facebook
Tweet this Story
Pin this Image

Posted by Daniel Uzi Frydman on Thursday, March 9th, 2017, 10:25 AM PERMALINK

Americans for Tax Reform (ATR) recently released a letter to the Rhode Island General Assembly urging legislators to oppose the "Energize Rhode Island: Clean Energy Investment and Carbon Pricing Act" of 2017 (SB 365). Rhode Island consumers and businesses already face the eighth highest overall state tax burden in the country. The Rhode Island carbon tax proposed in SB 365 would only make matters worse by levying a $15 per ton carbon tax on the state, which would increase $5 annually.

A carbon tax is likely to hinder economic competitiveness in the Ocean State by inflating the cost of energy, in turn negatively impacting businesses, jobs, and the price of consumer goods, thus increasing costs across the board for Rhode Islanders.

A study by the National Association of Manufacturers, based on a $20 per ton tax rate, reveals where the brunt of this misguided legislation will be felt if the tax is implemented. If this bill becomes law, Rhode Islanders will experience employment loss, elevated energy bills, and increased prices at the pump. Just one year after implementation, with a rate of $20 per ton, Rhode Islanders can expect the following:

Increased Prices at the Pump. In 2016 Rhode Island’s gas tax was the 9th highest in the nation, and the proposed carbon tax would only drive the rate higher. In addition to the federal gas tax of 18.4 cents per gallon and the Rhode Island state gas tax of 34 cents per gallon, SB 365 would add an additional 15 cents per gallon, totaling up to a 67.4 cents tax per gallon for topping off the tank.

Elevated Electricity Costs. The cost of natural gas is projected to increase by 40 percent in the state, driving up energy costs for residents and businesses. Homeowners would suffer as Senate Bill 365 would create significant increases in household electricity rates, with an average increase of around 22 percent. Such an increase energy prices would also ripple through the economy raising the costs of consumer goods, an impact that would fall hardest on the state’s low-income residents.

Evaporated Employment Opportunities. A $20 per ton carbon tax “would deal a blow to employment in Rhode Island, with a loss of worker income equivalent of between 2,000 to 5,000” jobs after the first year rising above “5,000 jobs by 2023.”  

Economic Sectors Would Spiral South in 2023. Economic sectors like services, energy-intensive manufacturing, and non-energy-intensive manufacturing face an aggregate loss in economic output that could reach a projected 2.6 percent by 2023.

Reduced Economic Competitiveness. Rhode Island currently ranks 44th worst on the bipartisan Tax Foundation’s 2017 State Business Tax Climate Index. Implementing SB 365 in Rhode Island would only slow down an already burdened tax climate. Bordering states would gain even more of a competitive edge over Rhode Island if SB 365 became law, which would only hinder the state’s competitiveness and deter business investment in Rhode Island further.

If passed, residents and businesses that call Rhode Island home will see employment loss, economic sectors deteriorate, electricity bills jolt up, and prices at the pump pile up. Lawmakers should oppose Senate Bill 365 and protect the residents and businesses in the great state of Rhode Island.

Photo Credit: CMFGU

More from Americans for Tax Reform


Keep the Earmark Ban! Norquist Praises Sen. Jeff Flake Letter to President Trump

Share on Facebook
Tweet this Story
Pin this Image

Posted by John Kartch on Tuesday, March 7th, 2017, 4:03 PM PERMALINK

Americans for Tax Reform President Grover Norquist today commended Sen. Jeff Flake for spearheading a letter to President Trump urging opposition to any return of congressional earmarks.

“Earmarks are the ‘broken windows’ of federal overspending, the currency of congressional corruption, and the price of bad votes for more spending,” said Norquist. “I commend Sen. Flake for his continued leadership on behalf of the American taxpayer.”

The letter – also signed by Sens. Mike Lee, Ted Cruz, John McCain, Rand Paul, and Ben Sasse -- reads in part:

President Reagan vetoed a highway bill in 1987 because it was larded up with 152 earmarks.  Escalating exponentially, the over-budget transportation bill signed into law in 2005 contained more 6,300 earmarks.  Earmark proponents are trying to reassure that this time will be different, promising fewer projects and even rebranding them as “congressionally-directed spending.”  With the serious fiscal problems facing our nation, processing thousands or even hundreds of pork requests will only distract and delay addressing pressing national needs and push spending decisions once again into the murky shadows.

We respectfully urge you to make it clear that you will veto any bill Congress sends to you containing earmarks within the legislative text or the accompanying report.  We look forward to working with you to make Washington more accountable and stop wasteful spending where it starts, which is often right here in Congress.

The full text of the letter is below and the signed PDF version of the letter is here.

President Donald J. Trump

The White House
1600 Pennsylvania Avenue, NW
Washington, DC 20500

Dear President Trump,

With our national debt set to top $20 trillion within days and growing at a rate of over half-a-trillion dollars a year, bringing fiscal sanity to the federal budget requires immediate attention and action.  We write today to urge opposition to any efforts by Congress to return to earmarking.

While cutting unnecessary and wasteful spending may be commonsense to most taxpayers, behind every dollar spent is a boisterous special interest group with the loudest being Congress itself.  Even with a full agenda that includes repealing Obamacare, reforming the tax code, easing the regulatory burden and strengthening our nation’s security, some lawmakers are focused on reviving the corrupt practice of earmarking that was ended in 2011 after what seemed like an endless series of corruption scandals.

Fondly described as a “favor factory” by a lobbyist convicted of exchanging gifts for government grants, earmarks represent the pay-to-play culture you have pledged to end.  It is unfathomable to those of us who fought to end earmarks and witnessed our colleagues go to jail for corruption that pork barrel politics would return, especially at this time when Americans are clearly fed up with business-as-usual. However, despite the success of the current moratorium enacted in both chamber of Congress, there are efforts underway seeking to revive the disdainful practice.

President Reagan vetoed a highway bill in 1987 because it was larded up with 152 earmarks.  Escalating exponentially, the over-budget transportation bill signed into law in 2005 contained more 6,300 earmarks.  Earmark proponents are trying to reassure that this time will be different, promising fewer projects and even rebranding them as “congressionally-directed spending.”  With the serious fiscal problems facing our nation, processing thousands or even hundreds of pork requests will only distract and delay addressing pressing national needs and push spending decisions once again into the murky shadows.

We respectfully urge you to make it clear that you will veto any bill Congress sends to you containing earmarks within the legislative text or the accompanying report.  We look forward to working with you to make Washington more accountable and stop wasteful spending where it starts, which is often right here in Congress.

Sincerely,

Jeff Flake

Mike Lee

John McCain

Rand Paul

Ted Cruz

Ben Sasse

Photo Credit: 
Gage Skidmore

More from Americans for Tax Reform


Repeal Bill Abolishes Obamacare Tax Increases


Posted by John Kartch, Alex Hendrie on Monday, March 6th, 2017, 6:34 PM PERMALINK

The Obamacare repeal bill is out and it abolishes Obamacare's taxes:

Individual Mandate Non-Compliance Tax: Under Obamacare, anyone not buying “qualifying” health insurance – as defined by the Obama-era Department of Health and Human Services -- must pay an income surtax to the IRS. In 2015, eight million households paid this tax. Most make less than $250,000. The Obama administration uses the Orwellian phrase “shared responsibility payment” to describe this tax.   

For tax year 2016, the tax is a minimum of $695 for individuals, while families of four have to pay a minimum of $2,085.

 

Households w/ 1 Adult

 

Households w/ 2 Adults

Households w/ 2 Adults & 2 children

 

2.5% AGI/$695

 

2.5% AGI/$1390

2.5% AGI/$2085

A recent analysis by the Congressional Budget Office (CBO) found that repealing this tax would decrease spending by $311 billion over ten years.

Medicine Cabinet Tax on HSAs and FSAs: Under Obamacare, the 20.2 million Americans with a Health Savings Account and the 30 - 35 million covered by a Flexible Spending Account are no longer able to purchase over-the-counter medicines using these pre-tax account funds. Examples include cold, cough, and flu medicine, menstrual cramp relief medication, allergy medicines, and dozens of other common medicine cabinet health items. This tax costs FSA and HSA users $6.7 billion over ten years.

Flexible Spending Account Tax: Under Obamacare, the 30 - 35 million Americans who use a pre-tax Flexible Spending Account (FSA) at work to pay for their family’s basic medical needs face an Obamacare-imposed cap of $2,500. This tax will hit Americans $32 billion over the next ten years.

Before Obamacare, the accounts were unlimited under federal law, though employers were allowed to set a cap. Now, parents looking to sock away extra money to pay for braces find themselves quickly hitting this new cap, meaning they have to pony up some or all of the cost with after-tax dollars. Needless to say, this tax especially impacts middle class families.

There is one group of FSA owners for whom this new cap is particularly cruel and onerous: parents of special needs children.  Families with special needs children often use FSAs to pay for special needs education. Tuition rates at special needs schools can run thousands of dollars per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education. This Obamacare tax increase limits the options available to these families.

Chronic Care Tax: Under Obamacare, this income tax increase directly targets middle class Americans with high medical bills. The tax hits 10 million households every year. Before Obamacare, Americans facing high medical expenses were allowed an income tax deduction to the extent that those expenses exceeded 7.5 percent of adjusted gross income (AGI). Obamacare now imposes a threshold of 10 percent of AGI. Therefore, Obamacare not only makes it more difficult to claim this deduction, it widens the net of taxable income. This income tax increase will cost Americans $40 billion over the next ten years.

According to the IRS, approximately 10 million families took advantage of this tax deduction each year before Obamacare. Almost all were middle class: The average taxpayer claiming this deduction earned just over $53,000 annually in 2010. ATR estimates that the average income tax increase for the average family claiming this tax benefit is about $200 - $400 per year.

HSA Withdrawal Tax Hike: Under Obamacare, this provision increases the tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

Ten Percent Excise Tax on Indoor Tanning: The Obamacare 10 percent tanning tax has wiped out an estimated 10,000 tanning salons, many owned by women. This $800 million Obamacare tax increase was the first to go into effect (July 2010). This petty, burdensome, nanny-state tax affects both the business owner and the end user. Industry estimates show that 30 million Americans visit an indoor tanning facility in a given year, and over 50 percent of salon owners are women. There is no exception granted for those making less than $250,000 meaning it is yet another tax that violates Obama’s “firm pledge” not to raise “any form” of tax on Americans making less than this amount.

Health Insurance Tax: In addition to mandating the purchase of health insurance through the individual mandate tax, Obamacare directly increases the cost of insurance through the health insurance tax. The tax is projected to cost taxpayers – including those in the middle class – $130 billion over the next decade. 

The total revenue this tax collects is set annually by Treasury and is then divided amongst insurers relative to the premiums they collect each year. While it is directly levied on the industry, the costs of the health insurance tax are inevitably passed on to small businesses that provide healthcare to their employees, middle class families through higher premiums, seniors who purchase Medicare advantage coverage, and the poor who rely on Medicaid managed care.

According to the American Action Forum, the Obamacare health insurance tax will increase premiums by up to $5,000 over a decade and will directly impact 1.7 million small businesses, 11 million households that purchase through the individual insurance market and 23 million households covered through their jobs. The tax is also economically destructive – the National Federation for Independent Businesses estimates the tax could cost up to 286,000 in new jobs and cost small businesses $33 billion in lost sales by 2023.

Employer Mandate Tax: Under Obamacare, this provision forces employers to pay a $2,000 tax per full time employee if they do not offer “qualifying” – as defined by the government -- health coverage, and at least one employee qualifies for a health tax credit. According to the Congressional Budget Office, the Employer Mandate Tax raises taxes on businesses by $166.9 billion over the ten years.

Surtax on Investment Income: Obamacare created a new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 for singles). This created a new top capital gains tax rate of 23.8% and increased taxes by $222.8 billion over ten years.

The capital gains tax hits income that has already been subjected to individual income taxes and is then reinvested in assets that spur new jobs, higher wages, and increased economic growth. Much of the “gains” associated with the capital gains tax is due to inflation and studies have shown that even supposedly modest increases in the capital gains tax have strong negative economic effects.

Payroll Tax Hike: Obamacare imposes an additional 0.9 percent payroll tax on individuals making $200,000 or couples making more than $250,000. This tax increase costs Americans $123 billion over ten years.

Tax on Medical Device Manufacturers: Under Obamacare, this law imposes a new 2.3% excise tax on all sales of medical devices. The tax applies even if the company has no profits in a given year. The tax was paused for tax years 2016 and 2017. Under Obamacare it was scheduled to cost Americans $20 billion by 2025.

Tax on Prescription Medicine: Obamacare imposed a tax on the producers of prescription medicine based on relative share of sales. This is a $29.6 billion tax hike over the next ten years.

Elimination of Deduction for Retiree Prescription Drug Coverage: The elimination of this deduction is a $1.8 billion tax hike over ten years.

$500,000 Annual Executive Compensation Limit for Health Insurance Executives: This deduction limitation is a $600 million tax hike over ten years.

Goodbye Obamacare tax hikes. You will not be missed.

The bill also prevents the "Cadillac" tax from taking effect -- the bill delays it another five years, to 2025.

 


Indiana Senate to Take Up House-passed Tax Hikes

Share on Facebook
Tweet this Story
Pin this Image

Posted by Miriam Roff on Sunday, March 5th, 2017, 1:41 PM PERMALINK

What a difference a year makes. The American Conservative Union (ACU) recently awarded the Indiana House as the “Most Conservative House of Representatives” in the country, with ACU Chairman Matt Schlapp touting Indiana as a “beacon for conservatism.” ACU might consider revoking that award, as that legislative body recently approved multiple tax hikes, which include the following:
 
·      House Bill 1002: A 30 percent increase in the state’s gas tax, taking the rate from 33.59 cents to 43.59 cents per gallon
·      House Bill 1001: $1-per-pack cigarette tax increase, taking the rate from $0.995 to $1.995
 
After being hit with 20 federal Obamacare tax increases over the last eight years, the last thing hardworking Hoosier taxpayers need is to have lawmakers in Indianapolis pile on with further tax hikes at the state level, but that is what the Indiana House of Representative have done.
 
The Indiana Senate will take up these House-approved tax hikes next week. Hopefully, for Indiana taxpayers, the state senate is more adverse to tax hikes than their House counterparts.
Photo Credit: 
Drew Tarvin

More from Americans for Tax Reform


Wyden Calls for Capital Gains Tax Hike

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alexander Hendrie on Friday, March 3rd, 2017, 5:05 PM PERMALINK

While giving remarks at the liberal Tax Policy Center, Senate Finance Ranking Member Ron Wyden (D-Ore.) called for increasing taxes on capital gains by taxing it as ordinary income. Deriding the capital gains tax as a “loophole,” Wyden criticized GOP plans to reduce the rate, instead suggesting that they should be taxed at a top rate of 39.6 percent. As noted in his remarks:

“Of course, when you talk about the carried interest loophole, you’re talking about capital gains. And when you talk about capital gains, you’re talking about the biggest tax shelter of all – the one hiding in plain sight. 

“Today the capital gains tax rate is 23.8 percent. Republicans want to make it 16 percent. So if you can take advantage of a gimmick that characterizes your income as a capital gain, your tax rate plummets. The White House and the majority party in Congress are working to make it even easier to get away with that gamesmanship.”

A goal of the left is higher taxes across the board and one of their favorite targets is hiking the capital gains tax. They do this because they know they can only raise the top ordinary income tax rate so much higher than it is today without wrecking the economy.

Often they see raising the cap gains tax in increments as the best way to achieve their long-term policy goal of higher taxes. One of their favorite targets is taxing carried interest capital gains as ordinary income. Despite the misleading rhetoric put out by the left, there is no difference between carried interest and any other income derived as a capital gain.

Photo Credit: 
Joe Frazier

More from Americans for Tax Reform


Philly Falling on Hard Times after Implementing Soda Tax

Share on Facebook
Tweet this Story
Pin this Image

Posted by Toni-Anne Barry on Friday, March 3rd, 2017, 4:27 PM PERMALINK

Back in June, Mayor Jim Kenney signed into law a city-wide tax on soda. Kenney claimed that it would promote public health all while funding a program to expand the city’s pre-k system, seemingly indifferent to the economic impact that it would have on Philadelphia residents and businesses.

The tax comes in the form of a 1.5 cent increase per every ounce of soda. The tax has increased the price of a 12-pack of soda by $2.16, directly affecting low and middle income families. Unsurprisingly, Philadelphia residents are by-passing their local stores in order to avoid the onerous tax, causing revenue to flow out of the city.  Soda sales in the city have dropped between 30 to 50 percent since the tax has taken effect less than two months ago. This loss in revenue has many local retailers looking to cut the size of their workforce.

Brown’s Super Store, one of Philadelphia’s largest distributors of soda products is likely to cut around 20 percent of its employees due to the sharp decrease in profits. Some businesses have reported a drop in sales as large as 50 percent.  This tax has single-handedly hurt middle class families, business incentive, and job creation.

In a Bloomberg interview, Jeff Brown, CEO of Brown Super Stores said, “I would describe the impact as nothing less than devastating."

Regardless of the clear economic distress that has been caused, Mayor Kenney is still under the illusion that the tax has been beneficial for the city. Kenney blamed the upcoming job cuts on retailers for not merely absorbing the added costs. During an interview with Philly.com, he stated, “I didn’t think it was possible for the soda industry to be any greedier.” Philadelphia’s out-of-touch mayor clearly has no conception of the most basic fundamentals of economics. Businesses actually need to make money in order to sell products and create jobs.

Yet, Mayor Kenney is proud of the $5.7 million that has been funneled into the city off the back of the soda tax. He continues to be unconcerned with the obvious toll this tax has already taken on retailers and Philadelphians alike. This is hardly the economic boost for the city that Kenney claimed it would be considering the massive job loss and burden it’s placed on families. The Philly soda tax fiasco is a sign of things to come if other cities make the mistake of using this as a model.  

Photo Credit: 
Thomas Hawk

More from Americans for Tax Reform


Montana Takes Important Steps to Improve Public Safety

Share on Facebook
Tweet this Story
Pin this Image

Posted by Sarah Caplin on Friday, March 3rd, 2017, 10:53 AM PERMALINK

On Wednesday night, Montana Governor Steve Bullock signed four criminal justice reform bills that seek to cut costs and reduce recidivism.

The newly signed legislation will require the Office of Public Defender to put clients in touch with social workers, allow jail inmates free phone calls to their attorneys, eliminate the requirement to appoint a public defender for an unknown parent in child abuse cases, and allow criminal records for juvenile offenders to be shared electronically.
 
Prisons in Montana are significantly overcrowded due to high recidivism rates and the growing impact of substance abuse. Without new legislation, the prison population is projected to increase 13 percent by FY2023, requiring at least $51 million in new spending. 
 
To address these concerns, the state Legislature created the Commission on Sentencing. After nearly two years of study, The Council of State Governments Justice Center announced their findings and brought 12 proposed bills to this legislative session. 
 
“We want to think about how we can spend taxpayer money wisely to address these issues and have better outcomes for everybody,” State Sen. Cynthia Wolken said. “Not do what we’re doing now, which is address them in prison, where it’s the most expensive way to treat them.”
 
The commission’s proposals also include Senate Bills 63, and 64, which aim to change the rules of probation and parole in an effort to keep fewer people from being sent back to prison for minor infractions. According to the Justice Center report, key findings show that revocations account for a majority of prison admissions in Montana and that people are on probation for unusually lengthy periods of time. Reducing revocations for mere technical violations of probation and parole can help reduce the 74% of people in Montana’s correctional system due to revocation of their probation or parole.
 
“The bottom line is we’ve got to change our thought process,” said state Rep. Jimmy Patelis, a Republican from Billings who previously worked as Montana’s chief U.S. probation officer. “We cannot think that way anymore. We don’t have room, we don’t have the money, and really we need to become updated and innovative.”
 
There are additional bills designed to further increase public safety through more effective supervised parole and reentry. The additional bills focus on creating a professional, rather than volunteer, state Parole Board, and expanding the reach and improving the efficacy of programs focused on reducing recidivism.
 
The effective implementation of these reforms will avert nearly $70 million in costs by 2023.
 
Photo Credit: 
Drew Tarvin

More from Americans for Tax Reform


Downsizing the regulatory state will upsize the American economy

Share on Facebook
Tweet this Story
Pin this Image

Posted by Celeste Arenas on Thursday, March 2nd, 2017, 3:07 PM PERMALINK

A recent study by the Phoenix Center on the cost of regulation to the American economy suggests the Trump Administration’s 2 for 1 Executive Order is making positive steps towards accelerating private sector growth and employment.
 
They show that a 10% reduction of the record breaking 81, 405 pages of regulations implemented since 2008 under the Obama administration would result in:
 
“$5.6 billion in annual savings, producing an additional $1.2 trillion in GDP over the next five years, or $244 billion annually.”
 
“A $45 gain for every $1 decline in the regulatory budget.”
 
“An annual increase of 3 million new private-sector jobs.”

 
The analysis found an inverse relationship between the size of the regulatory budget and economic growth. It concluded that the opportunity cost of one regulator was the equivalent of 138 private sector jobs and the financial cost, an $11 million annual loss to the US economy.
 
The size and scope of the federal regulatory state has become so expansive that it can be counted as a nation in and of itself, ranked as the world’s 10th largest economy behind Russia and ahead of India. This illusory economy has of course, come at the expense of the regulated, most of which are small businesses and their employees disproportionately impacted by regulatory excess. Small businesses, with 20 employees or less, currently face an annual regulatory cost that is 36% higher than large firms with 500 employees or more.
 
These regulations, combined with the financial capacity of large businesses to afford high compliance costs, have distorted the marketplace for 27.9 million small businesses who employ more than 50% of the American workforce. Gallup has since revealed the record breaking decrease of small businesses in operation alongside the increase in the number of firms that have shut down since 2008
 
In dismantling the capacity for small firms to thrive, the expanse of regulator power has strangled job opportunities for the American workforce as 65% of net employment from 1995 has been created by small businesses.
 
The statistics suggest rescinding two regulations for every new regulation enacted is the first of many steps necessary to address the systemic flaws of the regulatory state. Although outcome-based legislation is key to sustaining a smart regulatory framework, policy makers have been offered an ample opportunity to repeal excessive mandated requirements that are stifling entrepreneurial activity.
 
Instead of adding to a burdensome and lifeless regulatory economy, the careful down scale of federal departments and their budgets will accelerate the life of American innovation, private sector growth and opportunities for the workforce.

More from Americans for Tax Reform


Pro-Growth Tax Reform Must Reduce Taxes on Capital Gains

Share on Facebook
Tweet this Story
Pin this Image

Posted by Toni-Anne Barry on Wednesday, March 1st, 2017, 4:48 PM PERMALINK

The federal tax code is out of control. At more than 74,000 pages it is too long, too complicated and much too expensive for taxpayers. Comprehensive tax reform is imperative in 2017 and this must include reducing double taxation.

Here in the U.S. the same dollar is taxed when it is earned, invested, and yes even when you die. A key aspect of decreasing the effects of double taxation is reducing the capital gains and dividends tax. 

To improve economic growth, lawmakers should reduce taxes on capital gains/dividends, continue to treat carried interest as a capital gain, protect section 1031 like-kind exchanges, and index capital gains taxes to inflation. These changes will help promote much needed investment incentive to reboot the economy. Here’s how:

(Read the Full Study Here)

Taxes on Capital Gains/Dividends Should Be Reduced

The capital gains and dividends tax is levied on income that has already been subjected to individual income taxes and is then reinvested into the economy in a way that increases productivity and economic growth. 

Simply put, Obama’s policies have not worked and need to be changed. During his presidency he has raised the top capital gains rate from 15 to 20 percent and imposed a 3.8 percentage point surtax on capital gains. These polices have only resulted in putting U.S. businesses at a global disadvantage.

Among the 35 developed countries in the Organisation for Economic Development and BRICS, comprised of Brazil, Russia, India, China, and South Africa, the U.S. has some of the highest capital gains and dividends rates, coming just behind France.

To put it in perspective, the average OECD/Bric rate for distributions (includes corporate and state taxes) made as capital gains is 40.3 percent. This contrasts sharply with the U.S. rate that sits at 56.3 percent.

This trend is the same when dividend rates are averaged. OECD/BRICS have an average of 44.5 percent while the U.S. is 56. 2 percent.

Carried Interest Is and Should Be Treated as a Capital Gain

Some recent proposals have promoted taxing carried interest as ordinary income. Contrary to the common misconception that treating carried interest as a capital gain is a shady loophole, carried interest is actually the same as all other capital gains. It is simply the share of an investment partnership allocated to the investor. All of the income from the partnership is derived from a long-term investment in a business or real-estate. This means that all income earned is treated exactly the same as a capital gain.

Supporters of higher taxes on carried interest classify it as a matter of fairness when in reality it would hurt a wide range of investment partnerships such as pension funds, charities, and colleges. These partnerships rely on shared investments for their savings.

Additionally, increasing taxes on carried interest capital gains would only raise $19.6 billion over the next ten years, a miniscule number that barely fluctuates the $41.7 trillion that the Congressional Budget Office estimates will be raised throughout the upcoming decade.

Like-Kind Exchanges Should Be Preserved and Strengthened

Under current law, taxpayers are able to defer paying taxes on certain types of assets when they use those earnings to invest in another, similar asset because of the provisions set by Section 1031 of the tax code. This can be used on assets such as real estate, machinery for farming and mining, and other equipment such as trucks and cars.

Section 1031 eliminates unnecessary barriers that would impede investment. Allowing an investor to not have to pay taxes until they cash out promotes more efficient allocation of capital resources.

The House GOP “Better Way” blueprint takes the code in a pro-growth direction by implementing immediate full-business expensing, which streamlines business activity by allowing the effect purchase of new assets. Section 1031 compliments full expensing by letting businesses replace less productive assets with more productive assets.

Repealing section 1031 would only lead to higher taxes on investment, hurting economic growth and incomes.

Index Capital Gains to Inflation Through Treasury's Regulatory Authority

Indexing the capital gains tax to inflation is another pro-growth option for reform. The existing capital gains tax, without an inflation index, discourages long-term investment by exposing investors to higher inflation risk than short term investors. This essentially means that a long term investors have less incentive to invest than short term investors inhibiting a healthy, growing economy.

Without indexing capital gains taxes with inflation, long term investors are also subject to pay capital gains on real capital loses. This is why it is imperative that capital gains are measured with inflation, without the adjusted values the taxes on capital gains are not accurately evaluated.

To combat this issue, the Treasury should use its authority to interpret “cost” based on inflation. In the past the Treasury has advocated for the implementation of inflation based indexing on capital gains but was impeded by congress. Allowing the Treasury to interpret “costs” using inflation indexing would help create an even playing field for investors and promote investment incentives. 

More from Americans for Tax Reform

There are no related posts.


ATR Opposes Rhode Island Carbon Tax (S. 365)

Share on Facebook
Tweet this Story
Pin this Image

Posted by Justin Sykes on Wednesday, March 1st, 2017, 2:45 PM PERMALINK

Americans for Tax Reform (ATR) sent the following letter to the Rhode Island General Assembly today urging state lawmakers to oppose Senate Bill 365, the "Energize Rhode Island: Clean Energy Investment and Carbon Pricing Act" of 2017. 

Senate Bill 365 would impose a $15 per ton carbon tax in the state of Rhode Island that would increase $5 annually. Rhode Island lawmakers should oppose this costly and burdensome tax hike proposal which will increase the state's already high tax burden on businesses and consumers, and drive up energy costs for residents and businesses in the Ocean State.

Below is the full text of the letter, which can also be found here.

March 1, 2017

State of Rhode Island General Assembly
82 Smith Street
Providence, RI 02903

Dear Members of the Rhode Island General Assembly:

On behalf of Americans for Tax Reform I urge you to oppose Senate Bill 365, the “Energize Rhode Island: Clean Energy Investment and Carbon Pricing Act” of 2017, introduced by Senators Jeanine Calkin, Ana Quezada, James Seveney, Harold Metts, and Frank Lombardo.

Senate Bill 365 would impose a carbon tax on energy in the state at a rate of $15 per ton of emissions that will increase by $5 annually. Such a tax will reduce the state’s economic competitiveness by driving up the cost of energy, impacting jobs and increasing costs for Rhode Island’s most vulnerable.

Rhode Island’s tax climate was recently ranked 44th worst in the U.S. by the bipartisan Tax Foundation’s 2017 State Business Tax Climate Index, with some of the highest corporate, individual, and property tax rates in the country.

Rhode Island’s gas tax in 2016 was also ranked as the 9th highest in the country at 34 cents per gallon, on top of the federal rate of 18.4 cents. Estimates show Senate Bill 365 would add an additional tax of 15 cents per gallon of gas.

Studies show a carbon tax rate of $20 per ton in Rhode Island would result in the loss of worker income equivalent between 2,000 and 5,000 jobs, and would increase the cost of using natural gas in the state by 40 percent. Such an increase would drive up the cost of doing business in the Ocean State, and hit low-income households the hardest who spend a larger portion of their monthly income on energy costs.    

I urge all members of the Rhode Island General Assembly to oppose Senate Bill 365. 

Sincerely,                               

Grover G. Norquist                                                     
President                                                                   
Americans for Tax Reform

 

Photo credit: Taber Andrew Bain   

More from Americans for Tax Reform


hidden
×