Flush With Union Cash, DC Mayoral Candidate Vincent Gray Looks to Roll Back DC School Reform

The fight for the Democratic mayoral nominee in Washington DC encapsulates the national struggle for education reform. On one side you have Mayor Adrian Fenty and his appointed School Chancellor Michelle Rhee, true reforms who took on the teachers unions in hopes of improving DC’s schools.

On the other side you have Fenty’s primary opponent, Vincent Gray. Gray is your typical big city politician. He ran a dirty campaign that mischaracterized and demonized Fenty’s term, he’s owned by special interest groups (see teachers unions), and will only pay lip service to reform, something DC desperately needs.

For decades, Washington DC’s public schools were the laughingstock of the country, consistently ranking near the bottom in every education metric. Fed-up with the status quo, Fenty appointed Michelle Rhee as Chancellor of Washington’s schools giving her free rein to battle the self-serving teachers unions and implement reforms she deemed essential.  So, did it work? How does DC’s education system compare to other cities, now?

A new study by AEI’s Rick Hess examines “which of thirty major U.S. cities have cultivated a healthy environment for school reform to flourish.” Hess found that DC’s education environment now ranks second in a study of major US cities, largely due to Mayor Fenty and Michelle Rhee’s reforms.

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Daily Media Spotlight September 3, 2010

“How Do You Stop an Elephant Charging?” That’s the question asked by Peggy Noonan in The Wall Street Journal.  According to Grover Norquist, the charging elephant seems like it will be pretty hard to stop as long as it stays on point, “The big issue, and people know this, is the explosion of federal spending that is damaging our economy and threatening our future.”

National Review Online has picked up the brewing tax battle raging in Pennslyvania’s gubernatorial race between Republican Tom Corbett and Democrat Dan Onorato.  “ ‘These candidates understand that tax hikes right now are lethal,’ said Madonna. ‘Onorato’s problem is that he wants to replace a Democrat [in Rendell] who’s job performance has plummeted and who has, almost weekly, called for tax hikes.’ ”

LibertyCentral.org brings us further coverage of the false attacks by Dina Titus on Joe Heck and the Taxpayer Protection Pledge.  It seems Titus has found a new “union” ally in smearing Heck, The American Federation of State, Federal and Municipal Employees (AFSCME), who release their own false attack ad costing nearly three-quarters of a million dollars – most likely paid for with union member dues – to run.

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Dina Titus Attack Ad on Joe Heck and the Taxpayer Protection Pledge is Thoroughly Misleading

Following in the footsteps of the Democratic Congressional Campaign Committee (DCCC) and several other Democrat congressional candidates, Dina Titus launched a “blatantly false” attack ad against Joe Heck and the Taxpayer Protection Pledge. ATR responded Wednesday by explaining that the claim was bogus and already debunked by multiple sources.

Yesterday Jon Ralston, a leading political pundit in Nevada, further discredited the claims made by the Titus campaign about the Pledge on his TV show, Face to Face. During his Reality Check segment, Ralston said the Titus campaign’s claims against the Pledge were “thoroughly misleading.”

To view the whole segment, check the YouTube video below.

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120 Days to Go Until the
Largest Tax Hikes in History

See also:  Get 'Em While They're Hot: Medicine Cabinet Tax Hits in 120 Days

In just 120 days, the largest tax hikes in the history of America will take effect.  They will hit families and small businesses in three great waves on January 1, 2011:

First Wave: Expiration of 2001 and 2003 Tax Relief

In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families.  These will all expire on January 1, 2011:

Personal income tax rates will rise.  The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed).  The lowest rate will rise from 10 to 15 percent.  All the rates in between will also rise.  Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates.  The full list of marginal rate hikes is below:

- The 10% bracket rises to an expanded 15%

- The 25% bracket rises to 28%

- The 28% bracket rises to 31%

- The 33% bracket rises to 36%

- The 35% bracket rises to 39.6%

Higher taxes on marriage and family.  The “marriage penalty” (narrower tax brackets for married couples) will return from the first dollar of income.  The child tax credit will be cut in half from $1000 to $500 per child.  The standard deduction will no longer be doubled for married couples relative to the single level.  The dependent care tax credit will be cut.

The return of the Death Tax.  This year, there is no death tax.  For those dying on or after January 1 2011, there is a 55 percent top death tax rate on estates over $1 million.  A person leaving behind two homes and a retirement account could easily pass along a death tax bill to their loved ones.

Higher tax rates on savers and investors.  The top capital gains tax will rise from 15 percent this year to 20 percent in 2011.  The top dividends tax rate will rise from 15 percent this year to 39.6 percent in 2011.  These rates will rise another 3.8 percent in 2013.
 

Second Wave: Obamacare

There are over twenty new or higher taxes in Obamacare.  Several will first go into effect on January 1, 2011.  They include:

The Tanning Tax.  This went into effect on July 1^st of this year.  It imposes a new, 10% excise tax on getting a tan at a tanning salon.  There is no exemption for tanners making less than $250,000 per year.

The “Medicine Cabinet Tax” Thanks to Obamacare, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).

The HSA Withdrawal Tax Hike.  This provision of Obamacare increases the additional 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.

Brand Name Drug Tax.  Starting next year, there will be a multi-billion dollar tax assessment imposed on name-brand drug manufacturers.  This tax, like all excise taxes, will raise the price of medicine, hurting everyone.

Economic Substance Doctrine.  The IRS is now empowered to disallow perfectly-legal tax deductions and maneuvers merely because it judges that the deduction or action lacks “economic substance.”  This is obviously an arbitrary empowerment of IRS agents.

Employer Reporting of Health Insurance Costs on a W-2.  This will start for W-2s in the 2011 tax year.  While not a tax increase in itself, it makes it very easy for Congress to tax employer-provided healthcare benefits later.
 

Third Wave: The Alternative Minimum Tax and Employer Tax Hikes

When Americans prepare to file their tax returns in January of 2011, they’ll be in for a nasty surprise—the AMT won’t be held harmless, and many tax relief provisions will have expired.  The major items include:

The AMT will ensnare over 28 million families, up from 4 million last year.  According to the left-leaning Tax Policy Center, Congress’ failure to index the AMT will lead to an explosion of AMT taxpaying families—rising from 4 million last year to 28.5 million.  These families will have to calculate their tax burdens twice, and pay taxes at the higher level.  The AMT was created in 1969 to ensnare a handful of taxpayers.

Small business expensing will be slashed and 50% expensing will disappear.  Small businesses can normally expense (rather than slowly-deduct, or “depreciate”) equipment purchases up to $250,000.  This will be cut all the way down to $25,000.  Larger businesses can expense half of their purchases of equipment.  In January of 2011, all of it will have to be “depreciated.”

Taxes will be raised on all types of businesses.  There are literally scores of tax hikes on business that will take place.  The biggest is the loss of the “research and experimentation tax credit,” but there are many, many others.  Combining high marginal tax rates with the loss of this tax relief will cost jobs.

Tax Benefits for Education and Teaching Reduced.  The deduction for tuition and fees will not be available.  Tax credits for education will be limited.  Teachers will no longer be able to deduct classroom expenses.  Coverdell Education Savings Accounts will be cut.  Employer-provided educational assistance is curtailed.  The student loan interest deduction will be disallowed for hundreds of thousands of families.

Charitable Contributions from IRAs no longer allowed. Until this year, a retired person with an IRA could contribute up to $100,000 per year directly to a charity from their IRA.  This contribution also counts toward an annual “required minimum distribution.”  This ability will no longer be there.

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Government vs. Private Control and "Balkanization" of the Internet

The Economist had a piece yesterday called “The Future of the Internet: A virtual counter-revolution.”  It twists and turns through the ways that government and businesses are attempting to “balkanize” the Internet; to take it over and turn it into a “collection of proprietary islands accessed by devices controlled remotely by their vendors.”  The piece is certainly worth a read, but even if the picture it portrays is accurate, that doesn’t mean it’s not a good thing for consumers and the future of the Internet.

First, it points out how “governments are increasingly reasserting their sovereignty.”  China is blocking content; India and Saudi Arabia threatened to block BlackBerry and other services; the U.S. is pushing regulations for Net Neutrality that could lead to government enforcement of price control, access, and more, eventually turning the Internet into a virtual public utility.

Most disconcerting was where it highlighted United States government’s influence online.  According to The Economist piece, the U.S. ranked 4th amongst countries requesting that Google remove content from their website (roughly 125 times in the second half of last year).  Ironic that it came from the same government that wants to enact Net Neutrality regulations to supposedly preserve the current open nature and free flow of information online.  Worse, the U.S. government ranked second in requests for information from Google, 3,580 in the second half of 2009.  Again, from the same government that wants to establish a “Do Not Track” list for “helping” consumers control online privacy.

The government’s actions raise enormous red flags for privacy and 4th Amendment violations.  That’s why ATR is a member of the Digital Due Process coalition to require federal agencies to have a warrant and a target before asking, for example, Google for all Gmail emails sent between 2:00 and 3:00 pm EST yesterday.  Today, the Electronic Communications Privacy Act (enacted way back in 1986) is woefully out of date, and permits the FBI and others to do exactly that.  How are we supposed to trust a government that installs “strip-search” machines at airports, or President Obama who has been pushing for his own form of “online warrantless wiretapping” of late?  (Coincidentally, you can visit another section of The Economist’s website to discuss and vote “no” on government regulation of online privacy alongside Cato’s Jim Harper).

Where the Economist piece goes awry is when it looks at how businesses are using the Internet.  It says that if large players on the Internet move away from an open platform (where services, applications, and devices don’t construct walls against others), “this would be bad news.”  But this is an oversimplification and allowing the free market to offer both open and closed systems means greater consumer choice, innovation, and competition.  Mozilla Firefox vs. Apple’s Safari.  Android vs. iPhone’s iOS.

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Get 'Em While They're Hot:
Medicine Cabinet Tax Hits in 120 Days

Thanks to Obamacare, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement arrangement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin) starting in January 2011.  These drugs will have to be purchased with after-tax dollars.

The ridiculous result will be a rush to buy over-the-counter products in the days after Christmas this year.

That means that the 30 million Americans with an FSA, HSA, or HRA will see a tax hike in January 2011.  They will no longer be able to use their pre-tax accounts to purchase such basic items as:

• Aspirin
• Antihistamines
• Anti-ulcer medicines
• Cough syrup
• Motion sickness medicine
• Ibuprofen
• Antacids
• Laxatives
• Menstrual pain relievers
• Decongestants
• Hemorrhoid creams
• Allergy relief
• Athlete’s Foot cream

The Medicine Cabinet Tax is one of just seven tax hikes in Obamacare hitting families making less than $250,000 per year, a violation of Obama’s central campaign promise:

“I can make a firm pledge.  Under my plan, no family making less than $250,000 a year will see any form of tax increase.  Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”  (Dover, NH)  [Transcript] [Video]

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Vote 'NO!' to Government Regulation of Privacy at The Economist

Currently, several members of Congress and the Federal Trade Commission are pursuing onerous regulations concerning government regulation of online privacy.Two privacy bills are up for consideration amidst Senator Kerry’s pledge to regulate online privacy.

The Economist is currently hosting a live online debate over online privacy. Read as the debate unfolds here.  We encourage you to sign on and vote NO on government regulation of your privacy.

In the debate, Jim Harper from the Cato Institute makes an excellent argument against privacy control, refering to the “couch potato” for whom it seems easier to ask the government to take a problem off their hands than to become proactive themselves.  However, the government mustn’t be trusted with this task and Internet users are best off using the myriad of tools already available to protect themselves. Harper’s opposition, Marc Rotenberg, is the one to note the threat that the government itself has posed in the past to our privacy (NSA’s Clipper Chip and harmful and ineffective airport body scanners).

The government is too distanced from our needs, as evidenced by the ‘Do Not Track List.’ Tracking helps study preferences and cater to individual consumer needs. Harper states that more of a priority towards privacy would “undercut consumer welfare as indicated by the best evidence available: consumer behavior. People appear generally to prefer the interactivity and convenience of today's web, and the free content made more abundant by ad network tracking.”  It is precisely the free content that would be impacted by onerous federal privacy regulations.

Harper is correct in his assertion that the most efficient and cost-effective measure would be to get consumers educated and involved in their own privacy protection. We are our best protection.  That’s why you should join the debate and vote ‘NO’ at economist.com.

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FCC Stalls on Internet Regulation; Asks for More Comments

Against immense pressure from left-wing groups, yesterday the FCC announced that instead of adopting onerous Internet regulations, more study is needed.  This is a breath of fresh air, but it certainly doesn’t spell the end of the FCC’s needless foray into regulating the Internet and the flourishing industry that has built it.

In its public notice, the FCC asked how or whether mobile broadband should regulated, as opposed to wired Internet connections.  It also asked how to treat “specialized” services offered by service providers that run over the same broadband connection, such as teleconferencing, health IT, and gaming.  The questions stem from a consensus proposal on Net Neutrality by Google and Verizon, which had exemptions for wireless and specialized services.

Yet, the questions carried the hostile and hypothetical tone that exemplifies the regulation-hungry government agency.  They suggested service providers will use the “specialized service” designation to “supplant” the Internet.  Despite prior assurances that their regulatory scheme would not focus on pricing, the FCC questioned the value of usage-based mobile data pricing as a means of preventing congestion and allocating bandwidth.  They asked if regulations were necessary to prevent wireless carriers from blocking data-heavy applications or certain devices (that could frankly crash or congest mobile networks).  The tone stems directly from the Commission’s obvious desire to make the Internet a one-size-fits-all public utility, killing the currently dynamic and innovative free-market where consumers decide which services, pricing plans, and content is the best and worst.

Immediately, the far left was up in arms.  Gigi Sohn of Public Knowledge said the questions “were extensively explored in not one, but two proceedings.”  Media Access Project’s Matt Wood remarked, “The commission asks the same questions time and time again… instead of providing basic answers.”  Free Press’s S. Derek Turner declared, “We don’t need more questions from the FCC, we need more answers.”  Is this an admission that they didn’t supply correct answers during prior proceedings?  Or are they just concerned that the Commission may deviate from an authoritarian approach that regulates the Internet from the top down under an arcane 1930’s law?  Regardless, for a bunch of “consumer interest” groups, they obviously don’t think consumers should have anymore say in a public proceeding about how the Internet is (or isn’t) regulated.

The FCC’s move is a welcome sign that they may adopt a more consensus-based approach, as opposed to their originally proposed Title II regulations.  But it also raises a few red flags.  Given the wording of the notice, no one necessarily expects the FCC to adopt a proposal with limited regulations.  The FCC also appears to be punting the issue until after the election, when all the other horrid and unpopular ideas are passed in Washington.  This would provide some cushion should they decide to adopt the heaviest regulations possible.  In the meantime, the FCC is continuing what has become a multi-year regulatory saga that has left businesses looking to invest in broadband with infuriating uncertainty as to their regulatory fate.

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Why was the Volcker Commission Constrained by Obama’s Tax Pledge, but not the Simpson-Bowles?

During his campaign, President Obama made a “firm pledge” not to raise “any form” of taxes on families making less than $250,000 per year.  White House spokesman Robert Gibbs has said the pledge “didn’t come with caveats.”  

On March 25, 2009, Peter Orszag, the director of The Office of Management and Budget stated that the president’s Economic Recovery Advisory Board, headed by former Federal Reserve Chairman Paul Volcker, would be limited in their recommendations by President Obama’s “firm pledge”: 

DIRECTOR ORSZAG:With regard to the task force, the only constraints on its activities are that there will be no tax increases during 2009 or 2010, and the proposals should not raise taxes on American families making less than $250,000.

Despite saying new taxes were off the table with Paul Volker and the president’s Economic Recover Advisory Board, the White House has not held the Simpson-Bowles Debt Commission to the same standard. In an interview on Fox News Sunday, debt commission co-chairman Erskine Bowles had the following exchange with host Chris Wallace:

CHRIS WALLACE, ANCHOR:  Mr. Bowles, Barack Obama — I don't have to tell you — campaigned in 2008 for president on a flat pledge that he would not raise any taxes — not income taxes, not any taxes — on people making less than $250,000 a year. Do you feel bound by the president's pledge?

ERSKINE BOWLES, DEBT COMMISSION CO-CHAIRMAN:What I feel bound by is the president looked Senator Simpson and me in the eye and he said, everything is on the table.

Obama was first walking, and is now running away from his most famous pledge to taxpayers.  We’ve been discovering a no tax promise with a loophole becoming bigger than the promise.  Said Grover Norquiest.

Bowles also refused to rule out a Value-Added Tax. 

Did President Obama simply forget his tax pledge to the American people or is he making a play for political cover?  He seemed to remember it when instructing Paul Volcker and the president’s Economic Recovery Advisory Board.  Maybe if the debt commission recommends a tax increase, he thinks he will not have to be accountable to his pledge not to raise taxes anymore.  

Access the [PDF]

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Daily Media Spotlight September 2, 2010

From Nevada News and Views: "ATR Comes Back Swinging at Dina ' Tax-Us'."  Democrats seem to be truly committed this election cycle to misleading the American people about what the Taxpayer Protection Pledge means.  Besides Dina Titus, Rep. Mark Schauer (D-Mich.) and the Democratic Party of Wisconsin have made similar blatantly false attacks.  

Is Pennsylvania’s Democrat gubernatorial candidate Dan Onorato suffering from short term memory loss?  According to WITF: “For months, Onorato has decried Republican Tom Corbett’s pledge not to raise taxes as a “gimmick” and a stunt. But starting last week, Onorato began flat-out promising not to raise revenues, if he becomes governor next year. During a Capitol press conference today, Onorato was blunt. ‘I don’t plan on raising taxes,’ he said.”

RedCounty.com highlights a recent International Policy Network study showing that the political talking point saying we should invest in “green jobs” is bunk.  Investing in “green jobs” is actually a terrible investment. The article notes: “ATR [Americans for Tax Reform] previously stated that ‘it is estimated that for every government mandated ‘green energy job' created, 2.2 jobs in the private sector were prevented from being created’.”

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