Senate to Hold Hearing on Biden Treasury Nominee Janet Yellen
Members of the Senate Finance Committee will soon consider the nomination of Janet Yellen to be Secretary of the Treasury.
Yellen supports several tax increases including repeal of the Tax Cuts and Jobs Act (TCJA), which reduced taxes for middle class families and small businesses. Yellen also supports a $2 trillion energy tax that would increase the cost of electricity and consumer goods and services for Americans across the country.
Yellen opposes the Tax Cuts & Jobs Act, as noted in an April 2018 op-ed where she argued that there was no need for a tax cut because, “the economy was already at or close to full employment and did not need a boost.”
Americans who found jobs after the enactment of the tax cuts would disagree. After the tax cuts were signed into law in December 2017, the unemployment rate dropped from 4.1% down to 3.5% just before the pandemic hit. African American unemployment dropped from 6.7% to 5.8% and Hispanic unemployment dropped from 5.0% to 4.4%. Over 5.1 million jobs were created from December 2017 to February 2020. Median household income increased by $4,440 or 6.8% in 2019 -- the largest one-year wage growth in history.
It is important to note that this economic prosperity came despite significant headwinds to the economy. In fact, Moody’s Analytics Chief Economist Mark Zandi estimated that tariffs imposed by President Trump cost 450,000 jobs per year they were in effect.
Repealing the Tax Cuts and Jobs Act will repeal the 20 percent small business deduction and raise the corporate rate, which will prolong the economic downturn and hider growth and the creation of new jobs.
It will also directly increase taxes on American families.
American middle-income families saw significant tax reduction because of the TCJA. Specifically, taxpayers with AGI of between $50,000 and $100,000 saw their tax liability drop by an average of 13 percent. This is more than twice as much as taxpayers with AGI of $1 million or more, who saw their average tax liability drop by 5.8 percent.
In addition, repeal of the tax cuts means the individual mandate tax will come back into force, hitting five million households with a tax of between $695 and $2,085. 75 percent of these households make less than $50,000 per year.
Yellen also supports an Energy Tax of at least $40 per ton of Carbon. Yellen is a founding member of the Climate Leadership Council (CLC), an “international policy institute” lobbying Congress to pass this carbon tax, which would increase every year at 5% above inflation.” Yellen is also the author of a recent study commissioned by CLC, Exceeding Paris, that recommends a $43/ton carbon tax.
There is bipartisan recognition that an energy tax would harm low-income households and increase the cost of electricity and household goods. In 2016, Hillary Clinton decided to oppose a carbon tax after she learned the following from an internal Clinton report prepared by policy staff:
- The Hillary memo states that a carbon tax would devastate low-income households: “As with the increase in energy costs, the increase in the cost of nonenergy goods and services would disproportionately impact low-income households.”
- The Hillary memo states that a carbon tax would cause gas prices to increase 40 cents a gallon and residential electricity prices to increase 12% - 21%: “In our analysis, for example, a $42/ton GHG fee increases gasoline prices by roughly 40 cents per gallon on average between 2020 and 2030 and residential electricity prices by 2.6 cents per kWh, 12% and 21% above levels projected in the EIA’s 2014 Annual Energy Outlook respectively.
- The Hillary memo states a carbon tax would cause household energy bills to go up significantly: “Average household energy costs would increase by roughly $480 per year, or 10% relative to the levels projected in EIA’s 2014 Outlook.”
- The Hillary memo states that a carbon tax would increase the cost of household goods and services: “The cost of other household goods and services would increase as well as companies pass forward the higher energy costs paid to produce those goods and services on to consumers.”
Photo Credit: Gerald R. Ford School of Public Policy University of Michigan
Biden's $15 Minimum Wage Could Kill 3.7 Million American Jobs
President-elect Joe Biden has announced a $1.9 trillion COVID relief plan, a liberal wishlist of wasteful spending proposals that would do little to fight the pandemic and could prolong the economic downturn.
Notably, the Biden plan pushes a $15 minimum wage, a harmful proposal that could kill as many as 3.7 million American jobs and has failed on the state level time and time again.
Biden’s $15 minimum wage would substantially raise the cost of labor at a time when businesses are already struggling to pay their employees and keep the lights on. Small businesses with thin margins will be forced to pass the costs on to consumers that will inevitably take their business elsewhere, leading to a further loss of revenue and layoffs. Businesses that have been shuttered temporarily may decide not to reopen at all in the face of a $15 minimum wage.
While this drastic increase in labor costs would be a bad idea in normal times, the impact would be even worse during a pandemic that has ravaged American small businesses. Yelp data shows that 60 percent of business closures from the pandemic are now permanent.
Government policies are directly responsible for inflicting much of this economic damage. Government-mandated lockdowns forced hundreds of thousands of businesses to close their doors and kicked millions of Americans out of work. In areas where some businesses were allowed to reopen under onerous government restrictions, Nancy Pelosi’s $600-per-week unemployment expansion discouraged Americans from going back to work, as 68 percent of Americans got paid more on unemployment than in the workplace.
A $15 minimum wage would lead to further job losses for Americans. In 2019, the nonpartisan Congressional Budget Office estimated that a nationwide $15 minimum wage would cost at least 1.3 million American jobs, and could cost as many as 3.7 million at the high end. Another study shows that a $15 minimum wage would disproportionately impact women and shut out young, low-skilled workers attempting to enter the workforce for the first time.
The Biden plan also ends the tipped minimum wage, an absurd proposal considering 10,000 restaurants have closed their doors in the last three months alone. Imposing a 600 percent minimum wage increase on an already struggling industry in the middle a recession would only lead to more closures. If Biden is successful, one in three tipped workers would lose their job.
A $15 minimum wage has repeatedly failed at the state level. When Seattle implemented a $15 minimum wage, thousands of jobs were lost, while other workers saw a reduction in hours worked. New York City’s minimum wage increase forced 75 percent of restaurants to cut employee hours, and nearly 50 percent to eliminate jobs entirely.
Ultimately, Biden’s plan to raise the minimum wage to $15 an hour will kill millions of American jobs and cause thousands of additional small businesses to permanently close their doors. This is the last thing American workers and small businesses need as the economy attempts to recover from the COVID-19 pandemic. Congress should reject this harmful proposal wherever it appears.
Photo Credit: jlhervás
Congress Should Reject Biden $1.9 Trillion Spending Plan
President-elect Joe Biden has announced a $1.9 trillion COVID relief plan. This proposal contains numerous wasteful spending provisions that would do little to fight the pandemic and could prolong the economic downturn. This proposal should be rejected by Congress.
Congress has already provided trillions of dollars to individuals, small businesses, hospitals, and state and local governments, including the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act and the recently passed $900 billion relief bill attached to the December government funding bill.
Lawmakers should reject this and other efforts to pass trillions of dollars in new spending. The COVID-19 pandemic should not be an excuse for the left to enact vast new spending programs that will permanently expand the size and scope of government.
Biden’s plan calls for a $350 billion bailout for state and local governments, funding which is entirely unnecessary. Many states have seen little or no negative budgetary impact because of the pandemic, with California reporting a $15 billion budget surplus.
In addition, as recently reported by the New York Times, Wisconsin expects to have money to contribute to its rainy-day fund, Maryland has increased its revenue projections, and Minnesota expects a surplus. In all, state collections declined just 4.4 percent through September compared to the first nine months of 2019, according to the Tax Foundation.
Congress has also already provided aid to states, including approximately $360 billion that directly went to state and local governments to help them response to COVID-19.
In fact, even before the last $900 billion package, lawmakers had provided states and localities with 17 times their 2020 revenue loss and double their expected 2020 and 2021 loss, according to the Heritage Foundation.
Biden’s plan also calls for $400 additional unemployment benefits through September and proposes a nationwide $15 minimum wage. Biden’s $400-per week unemployment would prolong the economic downturn by creating a disincentive for workers to return to work and will unnecessarily drive up unemployment rates. It is important to note that these payments are on top of regular unemployment compensation that displaced workers receive from states.
This $400-per-week expansion would extend the $300-per week benefit that was passed for three months at the end of last year, as well as Nancy Pelosi’s $600-per-week unemployment expansion passed in the CARES Act.
The Pelosi proposal created a situation in which 68 percent of Americans got paid more on unemployment than in the workplace. The economic damage caused by this policy is long-lasting – a recent study conducted by the Heritage Foundation found the $600 UI policy would reduce GDP by between $955 billion and $1.49 trillion.
In addition to this $400 UI, Biden calls for a $15 minimum wage. If implemented, this proposal would cost jobs across the country. The Congressional Budget Office has found a $15 minimum wage would cost 1.3 million jobs, while other studies have found over 2 million jobs would be lost. This is not hypothetical – when Seattle implemented a $15 minimum wage, thousands of jobs were lost, while other workers saw a reduction in hours worked.
Tax Relief A Top Priority for Governor Ducey
Governor Doug Ducey is committed to delivering tax relief to the hardworking people of Arizona this year.
In his State of the State address, Gov. Ducey told Arizonans that he wants to use the 2021 legislative session to build on the pro-taxpayer record that he and the republican-controlled legislature have accomplished over the past few years. Gov. Ducey explained:
“Every year I’ve been governor, we’ve improved income taxes in the taxpayer’s favor. We’ve simplified the code, lowered all rates, protected them against inflation, and eliminated an entire tax bracket. In all of this, we’ve proven that our government can fulfill every obligation, and answer the unexpected needs of a growing state, without raising taxes.
My goal has been to make Arizona the best place in America to live, work, and do business – by letting Arizonans keep more of their hard-earned money. And having come this far, as other states chase away opportunity with their new taxes, why on earth would we ever want to follow their failed and depressing example?
So I propose, in this session, we work together to reform and lower taxes and preserve Arizona’s good name as a responsible, competitive state. On tax reform, let’s think big.”
This is great news for taxpayers across the Grand Canyon State. In addition to allowing Arizonans to keep more of their hard-earned money, pro-growth tax reform that results in a tax cut would signal to all that Arizona is still committed low taxes and limited government, and welcome to investment.
“Governor Ducey has enacted a series of laws in Arizona that have been emulated in other states: Right to Try, universal license recognition, and securing Arizonans the freedom to rent out their homes on Airbnb and HomeAway,” said Grover Norquist, president of Americans for Tax Reform. “It is exciting to hear that Arizona will now begin to reduce its state income tax to become the most competitive state in the country. The 40 other states with personal income taxes will be watching.”
Income taxes are consistently cited by CEOs and business owners as a key determinant of business location: the lower the rate, the more attractive the state. As more and more people and jobs continue to move into the 9 states that do not tax wage income, more and more states are looking to reduce and phase out their income taxes.
Tax reform that results in a net tax cut would be a great way for Arizona to remain a competitive state.
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Cuomo Calls for Federal Income Tax Hikes to Bail Out NY
Looking to fellow Democrats who recently took control of Washington, Gov. Andrew Cuomo called upon President-Elect Joe Biden and Congress to bail out the state of New York during his 11th annual State of the State address this morning.
“If the federal government needs revenue, it should raise income taxes on the wealthy to finance the state’s resurgence from this national devastation. That is basic economic justice and economic prudence,” said Gov. Cuomo.
With Democrats holding the White House, Senate, and the House for the first time in over a decade, tax hikes are a major threat. Included in Biden’s tax plan is a substantial tax increase on high-income-earning Americans. In short, Gov. Cuomo’s dream of a state bail out by Washington doesn’t seem too far-fetched.
Groups on the left are pushing for New York State tax hikes still, even as Cuomo questions how much revenue they would raise. Some pointed to data from A Strong Economy for All, a coalition of labor unions and community groups across New York State, that suggest a California-style 13.3% income tax rate on higher earners would generate $22 billion.
It appears Gov. Cuomo wants to place the blame of his mistakes on the federal government – and wants Washington to fix his terrible handling of the pandemic, too.
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Norquist Urges Biden to Oppose Digital Services Taxes
ATR President Grover Norquist was on CNBC’s Squawk Box to discuss the coming tax hikes when Biden is joined by a Democrat-controlled House and Senate, as well as the important fight against foreign Digital Services Taxes imposed by various different countries.
“And the other big question we have is where will he (Biden) be on fighting against the European effort to put a Digital Services Tax on America's rather large and successful companies like Google, Facebook, and Apple that Trump people had fought it very hard. Unclear that Biden with his new 'let's get along with Europeans' will continue to try to stop those taxes targeting American companies, not European companies.”
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DSTs pose an unprecedented danger to tax competition, innovation, and economic growth. These new taxes represent a dramatic and irreversible shift for the international tax system. While they are imposed on business revenues, DSTs will ultimately end up harming consumers and workers as the costs are passed down. This will result in fewer jobs and lower wages for businesses, especially third party suppliers and sellers that rely on tech companies for their livelihoods.
Stimulus Payment Woes Prove the IRS Should Not Be Given More Power
The IRS is unsurprisingly struggling to distribute stimulus checks to taxpayers. Some Americans will likely not receive their payments until they file months from now, while millions of payments have been sent to accounts that have been closed or are no longer active.
This news is more proof that the IRS should not be given more power, as some on the left are proposing.
It is expected that President Biden and a Democrat Congress will push to expand the power of the IRS. Biden Council of Economic Advisers member Jared Bernstein has said the incoming administration will seek “significant increases in IRS enforcement and auditing.” Several dozen House Democrats have already proposed increasing funding for the IRS including providing $5.2 for “enforcement activities.”
Radical Democrats like Senator Elizabeth Warren (D-Mass.) and Representative Alexandria Ocasio-Cortez (D-NY) even want to have the IRS take over the tax preparation and filing process. This would replace the existing system of voluntary compliance, where Americans are responsible for filling out their own tax returns, with a system where the government assesses and files taxes for Americans.
Naturally, this would create a strong conflict of interest. Under a system of government-run tax preparation, the IRS would tell you how much you owe and give you the opportunity to contest. This would give the government an incentive to overcharge or withhold information from taxpayers.
At the very least, it would empower the IRS to collect even more personal information as noted in a recent report by the Progressive Policy Institute. As the report notes, the IRS does not have the information it needs to prepare tax returns for American families. This could deprive low-income Americans from important tax credits like the child tax credit and earned income tax credit (EITC).
In fact, in order to properly file for Americans, the IRS would have to have a “deep knowledge” of the personal lives of a family, which would result in a significant intrusion into the personal lives of American citizens.
Not only would giving the government this new power be unfeasible, it is also deeply unpopular. According to data by the Computer & Communications Industry Association, 60 percent of taxpayers oppose government tax preparation including 45 percent that “strongly oppose.” Just 8 percent of taxpayers strongly support government tax preparation.
Time and time again, the federal government and the IRS have proven they should have less, not more responsibility. The problems Americans are having receiving their stimulus payments is the latest example. Given this fact, efforts to expand the size and scope of the IRS and have the agency take over tax preparation should be rejected.
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ATR Applauds DOL Final Rule Clarifying Independent Contractor Status
The U.S. Department of Labor has released a final rule clarifying the difference between an independent contractor and a traditional employee under the Fair Standards Labor Act (FSLA). After implementation, this rule will protect freelancers by providing much-needed clarity and flexibility for American workers and businesses alike.
“This rule brings long-needed clarity for American workers and employers,” said U.S. Secretary of Labor Eugene Scalia. “Sharpening the test to determine who is an independent contractor under the Fair Labor Standards Act makes it easier to identify employees covered by the Act, while recognizing and respecting the entrepreneurial spirit of workers who choose to pursue the freedom associated with being an independent contractor.”
The rule includes several criteria designed to clarify whether or not a worker has independent contractor status. First, the rule contains an “economic reality” test to determine whether an individual works for himself or herself (as an independent contractor) or an employer (as an employee).
Next, the rule identifies two “core factors” that help determine an individual’s status as an independent contractor or employee. The first is the nature and degree of control that the individual has over the work itself, such as the ability to set a schedule, choose assignments, or work with little or no supervision. The second is the opportunity for profit or loss based on the individual’s investment or initiative.
In situations where the two core factors do not point to the same worker classification, the rule contains three additional guidelines to help determine an individual’s status, which are:
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The amount of skill required to do the work
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The depth of working relationship between the individual and potential employer
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Whether or not the work is part of an “integrated unit of production,” i.e. if an individual works in a situation roughly equivalent to a production line.
By clarifying the tests that determine whether or not an individual is an independent contractor or employee, this rule will simplify compliance for American businesses, reduce worker misclassification, and increase flexibility for American workers. ATR supports this rule.
Photo Credit: The White House
USTR Should Continue Fight Against Digital Taxes
The Office of the United States Trade Representative announced the conclusion of investigations into digital taxes imposed by India, Italy, and Turkey, finding that they discriminate against U.S. companies. The administration also announced they are finalizing remaining 301 investigations into Digital Services Taxes (DST) imposed by Austria, Brazil, the Czech Republic, the European Union, Indonesia, Spain, and the United Kingdom.
The U.S. was set to enact 25% tariffs on a range of French products yesterday in retaliation for the country's discriminatory tax. Robert Lighthizer announced today that those duties are suspended indefinitely.
While the administration deserves praise for beginning to finalize outstanding 301 investigations, delaying retaliatory actions of France’s already-imposed DST is the wrong decision. This sends a message to foreign countries that the U.S. will not follow through on its promise to defend American companies and workers against DSTs. This inaction will only encourage other countries around the world that have already imposed or are about to impose similar discriminatory taxes.
Over the past four years, the Trump administration has consistently fought to ensure that American businesses and workers are competing with foreign countries on a level playing field. They should continue this effort by holding France and other countries accountable for unilaterally imposed DSTs.
To be clear, ATR opposes all taxes as a matter of principle. The best outcome to this dispute would be an end to all DSTs, tariffs, and other trade barriers.
However, it is important to remember that the current trade conflict was initiated by France and the European Union when they decided to unfairly tax American companies.
Back in December 2019, the USTR released an affirmative finding of discrimination of the French Digital Services Tax and issued a list of $2.4 billion worth of French goods that would be subject to an additional 25% tariff under Section 301. France agreed to not collect its tax until the end of the year if a solution can be negotiated at the OECD.
Due to the COVID-19 pandemic negotiations on digital taxation at the OECD stalled and missed a deadline in October 2020. France unliterary and without international agreement resumed the collection of its tax in December.
DSTs pose an unprecedented danger to tax competition, innovation, and economic growth. These new taxes represent a dramatic and irreversible shift for the international tax system. While they are imposed on business revenues, DSTs will ultimately end up harming consumers and workers as the costs are passed down. This will result in fewer jobs and lower wages for businesses, especially third party suppliers and sellers that rely on tech companies for their livelihoods.
There is strong, bipartisan opposition in Congress to foreign DSTs. For instance:
- Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.), as well as Ways and Means Chairman Richie Neal (D-Mass) and Ranking Member Kevin Brady (R-Texas), have all raised concerns about DSTs, noting that these unilateral taxes “adversely affect U.S. businesses and have negative economic and diplomatic effects.”
- Rep. Ron Estes (R-Kan.) and Rep. Dan Kildee (D-Mich.) have introduced a bipartisan resolution expressing congressional opposition to foreign efforts to impose DSTs on American businesses.
Lawmakers should be applauded for their strong stance against DSTs and should continue raising the alarm moving forward.
At the same time, the administration must hold foreign countries accountable. One step toward this is goal is finalizing the remaining 301 investigations including those that have been adopted or are being considered by the European Union, Indonesia, the United Kingdom, the Czech Republic, Spain, Austria, and Brazil. However, it is also imperative that the U.S. follows through on its promise to defend American workers and businesses when foreign countries impose DSTs.
Photo Credit: World Trade Organization
ATR Applauds EPA’s Final Rule Strengthening Scientific Transparency
Environmental Protection Agency (EPA) Administrator Andrew Wheeler announced the agency’s final rule to strengthen the transparency of its scientific information this morning during a policy forum hosted by the Competitive Enterprise Institute.
The final rule calls on the EPA to provide greater consideration to studies determined to be pivotal science where the underlying data is available for public review and scrutiny.
“Too often Congress shirks its responsibility and defers important decisions to regulatory agencies. These regulators then invoke science to justify their actions, often without letting the public study the underlying data,” wrote Administrator Wheeler in a Wall Street Journal op-ed accompanying the roll-out of the rule. “If the American people are to be regulated by interpretation of these scientific studies, they deserve to scrutinize the data as part of the scientific process and American self-government,” he continued.
The rule was first proposed in April of 2018 and supported by a coalition of conservative organizations urging the Trump administration to provide full transparency of all scientific data and studies used to justify all pending or new regulations.
Americans for Tax Reform applauds Administrator Wheeler for finalizing the EPA’s rule strengthening scientific transparency. Too often, the underlying data used by regulators to justify the growth of government is withheld from the public. The finalization of this rule furthers the public’s ability to review critical data for themselves and reflects the strong public support for greater transparency in government.
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