Germany's Merkel Clashes With Biden And Pushes Back On Vaccine Patent Waiver

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Posted by Andreas Hellmann on Thursday, May 6th, 2021, 2:16 PM PERMALINK

The Biden administration is supporting a proposal that would suspend all intellectual property rights for COVID-19 vaccines and would authorize the sharing of United States COVID-related IP with foreign nations. The petition by South Africa and India at the World Trade Organization (WTO) to waive most of the protections in the Trade-Related Aspects of Intellectual Property Rights (TRIPS) would undermine U.S. medical innovation, endanger American jobs and not help to fight the pandemic. 

German Chancellor Angela Merkel disagrees with President Biden saying that patent protection for COVID-19 vaccines "must remain in place". Merkel's spokesperson added: "The limiting factor for the production of vaccines are manufacturing capacities and high-quality standards, not the patents" and "the protection of intellectual property is a source of innovation and this has to remain so in the future."

Biden’s proposal of removing intellectual property rights would benefit Chinese manufacturers who have been trying to steal American innovation for over a year, which was considered a national security risk not too long ago. Instead of resulting in a rapid increase of safe and effective vaccines, this proposal will dilute the world supply with false, substandard, and counterfeit vaccines by illicit manufacturers and will not help to end the pandemic.

Photo Credit: sweejak

Tennessee’s Fiscal Responsibility Sets Nashville Music Scene Apart From New York, Los Angeles

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Posted by Karl Abramson on Thursday, May 6th, 2021, 2:04 PM PERMALINK

The vibrant music scene in Nashville, Tennessee has earned the area a well-deserved nickname: “The Music City”. While the origins of the moniker are unknown, it is believed that the first person to call Nashville “Music City” was Queen Victoria when she remarked that the Fisk Jubilee Singers, an African American choral ensemble from Fisk University in Nashville, had such beautiful voices they must have come from “Music City”.  

Perhaps a more fitting nickname, however, would be “The City of Music and Low Taxes”, as the incredible success of Nashville’s music industry is aided by Tennessee’s zero personal income tax and low regulations that have allowed Nashville’s music scene to be the fastest growing in the country by a landslide. 

The total economic impact of the music industry in the United States has increased by 9.2% since 2013, totaling more than $500 billion dollars a year. However, this growth is dwarfed by the massive success of Nashville’s music industry which has grown since 2013 by a staggering 43%. 

The music industry in Nashville contributes 80% more today to the Tennessee’s gross domestic product (GDP) than it did in 2013. This has given Nashville the opportunity to improve its already strong quality of life as tens millions of dollars each year in music-related tax revenue goes toward funding public works programs, community safety initiatives, and wage hikes for K-12 teachers. 

Compared to the ten largest cities for music-related jobs in the U.S., Nashville ranks first for net job growth as well as overall growth rate. In 2012, Nashville’s music industry employed 27,000 people. As of 2019, it had swelled to 41,000. Further, these jobs are incredibly well-paying. The median annual earnings for music and entertainment industry jobs in Tennessee is over three times the annual median earnings nationwide for all employment. 

Even though New York and Los Angeles employ more total people, Nashville’s per capita music industry employment is over three times that of Los Angeles’ and nearly four times higher than New York’s. More striking, however, is the disparity in job growth. Between 2009 and 2019, jobs in Nashville’s music industry have increased 31%. In Los Angeles, industry job growth is 2%. In New York, there has been a paltry net increase of ten total jobs over the ten-year period.  

The Recording Industry Association of America published a report on Nashville’s music industry, attributing its success to “the entrepreneurial drive that has characterized Nashville’s music industry from the start”, adding that it, “continues to be the core of this unique industry cluster.” This is largely due to Tennessee’s fiscally responsible economic policies that promote innovation and entrepreneurship through low taxes and reasonable regulations. 

In addition, Tennessee’s cost of living is the second lowest in the country, an attractive feature for young singers, songwriters, and producers looking to make a living in music or entertainment. Meanwhile, New York’s cost of living is third highest in the nation, just barely beating out California, which ranks second. The tax burden in Tennessee is also the second lowest in the country. Sales and property taxes are minimal, and the state’s personal income tax rate is zero.  

The Tennessee Entertainment Commission advertises the advantages of moving a music or entertainment company to Nashville. One of those advantages is free use of state-owned property for shooting music videos or feature films. As maintenance of this property is paid for by taxpayers, this is a simple, common sense policy that helps set Tennessee apart from its competition. Another noted advantage is Tennessee's status as a right-to-work state. Unionized and non-unionized workers are guaranteed equal treatment under the law, ensuring freedom of choice for workers considering unionization. 

Tennessee has prioritized fiscal responsibility, allowing Nashville’s music industry to grow in unprecedented numbers. Even though the Covid-19 pandemic has done considerable damage to many small businesses across the U.S., with the music industry being no exception, experts predict this downturn will be short-lived. While revenues are understandably down in 2020, the industry is poised for, and expected to have, a robust comeback.

The Music City has been an integral part of the American music and cultural experience for over a century. With the assistance of sound fiscal policies that make Tennessee one of the most economically competitive states in the nation, Nashville’s music industry will certainly continue to be a hub for musical innovation for decades to come. 

Photo Credit: munabril

More from Americans for Tax Reform

Biden Admin Surrenders on American IP Rights

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Posted by Isabelle Morales on Thursday, May 6th, 2021, 12:20 PM PERMALINK

The Biden administration is backing a global effort to suspend all intellectual property (IP) rights for COVID-19 innovations, a move that would do little to help end the pandemic but would undermine U.S. medical innovation, jobs, and the Constitution.  

Strong IP protections have facilitated the creation of several highly effective COVID-19 vaccines at a record pace.

Biden’s decision to support an IP waiver for COVID-19 innovations will create a precedent that IP rights can easily be waived or undermined when government bureaucrats find it convenient. Surrendering on IP rights will also provide an implicit endorsement of the rampant theft of American IP by China. The U.S. should be doing more, not less to defend American IP.  

Foreign countries like India and South Africa have been petitioning the World Trade Organization (WTO) to suspend IP rights associated with COVID-19 innovations.

The Chinese state media has already praised President Biden for giving into "global pressure."

Chen Weihua of China Daily, China state-affiliated media, replied to the decision in a tweet:

According to the Washington Post, the administration’s decision was made in a Tuesday meeting with President Biden. Commerce Secretary Gina Raimondo, who had concerns about the waiver, was not included in the meeting. 

IP rights are explicitly protected in the constitution. The Founding Fathers recognized the importance of intellectual property rights in Article 1, Section 8 of the Constitution. “To promote the Progress of Science and useful Arts, by securing for limited times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”   

Strong IP rights are vital because they turn new ideas into tangible goods and services that improve the quality of life for Americans by creating high-paying jobs and increasing economic growth.    

Without IP rights, medical innovators will have no incentive to create new treatments and cures as they will have no way to recoup the investments they made in developing new medicines. Patent exclusivity for medicines has been deliberately legislated to ensure that creativity, innovation, and medical growth are protected.   

Because of these policies, the U.S. is a world leader when it comes to medical innovation. According to research by the Galen Institute, 290 new medical substances were launched worldwide between 2011 and 2018. The U.S. had access to 90 percent of these cures, a rate far greater than comparable foreign countries. By comparison, the United Kingdom had access to 60 percent of medicines, Japan had 50 percent, and Canada had just 44 percent.  

Strong IP for medicines also supports millions of American jobs. Nationwide, the pharmaceutical industry directly or indirectly accounts for over four million jobs across the U.S and in every state, according to research by TEconomy Partners, LLC. This includes 800,000 direct jobs, 1.4 million indirect jobs, and 1.8 million induced jobs, which include retail and service jobs that are supported by spending from pharmaceutical workers and suppliers.  

The average annual wage of a pharmaceutical worker in 2017 was $126,587, which is more than double the average private sector wage of $60,000.  

Conservatives should oppose this effort to undermine IP rights.

Many lawmakers have rightly spoken out against this decision already. For instance, Senator Richard Burr (R-N.C.) and Ways and Means Republican Leader Kevin Brady (R-Texas) have condemned Biden’s decision to surrender on American IP protections. In addition, the Republican Study Committee announced in a tweet that Rep. Byron Donalds (R-Fla.) will be soon introducing a bill to prevent the Biden admin from undermining IP rights.

The Biden administration should reverse it’s position. Rather than surrendering to foreign governments and global bureaucracies, the administration should stand strong and protect intellectual property rights.

Photo Credit: Budiey

ATR Tells Congress Don't Waste Taxpayer Dollars on Broadband Failures

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Posted by Katie McAuliffe on Thursday, May 6th, 2021, 11:25 AM PERMALINK

WASHINGTON – Today, Americans for Tax Reform sent a letter to the House Energy and Commerce Subcommittee on Communications and Technology urging them to avoid the Biden Administration impulse to throw taxpayer dollars into broadband subsidies that are already proven failures.

Our letter highlights policies that Congress should follow if taxpayer dollars are to be spent closing the digital divide. Some our recommendations include: 

  1. Follow a technology neutral approach to broadband delivery.  
  2. Continue to champion private-sector investment over government-owned networks (GONs). 
  3. Continue our light-touch regulatory framework that put us ahead of our European counterparts. 
  4. Enact meaning reform to the Lifeline program. 


The Subcommittee will be holding a hearing today on this issue today. You can read the letter below or click HERE  to view it as a pdf. 

May 06, 2021

The Honorable
Michael F. Doyle, Chairman
U.S. House of Representatives
Subcmte on Communications & Technology
2123 Rayburn House Office Building
Washington, DC 20515
The Honorable
Robert E. Latta, Ranking Member
U.S. House of Representatives
Subcmte on Communications & Technology
3222-A Rayburn House Office Building
Washington, DC 20515


Dear Representatives:

If Congress is to address broadband connectivity and cost issues, we urge you to do so in a targeted, cost-effective way that considers the entire broadband universe, rather than the narrowly defined, non-technology neutral view proposed by the Biden Administration.

Congress should avoid overly restrictive definitions of what constitutes broadband. There are more choices than fiber. Cable, wireless, fixed wireless, satellite are all acceptable methods for achieving speeds that meet the needs of Americans now and into the future for working remotely, telehealth, remote learning, and entertainment. According to Zoom, only 2 Mbps is required for high-quality video calling for both upstream and downstream, while Netflix requires only 0.5 Mbps per second. Calls for symmetrical speeds at 100 up and 100 down end up mandating on fiber and doesn’t take into consideration the asymmetrical needs of individual broadband users or the ability of private networks of to upgrade to meet demand over time.

While the government may be suggesting an influx of $100 billion is revolutionary, it is not. A one-time spend, on a chosen technology, with a preference for government operators who will likely compete with existing private networks will not address the remaining digital divide.

The private sector has invested over $1.6 trillion into wireline broadband since 1997 and after the lifting of several government restrictions, the private sector invested $80 billion in 2018 alone. The US’s prioritization of investment through both the public and private sector instead of the burdensome government regulation seen throughout Europe leads to better broadband results hands down.

Looking only at wireline broadband connections the US beats out the EU when it comes to provider competition. In 2019 86% of all US households had a choice of two or more providers, while only 46% of Europeans had that choice. In rural areas, 49% of US residents had multiple access points while only 11% had choices in the EU. This isn’t surprising because between 2012 and 2018, US investment in broadband was about 40% higher than in the EU; US broadband providers invest about $708 per household which is about three times higher than in the EU’s $230 per household.

Municipal or government run networks are also not the answer, especially ones that compete with private networks already in place. They can charge below market rates because they receive tax subsidies and they still fail as projects. Taxpayers should not be forced to subsidize an ineffective service they may not even want to use. Similar programs, like the Broadband Technology Opportunities program (BTOP) have been tried and failed.

We hope you will look towards reforming the lifeline program at the FCC to be a sustainable solution to lack of connectivity due to cost, rather than returning to the failed programs of the past. Doing away with the Universal Service fee, which continues to put extreme pressure on a small segment of the population and moving to a Congressionally approved appropriation possibly attached to spectrum proceeds could be a viable solution. Congress should also do away with the Eligible Telecommunications Carriers requirement and move to a voucher program rather than a carrier directed program to increase options to individuals struggling to get online.

Should you have any questions or comments on this matter, please reach out to me, or our Director of Federal Policy, Katie McAuliffe,


Grover G. Norquist
Americans for Tax Reform


Photo Credit: Louis Velazquez

More from Americans for Tax Reform

Biden's fattened up IRS will audit "restaurants, retail, salons and other service-based companies"

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Posted by Michael Mirsky on Thursday, May 6th, 2021, 9:54 AM PERMALINK

President Biden's plan to fatten up the IRS by $80 billion will target small businesses with aggressive audits such as "restaurants, retail, salons and other service-based companies."

Experts interviewed by CNBC note the plan would affect many small businesses that depend on usage of cash:

Certain small businesses may face an audit under the plan.

“I think the industries that should be concerned are those in cash,” said Luis Strohmeier, a Miami-based CFP and partner at Octavia Wealth Advisors.

He expects the agency to scrutinize cash-only small businesses like restaurants, retail, salons and other service-based companies.

At a time when Americans are already struggling to stay afloat, Biden also wants the IRS to snoop on every bank account and Venmo/CashApp account in the country.

"The proposal would require banks to report annual account inflows and outflows to the Internal Revenue Service. The requirement would also extend to peer-to-peer payment services such as Venmo," notes the Wall Street Journal.

At a time when Americans are already struggling, these new reporting rules would create unnecessary burdens. As noted in this excerpt from Forbes:

It may create problems, however, that should be considered and addressed as this plan works its way through Congress. For example, consider a young couple saving up to buy a home. All savings are put into the “dream home” savings account. Then, when it comes time to make the down payment, the $50,000 dream home savings goes into the regular checking account, which is then wired to the seller’s escrow account. Buying a home is not a taxable event (at least for federal income tax), selling one is. Will the IRS receive information from the financial institutions that leads to an audit?

Paul Merski, vice president of congressional relations at Independent Community Bankers of America, voiced his criticism of the proposal:

Banks already report millions of transactions a day to the Financial Crimes Enforcement Network in the form of currency transaction reports, in addition to suspicious activity reports, which are required when potential illicit activity is detected by a bank. Banks are required to submit currency transaction reports when a deposit or withdrawal is $10,000 or more, a threshold that’s already very low, Merski said.

Merski said the proposal, as written, is akin to “sending your bank statement to the IRS every month,” which would be opposed by the banking industry because of the reporting burdens already required by federal regulators.

“The federal government can’t track all of that—any more requirements would be adding more hay to that haystack,” he said.

As also noted by the Wall Street Journal, the bank account snooping will give the IRS an "enormous" quantity of new data:

It would also create an enormous flow of information that the IRS would have to learn how to manage and use.


Congress will have to weigh the potential burdens and privacy concerns against the revenue gains as it considers the plan.

Observers are rightly skeptical that this plan will be able to generate anywhere near the $780 billion promised by the Biden administration. As noted in this excerpt from Yahoo News:

Previous government estimates put the benefits of increased IRS funding much lower. Last year, the Congressional Budget Office estimated that an additional $40 billion of funding over 10 years would increase government revenues by $103 billion.

Even Obama-era IRS chief John Koskinen questioned the Biden $80 billion funding request. "I'm not sure you'd be able to efficiently use that much money," he said.

A 25% Federal Corporate Income Tax Rate Still Leaves the United States Uncompetitive

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Posted by Isabelle Morales on Wednesday, May 5th, 2021, 4:25 PM PERMALINK

After originally proposing a corporate tax rate hike to 28 percent, Biden announced today that he would be willing to implement a 25 percent rate instead.

“I’m open to compromising, yes. It doesn’t have to be exactly what I say,” Biden said at the White House when asked if he would accept raising the corporate tax rate to 25% instead of the 28% he has proposed.


A 25 percent federal corporate rate would still leave the U.S. uncompetitive compared to the rest of the world.

The U.S. federal corporate tax rate is 21 percent. However, states also levy their own corporate tax rates, averaging an additional 6 percent. Because this state tax is deductible when paying the federal corporate rate, the combined national and subnational rate averages out to 25.77 percent.

A 25 percent federal rate would therefore result in a combined federal and state rate of 29.5 percent, higher than Communist China and higher than the average OECD rate.

OECD average national + subnational rate: 23.51% 

China’s rate: 25% 

U.S. national + subnational rate IF Democrats raise federal rate to 25 percent: 29.5% 

Workers, consumers, and shareholders will bear the burden of an increased corporate tax rate. Such a hike will cause businesses to invest less in the United States and more overseas, resulting in fewer job opportunities and lower wages for American workers:

  • A Treasury Department study estimated that “a country with a 1 percentage point lower tax rate than its competitors attracts 3 percent more capital.” This is because raising the corporate rate makes the United States a less attractive place to invest profits.  
  • According to the Stephen Entin of the Tax Foundation, labor (or workers) bear an estimated 70 percent of the corporate income tax in the form of wages and employment. As Entin notes, 50 percent70 percent, or even 100 percent of the corporate tax is borne by workers. 
  • A 2012 Harvard Business Review piece by Mihir A. Desai notes that raising the corporate tax lands “straight on the back” of the American worker and will see a decline in real wages.  
  • A 2012 paper at the University of Warwick and University of Oxford found that a $1 increase in the corporate tax reduces wages by 92 cents in the long term. This study was conducted by Wiji Arulampalam, Michael P. Devereux, and Giorgia Maffini and studied over 55,000 businesses located in nine European countries over the period 1996-2003. 
  • Even the left-of-center Tax Policy Center estimates that 20 percent of the burden of the corporate income tax is borne by labor.  


Raising the corporate rate to 25 percent, as some Democrats are calling for, would leave America with a rate higher than many foreign competitors and harm American workers, businesses, and investment.

Photo Credit: Matt Johnson

70+ Groups, Activists to Congress: Oppose the PRO Act

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Posted by Tom Hebert on Wednesday, May 5th, 2021, 11:00 AM PERMALINK

ATR has released a letter to Congress from over 70 groups and activists opposed to the "Protecting the Right to Organize" (PRO) Act.

If implemented, the PRO Act would drastically increase the Big Labor's power at the expense of the American worker. 

You can read the letter here or below: 

May 5, 2021

Dear Member of Congress,

We are writing in opposition to the Protecting the Right to Organize (PRO) Act. The PRO Act, introduced by Rep. Bobby Scott (D-Va.), passed the House on March 9, 2021 and is pending Senate consideration.

We oppose the PRO Act because the legislation would harm workers and taxpayers by codifying many of the Obama-era rules and decisions that led to higher unemployment and a stagnant economy. Representatives who vote for this bill are simply helping labor union bosses, their campaign contributors, at the expense of American workers.

For example, one of the Act’s harmful provisions would codify the National Labor Relations Board’s 2015 Browning-Ferris Industries decision. That decision expanded the definition of joint employer and increased liability for many businesses, especially franchises. In fact, the International Franchise Association has found that the expanded joint employer rule costs the franchise sector as much as $33.3 billion annually and has led to 376,000 lost job opportunities. Codifying this NLRB decision would effectively eliminate this business model, putting many employees and small businesses out of work. However, big labor would benefit from this provision because they could unionize these employees more easily.

This bill would also force all private sector workers to pay fees to labor unions, whether they wanted to support them or not. This would effectively invalidate all state Right-to-Work laws and would deny First Amendment rights to these workers. This provision hurts workers because right-to-work laws have benefited workers. From 2008 – 2018, for example, the percentage growth in the number of people employed in right-to-work states was 10.8%, while the percentage for those in forced-unionism states was much lower at 5%. Invalidating these laws would, therefore, hurt workers and employers, but would provide more dues to unions.

Another business model that is severely threatened by this legislation is the gig economy. The PRO Act would codify California’s “ABC” test to determine who is an independent contractor and who is an employee. This test makes it harder for employers to hire independent contractors, but makes it easier for unions to unionize workers. According to the Federal Reserve, about 3 in 10 Americans work in the gig economy, and these workers would be at risk for losing their jobs.

Because the legislation harms workers in order to help labor union bosses, we strongly urge Members of Congress to vote against the PRO Act.


Grover G. Norquist
President, Americans for Tax Reform

James L. Martin
Founder/Chairman, 60 Plus Association

Saulius "Saul" Anuzis
President, 60 Plus Association

Marty Connors
Alabama Center/Right Coalition

Bethany Marcum
CEO, Alaska Policy Forum

Phil Kerpen
President, American Commitment

Lisa B. Nelson
CEO, ALEC Action

Tom Giovanetti
President, Americans for a Strong Economy

Rick Manning
President, Americans for Limited Government

Scot Mussi
President, Arizona Free Enterprise Club

John Palatiello
President, Business Coalition for Fair Competition

Garrett Ballengee
Executive Director, Cardinal Institute for WV Policy

Andrew F. Quinlan
President, Center for Freedom and Prosperity

Russell Brown
President, Center for Independent Employees CEO, RWP Labor, LLC

Timothy Lee
Senior Vice President of Legal and Public Affairs, Center for Individual Freedom

Catrin Wigfall
Policy Fellow, Center of the American Experiment (Minnesota)

Chuck Muth
President, Citizen Outreach

Bob Luebke
Director of Policy, Civitas Institute (North Carolina)

David McIntosh
President, Club for Growth

Russell Hollrah
Executive Director, Coalition to Promote Independent Entrepreneurs

Nathan Benefield
Vice President & COO, Commonwealth Foundation (Pennsylvania)

Trey Kovacs
Policy Analyst, Competitive Enterprise Institute

Matthew Kandrach
President, Consumer Action for a Strong Economy (CASE)

Tom Schatz
President, Council for Citizens Against Government Waste

Katie McAuliffe
Executive Director, Digital Liberty

Grant Callen
President, Empower Mississippi

Brian Minnich
Executive Vice President, Freedom Foundation (California, Oregon, Washington)

Adam Brandon
President, FreedomWorks

Suzi Voyles
Georgia President for Eagle Forum

Victor Riches
President and CEO, Goldwater Institute (Arizona)

J. Scott Moody
CEO, Granite Institute (New Hampshire)

James Taylor
President, The Heartland Institute

Peter J. Ferrara
Senior Fellow, Heartland Institute

Tim Chapman
Executive Director, Heritage Action for America

Mario H. Lopez
President, Hispanic Leadership Fund

Fred Birnbaum
Vice President, Idaho Freedom Foundation and Idaho Freedom Action

Heather R. Higgins
CEO, Independent Women's Voice

Jon Caldara
President, Independence Institute

F. Vincent Vernuccio, J.D.
President, Institute for the American Worker

Chris Ingstad
President, Iowans for Tax Relief

Sal J. Nuzzo
Vice President of Policy, The James Madison Institute (Florida)

Brett Healy
President, The John K. MacIver Institute for Public Policy (Wisconsin)

Becki Gray
Senior Vice President, John Locke Foundation (North Carolina)

Dave Trabert
President, Kansas Policy Institute

Connor Boyack
President, Libertas Institute (Utah)

Michael J. Reitz
Executive Vice President, Mackinac Center for Public Policy (Michigan)

Matthew Gagnon
CEO, Maine Heritage Policy Center

Carl Copeland
Executive Director, Massachusetts Fiscal Alliance

Tim Jones
Chair, Missouri Center-Right Coalition
Fmr. Speaker, Missouri House

Jameson Taylor, Ph.D.
Vice President for Policy, Mississippi Center for Public Policy

Pete Sepp
President, National Taxpayers Union

Bill O'Brien
Co-chair of the New Hampshire Center Right Coalition

Robert Fellner
Policy Director, Nevada Policy Research Institute

Douglas Kellogg
Executive Director, Ohioans for Tax Reform

Tom Hebert                                                                                                          
Executive Director, Open Competition Center

Daniel J Erspamer
CEO, The Pelican Institute for Public Policy (Louisiana)

Lorenzo Montanari
Executive Director, Property Rights Alliance

David Y. Denholm
President, Public Service Research Council

Eli Lehrer
President, R Street Institute

Mike Stenhouse
CEO, Rhode Island Center for Freedom and Prosperity

Paul J. Gessing
President, Rio Grande Foundation (New Mexico)

Bette Grande
CEO, Roughrider Policy Center ND

Karen Kerrigan
President & CEO, Small Business & Entrepreneurship Council

Maureen Blum
Founder and Principal, Strategic Coalitions & Initiatives, LLC

Jeff Kropf
Representative (Ret) Oregon House of Representatives, Oregon Taxpayer Coalition

David Williams
President, Taxpayers Protection Alliance

Lynn Taylor
President, Tertium Quids (Virginia)

Christian N. Braunlich
President, Thomas Jefferson Institute for Public Policy (Virginia)

Carl Bearden
CEO, United for Missouri

Rick Esenberg
President and General Counsel, Wisconsin Institute for Law and Liberty           

Worker Rights Alliance (Washington)

Heather Greenaway
Executive Director, Workforce Fairness Institute

Carol Platt Liebau
President, Yankee Institute for Public Policy (Connecticut)

Photo Credit: Jason Chan

Biden Breaks Small Business Tax Pledge

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Posted by John Kartch on Wednesday, May 5th, 2021, 10:30 AM PERMALINK

During his campaign, President Joe Biden promised the American people that he would not raise taxes on small businesses. Now safely in office, he is violating that promise. His tax plan imposes direct tax increases on small businesses.

The promise was made on Feb. 20, 2020 before a national audience during a Democratic debate hosted by MSNBC:

MSNBC's Hallie Jackson: "I want to ask you about Latinos owning one out of every four new small businesses in the United States. Many of them have benefited from President Trump's tax cuts, and they may be hesitant about new taxes or regulations. Will taxes on their small businesses go up under your administration?"

Biden: "No. Taxes on small businesses won't go up."

Click here or below to see Biden's broken pledge

But Biden is pushing a series of tax increases that raise small business taxes:

1. Biden's increase in the top marginal income tax rate to 39.6 percent will hit small business sole proprietorships, LLCs, partnerships and S-corporations.

Small businesses organized as pass-through firms don’t pay taxes themselves. Instead, the profits of the business “pass through” to the owners who pay individual taxes on their 1040 form. Biden wants to raise the top marginal income tax rate to 39.6 percent which will hit many small businesses.

From the Tax Policy Center:

"In 2017, individuals reported about $1.03 trillion in net income from all types of pass-throughs accounting for 9.3 percent of total AGI reported on individual income tax returns."

According to the Congressional Research Service, "The majority of both corporations and pass-throughs in 2011 had fewer than five employees (55% of C corporations and 64% of pass-throughs). Nearly 99% of both corporations and pass-throughs had fewer than 500 employees, the most common employment-based threshold used by the Small Business Administration (SBA)."

As noted in a Senate Finance Committee report, "in 2016, only 42 percent of net business income in the United States was earned by corporations, down from 78.3 percent in 1980."

2. Biden’s corporate income tax rate hike from 21 percent to 28 percent targets one million small businesses across the country organized as corporations.

As noted by the Small Business Administration Office of Advocacy, there are 31.7 million small businesses in the U.S. Of those, 25.7 million have no employees, while 6 million have employees. Of these 6 million small employers, 16.8 percent, or 1 million of these businesses are classified as c-corporations. The SBA classifies a small employer as any independent business with fewer than 500 employees.

Biden claims his spending plan makes large corporations pay their “fair share.” However, the plan will raise taxes on many small businesses that are structured as corporations.

3. Biden's elimination of stepped up basis: A second death tax on small business.

Biden is targeting small businesses with a second Death Tax: Biden will eliminate step-up in basis. This is a devastating tax increase on small businesses. In this video, you can see a sample of the many times Biden has threatened to eliminate step-up in basis.

Elimination of stepped up basis would impose an automatic capital gains tax at death -- separate from, and in addition to -- the Death Tax.

In a Forbes piece titled "This Biden Tax Hike Hike Will Hit Mom & Pop Hard" tax lawyer Robert W. Wood writes:

Under current tax law, assets that pass directly to your heirs get a step-up in basis for income tax purposes. It doesn’t matter if you pay estate tax when you die or not. For generations, assets held at death get a stepped-up basis—to market value—when you die. Small businesses count on this.

Wood notes:

Biden's proposal would tax an asset's unrealized appreciation at transfer. You mean Junior gets taxed whether or not he sells the business? Essentially, yes. The idea that you could build up your small business and escape death tax and income tax to pass it to your kids is on the chopping block. Biden would levy a tax on unrealized appreciation of assets passed on at death. By taxing the unrealized gain at death, heirs would get hit at the transfer, regardless of whether they sell the asset.

As reported previously by CNBC:

“When someone dies and the asset transfers to an heir, that transfer itself will be a taxable event, and the estate is required to pay taxes on the gains as if they sold the asset,” said Howard Gleckman, senior fellow in the Urban-Brookings Tax Policy Center. 

As reported by Richard Rubin of the Wall Street Journal:

Manufacturers and farmers, who tend to be more asset-rich and cash-poor, are watching closely for those details, concerned they might have to sell illiquid businesses to pay the taxes.

Courtney Silver, president of Ketchie Inc., a family-owned, 25-employee machine shop in Concord, N.C. that started in 1947, said she was concerned about the potential impact.

“I really can’t imagine being hit with that decision of that potential tax implication,” said Ms. Silver, 40 years old, who took over the business when her husband, Bobby Ketchie, died in 2014. “That to me is really hard to wrap my head around.”

It could be challenging for asset owners to figure out their tax basis, which is what they paid for the property and invested in it. That complexity is part of what doomed a similar proposal in the late 1970s, which Congress passed, then delayed, then repealed.

As noted in an Ernst and Young study, if a small business is unable to provide sufficient evidence to prove the cost basis of an asset, then it may set to $0. In other words, tax would be applied to the entire value of taxpayer assets:

“Family-owned businesses may also find it difficult to comply because of problems in determining the decedent’s basis and in valuing the bequeathed assets. It seems likely that these administrative problems could lead to costly disputes between taxpayers and the IRS. Additionally, if sufficient evidence is not available to prove basis, then $0 may be used for tax purposes. This may result in an inappropriately large tax at death.”

To honor his small business tax pledge to the American people, Biden must forego the above tax increases.



Photo Credit: U.S. Secretary of Defense

Massachusetts’ Flavor Ban Fiasco is Costing the State Millions in Tax Revenue

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Posted by Karl Abramson on Tuesday, May 4th, 2021, 5:06 PM PERMALINK

On June 1, 2020, a law signed by Massachusetts Governor Charlie Baker went into effect, prohibiting all flavored tobacco products from being sold in Massachusetts. Since then, cigarette sales in the commonwealth have plummeted as Massachusetts retailers sold 17.7 million fewer cigarette tax stamps between June and November of 2020 than they did in that same time period the previous year.  

While a quick glance at this policy makes it appear successful, Massachusetts’ flavor ban has been a monumental disaster for the state. Neighboring states have more than made up for the decrease in sales in Massachusetts, clear evidence that the flavor ban has done nothing to decrease smoking rates. Rather, Massachusetts has lost tens of millions of dollars in tax revenue while surrounding states like New Hampshire and Rhode Island have seen massive spikes in revenue as a result of Massachusetts’ failed policy. 

report from the New England Convenience Store & Energy Marketers Association provides concrete data on the topic. Here are some of their findings. 

Key Findings

  • Between June 1, 2020, and September 30, 2020, New England states (Massachusetts, Maine, New Hampshire, Vermont, Rhode Island and Connecticut) have sold over 230 million tax stamps for cigarettes. In that same period in 2019, the same states sold 225 million tax stamps. This increase in cigarette tax stamp sales shows that even with Massachusetts’ tobacco flavor ban, cigarette sales have increased in a year where they were expected to decrease by 2% nationally. 

  • Excise tax revenues on cigarettes in Massachusetts are down significantly with estimates showing that “excise tax losses for Massachusetts are over 10 million dollars a month”. 

  • As Massachusetts revenues decrease, New Hampshire’s cigarette excise tax revenues have increased $28 million in 2020 compared to the same period the previous year. 

  • New Hampshire isn’t the only beneficiary of Massachusetts’ flavor ban. Rhode Island’s cigarette excise tax revenue increased by over $12 million in 2020 compared to the same period the previous year with an additional $2 million in sales tax revenue. 

This data clearly illustrates that instituting a flavor ban on tobacco has been a complete and utter disaster for Massachusetts. 89% of legal cigarette sales occur in convenience stores and over 54,000 Massachusetts residents are convenience store employees. The total economic cost of this policy has been massive. 

Not only has the flavor ban harmed businesses, but it will also have unintended consequences on children as well. Massachusetts’ excise tax revenue from cigarettes funds tobacco prevention programs. With tax revenue losses over $10 million a month, there will be considerably less resources available to teach school children in the Bay State the dangers of combustible cigarettes. The flavor ban was aimed at decreasing youth use of tobacco products. Unfortunately, it may very well have a paradoxical effect and lead to an increase in youth smoking.  

Politicians in at least thirteen states are considering flavor bans, many identical to Massachusetts’. In the interests of public health, protecting state tax revenue, and defending small businesses, these lawmakers must drop these senseless initiatives. 

Photo Credit: Kyle Klein Photography

More from Americans for Tax Reform

Biden’s Proposed Capital Gains Tax is More than Double China, OECD Average 

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Posted by Isabelle Morales on Tuesday, May 4th, 2021, 3:37 PM PERMALINK

President Biden has proposed doubling the capital gains tax rate as part of his $4 trillion spending plan. Under Biden, the top capital gains rate will be 48.8 percent after state taxes. This is more double China’s 20 percent capital gains tax rate.

The U.S. currently has a combined capital gains rate of over 29 percent inclusive of the 3.8 percent Obamacare tax and the 5.4 percent state average capital gains rate. Under Biden, this rate would approach 50 percent. This would give the U.S. a capital gains tax that is significantly higher than foreign competitors: 

OECD Simple Average: 18.4%  

OECD Weighted Average: 23.2%  

China's Capital Gains Rate: 20%  

United States Now: 29.2% (20% + 3.8% Obamacare tax + 5.4% state average)  

United States Under Joe Biden: 48.8% (39.6% + 3.8% Obamacare tax + 5.4% state average)  

Under Biden’s plan, taxpayers in California will pay a top capital gains tax rate of 56.7 percent (39.6% + 3.8% + 13.3% California state rate = 56.7%). New Yorkers will pay a top capital gains rate of 52.2%, while New Jersey taxpayers will pay a top capital gains tax rate of 54.14%. 

Not only will Biden’s capital gains tax hike make us uncompetitive, it will also harm the economy, threaten the life savings of Americans, and could even reduce short term revenues.

Capital gains taxes act as a barrier to job creation, wage growth, and economic growth. This tax imposes double taxation on corporate income – first, businesses pay the corporate income tax on their earnings. Second, the investor pays the capital gains tax on dividends received or stocks when they are sold. This double taxation discourages savings, suppresses productivity, and discourages investment. Ultimately, this tax hike will threaten business creation, business expansion, entrepreneurship, and jobs and wages.

Biden’s capital gains tax hike could also reduce retirement savings. As part of his tax hike, Biden would double the tax rate on carried interest capital gains. This will harm private equity investors including the 165 public pension funds representing 20 million public sector workers.

Biden’s tax hikes could even reduce federal revenues in the short term. Because the tax only applies when a taxpayer sells the asset, a high capital gains rate discourages individuals from selling in order to delay having to pay the tax.  Historically, when the capital gains tax was cut, revenue increased. When the capital gains tax is low, investment increases, stock prices increase, and revenue goes up. The inverse is of course true.  

Democrats used to oppose a high capital gains tax. As recently as 2012,  Senator Chuck Schumer (D-NY) rejected doubling the capital gains tax rate to 39.6 percent. As Schumer noted: 

“Now, if you are returning the top income rate to Clinton-era levels, as I have proposed, I do think it is too much to treat capital gains the same as ordinary income,” Mr. Schumer said. “We don’t need a 39.6% rate on capital gains.”

Photo Credit: Gage Skidmore