American Rescue Plan Blocks Tax Cuts, Multiple States File Lawsuits Against Biden Administration
The $1.9 trillion COVID-19 spending plan enacted by President Joe Biden includes an additional $350 billion to states and localities on top of the hundreds of billions they have already received from other packages. Unfortunately for taxpayers, Senate Democrats found a way to make this blue state bailout even worse. The spending plan, disingenuously named the American Rescue Plan Act (ARPA), contains an unconstitutional amendment that attempts to scare states out of providing much-needed tax relief. The amendment states:
“A State or territory shall not use the funds provided under this section or transferred pursuant to section 603(c)(4) to either directly or indirectly offset a reduction in the net tax revenue of such State or territory resulting from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase.”
In response to this unprecedented infringement on state sovereignty, which is partially an attempt to protect Democrat-run states from competition with low-tax states, 21 state attorneys general sent a joint letter to U.S. Treasury Secretary Janet Yellen in March seeking confirmation that ARPA does not strip states of their well-established sovereign authority to set their own tax policy.
"Absent a more sensible interpretation from your department, this provision would amount to an unprecedented and unconstitutional intrusion on the separate sovereignty of the States through federal usurpation of essentially one half of the State’s fiscal ledgers," the AGs wrote in their joint letter to Yellen. "We ask that you confirm that the American Rescue Plan Act does not prohibit States from generally providing tax relief through the kinds of measures listed and discussed above and other, similar measures, but at most precludes express use of the funds provided under the Act for direct tax cuts rather than for the purposes specified by the Act."
In response to the letter, Secretary Yellen wrote that Congress does have the authority to place conditions on how states use federal funding. Having deemed this response from Yellen to be insufficient, multiple state attorneys general have filed lawsuits.
“We will now take the final steps necessary to meet the Biden administration in court,” said West Virginia Attorney General Patrick Morrisey on March 24. “West Virginia cannot accept the statute’s ambiguity, and given the administration’s failure to correct this problem, we are left with no option other than seeking a court order to protect West Virginia’s interests.”
A lawsuit was filed by Morrisey and 12 other attorneys general on March 31. A similar lawsuit had already been filed by Arizona Attorney General Mark Brnovich.
“Arizona needs clarity on the legality and meaning of this provision,” Attorney General Brnovich said. “Policymakers in the state have real and present interest in tax policy which could potentially decrease net tax revenue against some baselines. Those policymakers need to know how their decisions could interact with their use of funds under the Act.”
Prior to Attorney General Brnovich’s action, Ohio Attorney General Dave Yost had filed a similar lawsuit against the Biden administration as well.
“Ohio’s argument with the federal government is not about cutting taxes; it is about whether the federal government may use its disbursal of funds to dictate state policy — about this or any other subject that is not the province of the federal government under the Constitution,” Attorney General Yost explained in a column for National Review. “The Supreme Court has held that, when the federal government wants to attach strings to the money it sends back to the states, a few thin strings are okay; coercion is not.”
Ironically, this unconstitutional restriction on state tax cuts inhibits ARPA from actually achieving its intended purpose: helping millions of Americans recover from the pandemic. If Democrats in Congress really wanted a strong and speedy economic recovery, they would allow and encourage states to provide much-needed tax relief to individual taxpayers, families, and businesses. It’s telling that congressional Democrats sought to prevent states from providing tax relief, while green lighting states to raise taxes further despite being showered with federal cash. In fact, lawmakers in Hawaii, Maine, and other blue states are pushing forward right now with tax increases despite state coffers being awash in federal cash.
Senator Mike Braun (R-Ind.) and Congressman Dan Bishop (R-N.C.) have filed bills that would repeal the unconstitutional amendment to ARPA blocking state tax cuts. Democrats are unlikely to support it, however, so it will take a court ruling to remove this federal restriction. In the meantime, expect lawmakers in many states to proceed as though this unconstitutional provision, added at the last minute at the request of Senator Joe Manchin, will ultimately be struck down by a judge.
Photo Credit: John Brighenti
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California Now Bans State Employee Travel To 17 Red States, But Thousands Of California Families Are Moving To Them Every Year
California’s ban on government employee business travel to certain Republican-led states expanded even further this week. With Attorney General Rob Bonta’s addition of Florida, Arkansas, West Virginia, North Dakota, and Montana to the California travel blacklist, the Golden State now forbids state employees from visiting a total of 17 states on official business, barring special circumstances.
Bonta’s decision to expand the list comes on the heels of laws passed in those five states related to the participation of transgender students in school sports. Bonta’s predecessor, now Health and Human Services Secretary Xavier Becerra, dramatically grew the list during his four years in office in response to similar legislation.
Despite Attorney General Bonta’s assertions of “an unprecedented wave of bigotry and discrimination” in the 17 listed states, Californians themselves seem to have a different perspective. IRS migration data reveals that Californians are flocking in droves to the 17 states where California state travel is restricted. Between 2018 and 2019, the state of California had a net loss of a whopping 75,117 people to the 17 states on California’s blacklist. Those residents took $4,722,021,000 in annual income with them.
That continues a years-long trend of outmigration from California to red states with lower tax burdens, a reduced cost of living, and a better tax and regulatory climate. In fact, several of the states on the blacklist recently reformed their tax codes. Florida, one of nine states with no income tax, reduced its commercial rent tax from 5.5% to 2% in April, creating an even more competitive business environment for the state, particularly in comparison to high-tax, high-regulation states like California. Between 2018 and 2019, the Sunshine State saw a net of 4,811 Californians migrate to its shores, hauling over a billion in annual income.
In North Carolina, where the California embargo on state business travel is stretching into its fifth year, 4,648 ex-Californians on net and $268 million in annual income flowed from the west coast to the Tar Heel State between 2018 and 2019. And those numbers seem likely to rise even further over the next few years if the new budget recently approved by the North Carolina Senate becomes law.
The North Carolina Senate budget, passed on June 24, would reduce the state’s flat personal income tax from 5.25% to 3.99%. For California residents in the top marginal income tax bracket, moving to North Carolina would lower their state income tax rate by a striking ten percentage points. North Carolina’s increasingly business-friendly environment may well attract thousands more Californians in the coming years who are weary of their state’s overbearing tax system and stifling regulations.
Meanwhile, Republican legislators in Montana and Idaho, two of the states that Attorney General Bonta added to the blacklist this week, reduced the top marginal tax rate in each state from 6.9% to 6.5%. A net of nearly 14,000 Californians made Idaho their home between 2018 and 2019 – a remarkable figure for the 13th least populous state in the country.
Former Attorney General Becerra added Tennessee to the government travel ban in 2016, when it passed a law permitting mental health counselors to reject patients based on religious beliefs. But a net 5,829 Californians still took their $376 million in annual income to start a life in the Volunteer State between 2018 and 2019. Tennessee has developed an attractive tax climate, becoming a true no-income tax state last December after its investment income tax was fully phased out.
Texas is also among the blacklisted states that recently enacted pro-growth tax reform. Republican Governor Greg Abbott signed a law in 2019 to limit the growth of property tax burdens, requiring localities to obtain voter approval before raising property taxes more than 3.5%. Tellingly, the state welcomed a net 33,274 ex-Californians and their $1.58 billion in annual income between 2018 and 2019.
These migration outflows from California are part of a broader, decade-long trend of Californians leaving for states with friendlier tax and regulatory climates. The Democratic supermajorities in Sacramento show no signs of abating the deluge of progressive policies that continue to drive employers and families out of the state. It’s why California is set to lose a congressional seat for the first time in history next year. Though Attorney General Bonta can try to weaponize his vast political power against Republican-led states through a ban on government travel, the real cost will be paid by a declining California, as families take their wealth and their livelihoods to freer states.
Below is a complete list of net migration outflows from California to the 17 states to which state business travel is currently prohibited, calculated using 2018-2019 IRS migration data.
Florida
Net population outflow: 4,811
Net annual income outflow: $1,195,069,000
West Virginia
Net population outflow: 125
Net annual income outflow: $17,944,000
North Dakota
Net population outflow: 282
Net annual income outflow: $3,409,000
Arkansas
Net population outflow: 1,668
Net annual income outflow: $46,470,000
Montana
Net population outflow: 2,175
Net annual income outflow: $135,726,000
Texas
Net population outflow: 33,274
Net annual income outflow: $1,581,624,000
Alabama
Net population outflow: 1,101
Net annual income outflow: $62,818,000
Idaho
Net population outflow: 13,942
Net annual income outflow: $734,470,000
Iowa
Net population outflow: 327
Net annual income outflow: $15,040,000
Oklahoma
Net population outflow: 2,187
Net annual income outflow: $27,860,000
South Carolina
Net population outflow: 2,192
Net annual income outflow: $133,094,000
South Dakota
Net population outflow: 691
Net annual income outflow: $51,494,000
Kentucky
Net population outflow: 973
Net annual income outflow: $31,416,000
North Carolina
Net population outflow: 4,648
Net annual income outflow: $268,428,000
Kansas
Net population outflow: 608
Net annual income outflow: $20,546,000
Mississippi
Net population outflow: 284
Net annual income outflow: $20,377,000
Tennessee
Net population outflow: 5,829
Net annual income outflow: $376,236,000
Photo Credit: Devin Cook
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ATR Leads Coalition Urging PMTA Enforcement Extension
Americans for Tax Reform today led a coalition of 23 organizations urging the Food & Drug Administration (FDA) to follow the common-sense recommendations of the Small Business Administration and seek a court order to allow vaping manufacturers to keep products on the market while their Pre Market Tobacco Authorizations (PMTA) reviews are in progress. The FDA has acknowledged it is unlikely to complete all authorizations by the September 9 deadline, meaning thousands of businesses, who did the right thing, and completed all legal requirements, would be prohibited from selling their life-saving products merely due to FDA delays in processing their application.
The letter acknowledged that FDA has promised to exercise discretion in enforcement, but asserted that, “This does not provide the degree of certainty necessary for businesses who have complied with all relevant regulations and have not received authorization due to processing delays by FDA. If an extension is not granted, there could be devastating consequences for businesses, particularly small businesses. Furthermore, any potential reduction in the supply of safe alternatives to tobacco could have a negative impact on public health across the United States and lead to an increase in tobacco-related mortality.”
The letter continued, “There is no final rule in place governing the PMTA process and therefore it is possible that a significant number of products may be removed from the market following the deadline. Millions of consumers who depend on ENDS products for their health and thousands of businesses who depend on these products for their livelihood are threatened by this needless bureaucratic uncertainty. The only sure way to avert a disastrous outcome is for the FDA to obtain a court order allowing it to extend the existing moratorium on enforcement by another year.”
“The vaping industry,” the letter notes, “unlike many others, was created by small businesses, and these same small businesses continue to drive innovation in the market. Without these entrepreneurs, the vape industry will be consolidated into a few large corporations, causing prices to rise and consumer choice to decrease.”
The letter concluded by drawing attention to the science on vaping, which shows e-cigarettes to be 95% safer than combustible cigarettes and two to four times as effective at helping smokers quit than traditional nicotine replacement therapies. With the potential to save 6.6 million American lives, according to an analysis from Georgetown University Medical Center, and reduce socioeconomic disparities in healthcare, adult access to vaping must be preserved.
The full letter and list of signatories can be read here.
Photo Credit: ABC News
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KEY VOTE: ATR Urges “NO” Vote on “INVEST Act” (H.R. 3684)
The House of Representatives is expected to vote tomorrow on the “Investing in a New Vision for the Environment and Surface Transportation in America (INVEST in America) Act.”
Americans for Tax Reform urges lawmakers to oppose the INVEST ACT and vote “No.”
House Democrats have taken what is normally a strongly bipartisan surface transportation reauthorization process and turned it into a grab bag of wasteful spending on progressive priorities.
This bill would spend $547 billion over 5 years, a 34% increase above current baseline spending while also bringing back earmarks for the first time since 2011.
Section 107 of the bill lists 1,473 “Member-designated projects” that would receive $5.7 billion in additional funding. This is the exact type of wasteful spending that resulted in public outrage from voters and led to the House moratorium on earmarks in 2011.
This legislation is filled with provisions unrelated to infrastructure meant to be a down payment on President Biden’s Leftist climate agenda.
Democrats included roughly $20 billion on climate provisions, $8.4 billion for a Carbon Pollution Reduction Program and $4 billion for the “Clean Corridors program” to use taxpayer money building electric vehicle charging stations for wealthy EV owners.
Democrats also include several new burdensome regulations into this bill. Section 8202 would “rescind any special permit or approval for the transport of liquefied natural gas (LNG) by rail tank car” designed to make it more difficult for natural gas to be transported. Section 4301 would require limo drivers to have a new commercial driver’s license (CDL) in order for drivers to work.
House Democrats even managed to sneak a few “woke” provisions into their infrastructure bill, including $20 million for “Implicit bias research and training grants” for institutions of higher learning. Here it is straight from the text:
Section 3010: “Establishes a discretionary grant program available to institutions of higher education for research, development, technology transfer, and training activities in the operation or establishment of an implicit bias training program as it relates to racial profiling at traffic stops. Authorizes $20 million annually to be appropriated for the program out of the general fund.
Congress should not be engaged in such gross level of wasteful spending at a time when inflation is a growing national concern. Democrats have simply slapped the word "infrastructure" onto their progressive tax and spend agenda in hopes of tricking taxpayers.
Americans for Tax Reform urges all Members to oppose the INVEST Act and vote NO.
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FTC vs. Facebook Dismissal Does Not Justify Weaponizing Antitrust Law
On Monday, U.S. District Judge James Boasberg in Washington dismissed the Federal Trade Commission’s complaint against Facebook, alleging that the technology company abuses its monopoly power to squash its competitors. The FTC has until July 29 to file an amended complaint.
Boasberg, appointed by former President Obama, dismissed the complaint because the FTC had no evidence to prove its assertion that Facebook had in excess of 60 percent of the market the FTC calls “personal social networking services.”
In his dismissal, Boasberg says: “The FTC’s complaint says almost nothing concrete on the key question of how much power Facebook actually had, and still has, in a properly defined antitrust product market. It is almost as if the agency expects the court to simply nod to the conventional wisdom that Facebook is a monopolist.”
In response, some lawmakers seized on the dismissal as justification for a drastic rewrite of antitrust law. Senator Amy Klobuchar (D-Minn.) tweeted that the dismissal is proof that “our antitrust laws need to be updated after years of bad precedent.” Several other lawmakers renewed the call for weaponizing antitrust law in the face of the dismissal.
Translation: “the government lost an antitrust case, so we need to rewrite antitrust law to make the government win every time.”
Klobuchar’s “Competition and Antitrust Law Enforcement Act” would flip the burden of proof in certain monopolization cases from the plaintiff to the defendant, meaning that courts would presume companies guilty of alleged anticompetitive conduct until proven innocent.
The bill also relieves antitrust enforcers from defining the relevant market a company is ostensibly monopolizing. The FTC’s paper-thin case couldn’t properly define the social media market that Facebook supposedly dominates, which is probably why Klobuchar wants to release antitrust enforcers from having to do so.
Worst of all, none of the left’s antitrust plans address real and legitimate conservative anger over Big Tech censorship. They would simply give Biden bureaucrats sweeping new power to pick economic winners and losers to the detriment of American shoppers.
The dismissal of the FTC’s complaint against Facebook gives us a few takeaways.
First, the FTC’s complaint was dismissed because enforcers could not provide evidence for its claim that Facebook dominates 60 percent of the social media market. This is not evidence that antitrust law needs to be rewritten, it is evidence that the FTC was unprepared for court.
Second, Article III judges are a huge obstacle to the left’s plot to rewrite antitrust law, even judges appointed by liberal presidents. This is a big reason why the left wants to shift crucial antitrust enforcement decisions from neutral judges to partisan bureaucrats.
Third, the dismissal proves that antitrust law is working as intended, not broken. Consumer welfare remains the priority when assessing alleged anticompetitive conduct. Breakups are a tool of antitrust enforcement, not a goal. It should be difficult for the government to break up companies, especially considering the acquisitions the FTC seeks to undo happened with FTC approval almost a decade ago.
Ultimately, the FTC’s complaint against Facebook fell apart because enforcers could not get their facts straight, not because antitrust law is broken. Conservatives should continue to reject efforts to weaponize antitrust law for Democrat political gain.
Three States Pass Historic Tax Cuts on the Same Day
Republican-run states provide tax relief while Biden and congressional Democrats try to impose enormous tax increases
June 24, 2021 was a significant date in state tax reform history. On that day Arizona, New Hampshire, and North Carolina took monumental steps towards the enactment of pro-growth income tax cuts.
ARIZONA ENACTS 2.5% FLAT TAX
Arizona lawmakers, in a party line vote, gave final passage to a sweeping tax relief package that will make the state’s tax code among the nation’s most competitive. Once fully implemented, this package, which Gov. Doug Ducey (R) is eager to sign into law, will leave an additional $1.9 billion a year in the pockets of individual taxpayers, families, and small businesses across the Grand Canyon State.
Under the Republican tax package, Arizona’s four income tax brackets, which range from 2.59% to 4.5%, (and effective fifth bracket with a rate of 8% when accounting for Proposition 208’s 3.5% surcharge on certain income) will be streamlined down to a flat rate of 2.5% (with an aggregate cap of 4.5% to mitigate some to harm inflicted by the Prop. 208 “surcharge”). Arizona’s new flat rate will be lower than Arizona’s current bottom rate of 2.59% and the lowest flat rate in the nation.
“Arizona passed a historic and game changing budget that reduces taxes for all taxpayers and moves Arizona to a flat tax on the road to phasing out the entire state income tax,” said Grover Norquist, president of Americans for Tax Reform. “Already there are eight states with no state income tax. Governor Doug Ducey, bill sponsors Senator J.D. Mesnard and Majority Leader Ben Toma, Senate President Pro Tempore Vince Leach, House Appropriations Chair Regina Cobb, House Ways & Means Chair Shawnna Bolick, and many others worked together to create a brighter future for Arizona.”
NEW HAMPSHIRE VOTES TO BECOME A TRUE NO-INCOME-TAX STATE
Also on June 24, legislators passed and sent a budget to the desk of Gov. Chris Sununu (R) that will finally make New Hampshire a true no-income-tax state. While New Hampshire has long avoided taxing wage income, its 5% tax on interest & dividend income has required it to appear with an asterisk by its name when listed as a no-income-tax state.
This provision of the Republican budget will provide much-needed relief to senior living off of investment income and allow New Hampshire to better compete with the other eight no income tax states.
“New Hampshire becomes the nation’s ninth true no-income-tax state fewer than six months after Tennessee became the eighth. States led by smart governors and legislators are now competing to see who will become no-income-tax state number ten,” said Norquist.
NORTH CAROLINA PHASES OUT CORPORATE TAX AND CUTS FLAT INCOME TAX RATE FROM 5.25% to 3.99%
The same day that New Hampshire and Arizona Republicans passed the aforementioned tax reform packages, North Carolina state senators approved their new budget, which includes a new round of income tax relief, with a bipartisan, veto-proof majority. The North Carolina Senate budget cuts the state’s flat income tax rate from 5.25% to 3.99%.
At 2.5%, North Carolina’s corporate income tax, which used to be the highest in the southeastern U.S., is now the lowest among states that impose the tax thanks to tax reform enacted in 2013. The North Carolina Senate budget phases out the corporate income tax entirely by 2028.
“By passing these historic tax relief packages Republican legislators are taking the tax codes of these politically and economically crucial purple states in the opposite direction from Biden and congressional Democrats are seeking to take the federal tax climate,” said Norquist. “While Democrats seek to push the U.S. corporate rate beyond that of China and European competitors, confiscate more household savings and investment income through ending stepped up basis, and impose massive income tax hikes that will crush small businesses, Republicans are using their control of state governments to demonstrate that there is another, better way.”
ATR Submits Comments Urging FTC To Keep Bipartisan Limits On Antitrust Enforcement Authority
Americans for Tax Reform, the Open Competition Center, and Digital Liberty today submitted comments to Federal Trade Commission Chair Lina Khan urging the Commission to leave a 2015 bipartisan agreement in place that limits the FTC’s antitrust enforcement authority.
Section 5 of the FTC Act outlaws “unfair methods of competition or in commerce” (UMC), but does not list specific business practices that fall under the UMC definition. Instead, the statute allows the FTC to make that determination on a case-by-case basis.
The bipartisan 2015 statement limits the FTC’s “standalone” UMC authority in three crucial ways when addressing anticompetitive conduct that violates the spirit, if not the letter, of the Sherman and Clayton Acts.
Revoking this important agreement will send two troubling signals. First, that the FTC is moving towards a European-style antitrust approach that props up inefficient competitors and disregards consumer harm. Second, that the FTC is actively working to shed all limits on its authority when it comes to antitrust enforcement.
For these reasons, ATR, OCC, and Digital Liberty urge the FTC to leave the 2015 bipartisan statement of principles in place.
You can read the full letter here or below.
The Honorable Lina Khan
Chair, Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580
Re: Comment on the Federal Trade Commission’s Possible Revocation of the “Statement of Enforcement Principles Regarding ‘Unfair Methods of Competition’ Under Section 5 of the FTC Act”
Dear Chair Khan,
We write to express concern over the Federal Trade Commission’s vote to revoke the “Statement of Enforcement Principles Regarding ‘Unfair Methods of Competition’ Under Section 5 of the FTC Act” at the July 1, 2021 Open Commission Meeting. If the Commission rescinds this bipartisan agreement, it would be a significant blow to consumer welfare and will hinder our economic growth as we recover from the COVID-19 pandemic.
Section 5 of the Federal Trade Commission Act outlaws “unfair methods of competition or in commerce.” Section 5 does not list specific business practices that qualify as unfair methods of competition (UMC), instead leaving that determination to the FTC to evaluate on a case-by-case basis.
The Statement of Enforcement Principles is designed to limit the FTC’s “standalone” UMC authority when addressing anticompetitive conduct outside of the scope of the Sherman or Clayton Acts. The agreement was approved by the FTC in 2015 in a 4-1 vote, with all three Democratic commissioners voting in support.
The agreement articulated the limits on the FTC’s UMC authority in three ways.
First, the agreement emphasized the agency’s commitment to prioritizing consumer welfare when applying antitrust law. The long-held consumer welfare standard has anchored antitrust law for over four decades. Under the standard, enforcement action is only taken if consumers are being harmed through tangible effects like higher prices, decreased quality, or lack of choice. The consumer welfare standard prevents judges and regulators from using antitrust law as a vehicle to advance unrelated social priorities.
Second, the statement said that Section 5 enforcement should target “harm to competition or the competitive process,” but must consider whether there is a procompetitive justification for the conduct in question and whether it results in a countervailing benefit to consumers or competition. This is a key element of antitrust law under the consumer welfare standard, which protects the competitive process and consumers instead of protecting individual competitors in a marketplace. Robust competition among companies delivers better prices and better choices for all Americans.
Third, the agreement states that the FTC would be less likely to challenge business conduct as an unfair method of competition if “…enforcement of the Sherman or Clayton Act is sufficient to address the competitive harm arising from the act or practice.” This is an important limit that ensures that the FTC exercises its standalone UMC authority only when business conduct violates the spirit, if not the letter, of the Sherman or Clayton Acts.
Rescinding this bipartisan agreement would send two troubling signals. First, that the FTC is moving towards a European-style antitrust approach that props up inefficient competitors and disregards consumer harm. Second, that the FTC is actively working to shed all limits on its authority when it comes to antitrust enforcement.
Taken together, these changes will hamper economic growth as we attempt to rebound from the pandemic. Companies fearful of predatory antitrust litigation would pull their punches when competing with rivals, reducing choice and access to goods and services for shoppers across the country. Bureaucrats would win, American shoppers would lose.
For these reasons, we urge the FTC to leave the 2015 Statement of Section 5 Enforcement Principles in place.
Sincerely,
Grover Norquist
President, Americans for Tax Reform
Tom Hebert
Executive Director, Open Competition Center
Katie McAuliffe
Executive Director, Digital Liberty
ATR Signs Coalition Opposing BRIDGE Act
Americans For Tax Reform joined a coalition opposing the BRIDGE Act. This bill would increase the size and scope of the federal government negatively affecting broadband deployment, while also limiting the constitutionally delegated power of states over their own subdivisions.
You can read the full letter below or click HERE for a pdf.
Dear Senators,We, the undersigned organizations representing millions of taxpayers and consumers across the nation, ask you to oppose the BRIDGE Act as introduced by Sens. Michael Bennet (D-Colo.), Rob Portman (R-Ohio), and Angus King (I-Maine). The bill would increase the size and scope of the federal government for broadband deployment, while limiting the constitutionally delegated power of states. Any lawmaker who values limited government and the free market should stand up against this proposal.
Internet speeds have been getting faster and more affordable across the nation. The surest way to risk stifling innovation and suppressing investment is with the rate regulations contained in this legislation. Forcing companies to provide a high-quality service for a government mandated low price will decrease supply, as it will become far less affordable for companies to do so. It will also disincentivize the type of risk that has led to some of the greatest innovations in the country. Rate regulation in this – or any other – industry ignores the fundamentals of the free market.
Whether or not localities may create their own government-run networks is an issue that should be left to state and municipal governments. However, the BRIDGE Act pre-empts state laws that prohibit municipal broadband networks. Because these networks represent locally built infrastructure, they are creatures of state, not federal law. Attempting to dictate local construction policies is nothing short of an unconstitutional overreach from Congress. The federal government should not interfere with local policy in this way.
While the intent to deliver high speed service to unserved areas to close the digital divide is a noble one, the BRIDGE Act would fail to meet even that need. The bill only actually mandates 50 percent of its disbursements be used for unserved areas. The rest is designated for areas that might have high speed internet, but whose upload and download speeds aren’t symmetrical. To give any sort of priority to these areas over the unserved ones is a gross oversight and will leave in place the same inequalities that already existed.
The bill will also create confusion for private networks that are not run by the government at the municipal level. It requires a standard of speed for all new networks, but allows states to put requirements on top of it. This will create a patchwork of regulations that will be impossible to comply with in any affordable manner. The irony is that the BRIDGE Act allows states to regulate national networks, but prohibits them from setting reasonable guidelines when it comes to networks built exclusively within their borders. It fundamentally misunderstands the Constitution and our federalist system.
For these reasons, and more, we urge you to oppose the BRIDGE Act. Closing the digital divide is a worthy goal and we hope you will pursue solutions that empower the free market to innovate and provide high-speed service.
Sincerely,
David Williams
President
Taxpayers Protection Alliance
Andrew LangerPresident
Institute for Liberty
Phil Kerpen
President
American Commitment
Grover NorquistPresident
Americans for Tax Reform
Brandon ArnoldExecutive VP
National Taxpayers Union
Garrett Bess
Vice President
Heritage Action for America
Jessica Melugin
Director, Center for Technology and Innovation
Competitive Enterprise Institute
Tom Schatz
President
Council for Citizens Against Government WasteKatie McAuliffeExecutive DirectorDigital Liberty
Annette Thompson Meeks
CEO
Freedom Foundation of Minnesota
Paul Gessing
President
Rio Grande Foundation
Mike Stenhouse
CEO
Rhode Island Center for Freedom and Prosperity
Jim Waters
President/CEO
Bluegrass Institute for Public Policy Solutions
Brian Balfour
Senior VP of ResearchJohn Locke Foundation
Adam BrandonPresidentFreedomWorks
Gerard ScimecaVice PresidentCASE
Jeffrey Mazzella
President
Center for Individual FreedomAndrea Castillo O'Sullivan
Director, Center for Technology and Innovation
The James Madison InstituteMichael Melendez
Vice President of Policy and StrategyLibertas Institute
Bartlett Cleland
Executive DirectorInnovation Economy Alliance
Heather R. Higgins
CEO
Independent Women’s Voice
Ellen WeaverPresident/CEO
Palmetto Promise InstituteMario H. Lopez
President
Hispanic Leadership Fund
Photo Credit: Jordan Harrison
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Ohio Passes Largest Personal Income Tax Cut in State’s History
The final biennial budget in Ohio includes a $1.6 billion reduction in the state income tax – the biggest income tax cut in a two-year budget in state history.
Ohio Republicans crafted a budget that eliminates two income tax brackets over 4%, and makes the top rate 3.99%. The state has eliminated multiple tax brackets over the past two budget cycles, heading towards a flat tax.
The budget also raises the minimum income that is subject to income tax to $25,000 per year. Moving forward, anyone making less than $25,000 will owe no income taxes in Ohio, and all taxpayers will pay zero tax on their first $24,999 in earnings.
All Ohio taxpayers will benefit from a 3% across-the-board reduction in income taxes.
“Ohio Republicans have earned thanks from all taxpayers for passing this significant tax relief. Families and businesses will keep more of their hard-earned money, have a simpler tax code, and get needed protections from cities taxing them when they don’t live or work in the city. On top of that, parents will enjoy more school choice," said Americans for Tax Reform President Grover Norquist.
On top of the income tax savings, the Senate “repealed sales taxes on hiring and recruiting companies that work to fill job openings around the state.”
The Senate and House compromised on a 3% income tax cut, the initial Senate proposal was 5%, and House 2%.
These tax reforms are a massive win for Ohio, and will make the state much more competitive in attracting new workers, new investment, and new jobs. In particular, Senate Republicans under Senate President Matt Huffman, and previous Senate President Larry Obhof, have led on tax reforms, and pro-worker occupational licensing reform, and regulatory reforms, that also boost the state’s economy. Representatives Bill Roemer, Derek Merrin, and more have championed tax relief to make the state more competitive and friendly toward job-creation.
Given Ohio’s many local taxing jurisdictions, the state legislature’s strong example is doubly important for driving growth in the Buckeye State.
The budget includes protections for Ohioans who are working from home, so they don’t end up paying taxes to cities where they no longer work. Taxpayers can get a refund, at least on 2021 taxes that have been withheld. Addressing the issue of remote taxation is vital at the state and local level, to keep governments from reaching outside their jurisdictions to tax workers.
The new budget does include changes to the education aid formula which taxpayers will need to watch closely to ensure excessive spending levels do not result.
Back on the positive side, the budget expands school choice options, adding ESAs, and offers a small tax credit for private school tuition, further empowering Ohio families, not teachers’ unions, to guide their child’s education.
A measure to block local governments from running broadband networks was removed, one of the few negatives in this budget. Instead, following Governor DeWine’s push for more spending on broadband expansion, $250 million will be unnecessarily spent by the state on broadband. The reality is, the private sector is spending trillions of dollars to expand broadband access, and government interference is simply not required.
Republican legislators who have championed relief for Ohio taxpayers deserve immense credit for this successful budget. The state continues to advance reforms that make it ready to compete with its neighbors, create jobs, retain talent, a grow.
“With the Governor’s signature, the Buckeye State will become a better place to raise a family, and a more attractive place for businesses and workers," added Norquist.
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City-Run Network Would Leave Knoxville Taxpayers Holding the Bag
The Knoxville City Council will be voting this evening on whether to put tax and ratepayers on the hook for the Knoxville Utility Board’s (KUB) government-run broadband plan. As plenty of cities and even a few states have learned the hard way over the years, doing so would be a terrible mistake.
Knoxville does not need to look very far to see a current example of a Government-Owned Network (GON) failing to deliver on promises and turning out to be a terrible deal for taxpayers.
KentuckyWired, a 3,000-mile GON that is currently being constructed in the Bluegrass State, was sold to taxpayers as a $350 million project that would be complete by the spring of 2016. Unfortunately for Kentuckians, those projections could not have been more wrong.
More than five years past the supposed completion date, fiber construction for KentuckyWired is still “in progress” in some parts of the state and a report from the state auditor has concluded that taxpayers will end up wasting a whopping $1.5 billion on this redundant “government owned network” over its 30-year life.
KentuckyWired is not the exception. It is the rule. Where GONs have not failed outright, they have required massive additional subsidies from taxpayers and ratepayers. This is because government entities lack the experience and expertise needed to build out and maintain a state-of-the-art broadband network.
After the initial construction cost, frequent and expensive technology upgrades will be necessary in order for a GON to remain current in such an innovative field. This fact is something politicians often forget to mention.
If underestimating the true costs is not problematic enough, government entities also grossly overestimate the demand. Despite having access to a government network, most consumers choose to remain with their trusted private sector provider.
Underestimated costs and overestimated demand is a recipe for a financial gap that taxpayers and ratepayers will always be forced to fill. Even in the very early stages of the KUB’s plan, it is clear that its proposed GON will face the same fate.
The Knoxville Utility Board’s own business plan projects that its fiber division will rack up $123 million in losses over the first 10 years alone, which is why the Board is planning to subsidize it with its electric operation. This will leave all ratepayers – including those that do not subscribe to the GON – at risk for future rate increases.
Adding insult to injury, a consumer survey conducted by the Board finds that there is almost no legitimate demand for its proposed GON. A May 2021 report by Gillan Associates, An Analysis of the Fiber-to-the-Home Broadband Business Plan of the Knoxville Utility Board, summarizes key findings of the survey:
“There is no evidence of widespread dissatisfaction with existing providers. On a scale of 1 to 10, only 11% of Comcast subscribers and 8% of AT&T customers rated the service as a four or less… Even if unsure of their speeds, a majority think their service is fast enough…Only 1% of subscribers choose 1 Gbps service, even though it is broadly available.”
One of the arguments for this largely duplicative network is that it would allegedly expand broadband access into unserved communities. While expanding broadband access to those who do not have it is a laudable goal, the private sector, which has a track record of success, is already working on it.
Comcast, for example, has proposed to expand gigabit availability to every single unserved home and business in KUB’s footprint in Knox, Grainger, and Union County. Comcast would build and operate the network as well as provide most of the funding and take on the risk. This approach would make more efficient use of tax dollars and take ratepayers off the hook for future increases.
The private sector has invested $1.7 trillion over the years into the reliable networks we have today and is eager to invest more. Government simply needs to get out of the way. Wasting taxpayer dollars on a redundant network is useless and will only lead to more problems.
Photo Credit: TaxCredits.net
Banning Flavored Vapes in Canada Will Increase Cigarette Smoking and Harm Small Businesses
Earlier today, Americans for Tax Reform wrote to Health Canada, urging the agency to not move forward with a proposed ban on flavored vaping products. Tim Andrews, ATR’s Director of Consumer Issues, wrote the letter, drawing the Canadian government’s attention to real-world evidence showing the damage that flavor prohibitions cause to small businesses and the public health. The full letter can be read below.
Dear Minister Hajdu,
On behalf of Americans for Tax Reform (ATR), a non-profit organization which advocates in the interests of taxpayers and consumers throughout the United States, we wish to draw your attention to recent evidence from United States directly relevant to your decision to ban flavored reduced risk tobacco alternatives such as e-cigarettes in Canada. In the interests of public health, it is imperative that the prohibition on flavored vaping products is not enacted.
As demonstrated in a study coordinated by Yale University and published last week in the world’s leading pediatric journal, JAMA Pediatrics, empirical data now demonstrates conclusively that flavor bans, such as the one under, consideration have one effect only – drastically increasing the rate at which young people will smoke deadly combustible cigarettes. When a ban on flavored vaping products was introduced in San Francisco, California, youth smoking rates doubled, demonstrating that this policy is a clear public health disaster, and should serve as a cautionary tale to you as you consider enacting a similar measure in the Netherlands.
In the study, Dr. Abigail Friedman of the Yale School of Public Health examined smoking rates in San Francisco school districts and compared them to rates in other major school districts like New York City, Miami, and Los Angeles. In the years before the flavor ban was enacted, San Francisco’s youth smoking rate was consistently declining and was lower than the rates in comparable districts. After the ban was implemented, San Francisco’s youth smoking rate skyrocketed to 6.2%. In the comparable districts, the smoking rate had fallen to 2.8%, an all-time low. This shows the distinct difference in smoking rates between a city that banned flavors in tobacco and vaping products and cities that followed the science and allowed flavors.
Your proposed flavor ban is aimed at reducing youth vaping, even though flavors play no role in youth uptake of vaping. Academic studies have found that teenage non-smokers “willingness to try plain versus flavored varieties did not differ” and a mere 5% of vapers aged 14-23 reported it was flavors that drew them to e-cigarettes. National Youth Tobacco Survey results have shown no increase in nicotine dependency among youths since flavored products entered the market.
ATR further submits that in addition to the public health disaster that reducing access to reduced risk tobacco alternatives will unleash, these proposals would also have devastating consequences on businesses, at a time when they can afford it least. At a time of great hardship due to the Covid-19 pandemic, this bill which would effectively outlaw sections of the Canadian economy. It would kill thousands of jobs and would cost business owners their livelihood. The total economic cost would be devastating.
It should be noted that traditional combustible tobacco remains one of the leading preventable causes of death in Canada. The negative health effects of combustible tobacco come from the chemicals produced in the combustion process, not the nicotine. While highly addictive, nicotine is a relatively benign substance like caffeine and nicotine use “does not result in clinically significant short- or long-term harms”.
Nicotine replacement therapies such as nicotine patches and gums have helped smokers quit for decades. In recent years, advancements in technology have created a more effective alternative: vapor products and e-cigarettes. These products deliver nicotine through water vapor, mimicking the habitual nature of smoking while removing the deadly carcinogens that exist in traditional cigarettes.
Vapor products have been proven to be 95% safer than combustible cigarettes and twice as effective at helping smokers quit than traditional nicotine replacement therapies. As such, Vaping has been endorsed by over 30 of the world’s leading public health organizations as safer than smoking and an effective way to help smokers quit.
Further, flavored vaping products are proven to be more effective at helping smokers quit the deadly habit of combustible cigarettes than un-flavored ones. A study from leading researchers on cancer prevention, tobacco control, and public health found that smokers who use sweet-flavored vapor products were 43% more likely to quit smoking than those who used unflavored or tobacco flavored vapor products. Of those who quit smoking, 48% quit nicotine use entirely.
Your own agency has admitted that this proposal will substantially increase cigarette use among adult vapers. Going ahead with the flavor prohibition, knowing it will increase cigarette consumption, is incredibly irresponsible. Long-term combustible tobacco use is deadly, and you have acknowledged that this policy will lead to more smoking, and a result, more deaths. There is, in fact, evidence from Canada that shows this. Nova Scotia enacted a flavor ban in 2020 and cigarette sales increased by 21% within six months. A poll of vapers in Nova Scotia showed that 29% of them were at risk for relapsing to combustible cigarettes.
Flavor bans also increase illicit, black-market activity when a product is banned. This drives down tax revenues from the sale of vaping products and increases the revenues of the multi-million-dollar crime syndicates that smuggle these goods. These same criminal organizations use their profits to fund terrorism while engaging in money laundering and human trafficking. Because of this, the U.S. State Department has determined that tobacco smuggling is a “threat to national security”.
Additionally, banning flavors in e-cigarettes will have a tremendously negative impact on public health and would fail to decrease socioeconomic disparities by reducing access to products proven to help people suffering from mental health issues. A University of Glasgow study showed that e-cigarettes particularly help disadvantaged persons quit smoking and another new study demonstrated that high-strength electronic nicotine products are particularly helpful for smokers with mental health issues quit smoking, like people with schizophrenia who smoke at rates more than three times the national average.
Policy making must be grounded in evidence. Dr. Friedman's study, along with the countless others that demonstrate the importance of e-cigarettes, is further proof that a flavor ban would be a disaster for public health in Canada and lead to increased smoking rates among teenagers. With so many advocates of this proposal claiming that this will combat youth vaping, I urge you to consider what will truly occur if this bill is enacted. The evidence is clear. Youth smoking will increase, fewer adults will have access to lifesaving reduced harm products, and as a result, more people in Canada will die from tobacco-related illnesses.
If you are interested in reading an overview of the study, Americans for Tax Reform published a short summary you can read here. If you would like to read the full study, it can be accessed here.
Policy must be enacted on the basis of evidence, not emotion, and the evidence is clear: Flavor bans are a public health disaster. We strongly urge you to not go ahead with this proposal.
Sincerely,
Tim Andrews
Director of Consumer Issues
Americans for Tax Reform
A downloadable version of the letter can be accessed here.
Photo Credit: Alirod Ameri
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