Alex Hendrie

Conservatives Strongly Oppose Foreign Price Controls & Tax Hikes in HR 3  

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Posted by Alex Hendrie on Wednesday, April 7th, 2021, 12:15 PM PERMALINK

After unveiling a $2 trillion tax hike and “infrastructure” plan, President Joe Biden is expected to unveil another $1 to $2 trillion spending plan in the coming weeks that will include foreign price controls on the American healthcare system.

Recent reports indicate that House Democrats are pushing to include “The Lower Drug Costs Now Act,” legislation that will force pharmaceutical manufacturers to accept government-set prices as dictated by foreign countries and federal health bureaucrats or pay a 95 percent excise tax on hundreds of medicines. While this bill has not been introduced this year, it was designated as H.R. 3 in the last Congress.

Lawmakers should reject this radical proposal.

In 2019, as Democrats were working to pass H.R. 3, ATR led a coalition letter signed by 71 groups and activists urging Members of Congress to reject the proposal.

The letter was signed by federal and state organizations including the American Conservative Union, National Taxpayers Union, Heritage Action for America, Club for Growth, Council for Citizens Against Government Waste, FreedomWorks, Taxpayers Protection Alliance, Small Business Entrepreneurship Council, and the Competitive Enterprise Institute.

H.R. 3 would impose foreign price controls through a system of international reference pricing. This would set prices based on the prices of foreign countries which utilize socialist price controls. As the letter notes, these price controls will reduce access to new medicines:

“The bill imposes new government price controls that would decimate innovation and distort supply, leading to the same lack of access to the newest and best drugs for patients in other countries that impose these price controls.

A study by the Council of Economic Advisors estimated that H.R. 3 would lead to 100 fewer lifesaving medicines over the next decade and could reduce life expectancy of the average American by four months.

The legislation enforces these price controls through the creation of a 95 percent excise tax imposed on hundreds of life-saving and life-preserving drugs including cures for cancer, hepatitis C, epilepsy, and multiple sclerosis. As the letter notes:

“Pharmaceutical manufacturers would face a retroactive tax of up to 95 percent on the total sales of a drug (not net profits). This means that a manufacturer selling a medicine for $100 will owe $95 in tax for every product sold with no allowance for the costs incurred. No deductions would be allowed, and it would be imposed on manufacturers in addition to federal and state income taxes they must pay.”

The fact is, the American people do not want price controls and socialist healthcare. Congressional Democrats ran on H.R. 3 in the 2020 election and hammered Republicans that voted against the proposal claiming they were obstructing efforts to lower prices.

However, voters were not fooled. Instead, they punished swing-state Democrats over their support for socialist policies, including price controls on prescription medicine.

As lawmakers begin taking up Biden’s next major legislative package, they should reject any effort to adopt H.R. 3 in part or in full and should stand against price controls and taxes on American medicines. Conservatives strongly oppose these policies and the effort by the Left to increase the power the federal government has over the healthcare system.

See Also: 10/15/2019 - ATR leads coalition of 71 groups and activists opposed to price controls and taxes in H.R. 3

Photo Credit: Geoff Livingston


Yellen Previews Biden Tax Collaboration with Russia, China, Saudis

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Posted by Alex Hendrie on Monday, April 5th, 2021, 4:35 PM PERMALINK

Treasury Secretary Janet Yellen today said the Biden administration will yoke the United States to a tax regime with the likes of China, Russia, Saudi Arabia, and Indonesia.

Yellen and the Biden administration want to surrender U.S. sovereignty to foreign leaders in Russia, China, Saudi Arabia, Indonesia, and the EU in order to bind the world into higher taxes and bigger government.

This would take the form of a corporate global minimum tax, designed to “end the pressures of tax competition” and “make all citizens fairly share the burden of financing government.”

According to Yellen, the Biden administration will achieve these goals by working with the G20 – a global forum that includes Argentina, Australia, Brazil, Canada, China, France, Germany, Japan, India, Indonesia, Italy, Mexico, Russia, South Africa, Saudi Arabia, South Korea, Turkey, the United Kingdom, and the European Union. 

If this pact for global minimum taxes goes into effect, it will harm American workers and businesses who will be paying higher taxes to finance wasteful spending in the U.S. and across the world.

Can the U.S. really trust foreign countries – many of which have a history of undemocratic governance and human rights violations -- to play by the rules in a way that ensures American businesses and workers are treated fairly?

The push to impose a global minimum tax shows that the Biden administration is not prioritizing American workers, families and businesses but instead wants to expand the size and scope that the federal government has over the U.S. economy and the power that global organizations have over economies across the world. 

This is not the first time Democrats have taken aim at tax competition in recent months. During consideration of the $1.9 trillion Biden spending plan passed last month, Congressional Democrats snuck in a provision giving federal bureaucrats veto power over any state tax cut until 2024 if the state accepted a portion of the $350 billion in state and local aid.

Democrats are pushing these policies to suppress competition because they know that imposing tax hikes in the U.S. will make America less competitive. Biden is calling for a $2 trillion tax hike on businesses and workers which calls for a 21 percent global minimum tax and proposes raising the corporate from 21 percent to 28 percent, a 33 percent increase. 

If enacted, these tax hikes will send American jobs overseas and reduce wages and economic opportunity for U.S. workers.

Rather than colluding with foreign governments to keep taxes high, the Biden administration should ensure our tax code remains globally competitive. After Republicans passed the 2017 tax cuts, the U.S. was named the most competitive economy in the world.

The U.S. grew faster than rest of the world and was the only G7 industrialized country to record annual real GDP growth exceeding 2 percent in 2018 or 2019. The U.S. growth rate of 2.9 percent in 2018 was significantly higher than other developed countries like Germany, which saw 1.5 percent growth and the United Kingdom, which grew by just 1.3 percent.

Yellen’s push to impose a global minimum tax shows that the Biden administration is not focused on helping American workers, families and businesses. Not only do they want higher taxes in America, they also want to work with foreign countries including Russia and China to lock in higher taxes across the world and end tax competition.

Photo Credit: European Central Bank


Joe Biden is Wrong: The Tax Cuts and Jobs Act Benefited the Middle Class

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Posted by Alex Hendrie on Monday, April 5th, 2021, 3:30 PM PERMALINK

President Joe Biden has proposed $2 trillion in higher taxes on American businesses and workers to fund new federal spending. In announcing this plan, Biden falsely claimed that the 2017 Tax Cuts and Jobs Act (TCJA) passed by the Congressional Republicans and President Trump overwhelmingly benefited “the rich” and large corporations and did little or nothing to help middle class families.

This is not true. The TCJA directly reduced taxes for American middle-class families and grew the economy, increasing wages and creating more job opportunities for Americans.

Even left-leaning media outlets have (eventually) acknowledged the tax cuts benefited middle class families. The Washington Post fact-checker gave Biden’s claim that the middle class did not see a tax cut its rating of four Pinocchios. The New York Times characterized the false perception that the middle class saw no benefit from the tax cuts as a sustained and misleading effort by liberal opponents."

Here are some of the ways the TCJA benefited middle-class Americans:

American families and individuals saw strong tax reduction from the TCJA. According to IRS statistics of income data analyzed by Americans for Tax Reform, households earning between $50,000 and $100,000 saw their average tax liability drop by over 13 percent between 2017 and 2018. By comparison, households with income over $1 million saw a far smaller tax cut averaging just 5.8 percent.

This tax reduction was seen in across the country including in key swing states. In Pennsylvania households earning between $50,000 and $100,000 saw their tax liability drop by over 14 percent, while households with incomes over $1 million saw their tax liability drop by just 3.1 percent.

In Ohio, American families with AGI of between $75,000 and $99,999 saw an average reduction in tax liability of 15.3 percent. In contrast, Americans with AGI of $1 million or above saw an average reduction in tax liability of just 0.4 percent.

Thanks to the TCJA, millions of Americans saw an increased child tax credit, and millions more qualified for this tax cut for the first time. The TCJA expanded the child tax credit from $1,000 to $2,000 and raised the income thresholds so millions of families could take the credit. In 2017, 22 million households earning $200,000 or less took the child tax credit. These households received an average tax credit of $1,213.

By 2018, 36 million households earning $200,000 or less took the child and other dependent tax credit. These households received an average credit of $2,002.

The TCJA repealed the Obamacare individual mandate tax by zeroing out the penalty. Prior to the passage of the bill, the mandate imposed a tax of up to $2,085 on households that failed to purchase government-approved healthcare. Five million people paid this in 2017, and 75 percent of these households earned less than $75,000.

This tax hit 153,000 Pennsylvania households, 353,000 Florida households, and 143,000 Georgia households

The tax cuts grew the economy, leading to more jobs, higher pay, and increased economic opportunity.

Following passage of the tax cuts, the unemployment rate dropped to 3.5 percent in 2019, a 50-year low. In the same year, median household income increased by $4,440 or 6.8 percent, the largest one-year wage growth in history.

This wage growth dwarfed the wage growth experienced under the entire eight years of Barack Obama's presidency, which was just 5 percent.

Under this economy, there were more job openings than job seekers for 24 consecutive months. In March 2018, the ratio of unemployed persons to job openings dropped to 0.9. It remained at this low level until the pandemic hit America.

This economic prosperity was experienced by key demographics and income levels. For instance, Black and Hispanic Americans saw their median income hit record levels, while the poverty rate declined to 10.5 percent, the lowest rate in decades. The bottom 25 percent of wage earners also experienced wage growth faster than the top 25 percent of wage earners, according to the Atlanta Fed.

Key demographics experienced the growth, including Black Americans, Hispanic Americans, and women, with each group seeing their unemployment rates drop to all-time lows and wage growth increasing by record levels.

The tax cuts resulted in businesses giving their employees pay bonuses, pay raises, increased 401(k) matches, and new employee benefit programs. 

Large and small businesses passed the Tax Cut to their Employees

  • Wells Fargo raised base wages from $13.50 to $15.00 per hour.
  • Apple provided $2,500 employee bonuses in the form of restricted stock.
  • Pfizer provided $100 million worth of bonuses to non-executive employees.
  • Guy Chemical, a Pennsylvania Based small businesses was able to raise wages, expand bonuses by 50 percent, start a 401(k) retirement program and create 29 new jobs.
  • Firebird Bronze, an Oregon-based manufacturer was able to afford to give its nine employees health insurance for the first time.
  • Anfinson Farm Store, a family owned business in Cushing, Iowa (population 223) has given its employees a $1,000 bonus and raised wages by 5 percent.
  • Five Senses Spa, Salon and Barbershop based in Peoria, Illinois gave $500 bonuses to its 20 employees and provided its employees with health insurance for the first time.

 

Businesses Created New Employee Benefit Programs

  • Walmart and Lowes provided $5,000 to help cover the cost of adopting a child.
  • Express Scripts in Missouri created a $30 million education fund for their employees’ children.
  • Boeing provided $100 million in workforce development programs
  • McDonald’s employees who work just 15 hours a week received $1,500 worth of tuition assistance every year per year.
  • Walt Disney announced $50 million in employee educational programs.
  • Visa doubled its 401(k) employee contribution match to a maximum of 10 percent of employee pay.
  • Cigna spent $30 million on 401(k) matches.

 

The corporate rate reduction also resulted in lower utility bills, including electric bills, gas bills, and water bills, for American households and businesses in all 50 states.

The Pennsylvania Public Utility Commission (PUC) today issued an Order, requiring a “negative surcharge” or monthly credit on customer bills for 17 major electric, natural gas, and water and wastewater utilities, totaling more than $320-million per year. The refunds to consumers are the result of the substantial decrease in federal corporate tax rates and other tax changes under the Tax Cuts and Jobs Act (TCJA) of 2017, which impacted the tax liability of many utilities.

  • Utilities in Arizona also reduced rates as noted in a June 2018 statement from EPCOR: ​​​​​​​More than 57,000 EPCOR wastewater customers will receive more than $1.1 million in federal corporate tax cut savings, reducing the amount of their monthly wastewater bill starting with the July 2018 billing cycle.

Today, the Arizona Corporation Commission (ACC) approved EPCOR’s request to refund $1,106,392 in tax reform savings to all of the company’s residential and commercial wastewater customers.

“We are extremely pleased to help our wastewater customers save more than $1 million each year, and it’s important to us that we put this into effect as soon as possible,” commented Joe Gysel, President of EPCOR USA, Arizona’s largest regulated water utility. “All our customers deserve to share in the savings generated by federal tax reform. It's positive for them, for their communities and for our state.” - June 12, 2018 EPCOR press release

Georgia Power has completed an assessment of the impact of the Tax Cuts and Jobs Act for the company – including approximately $1.2 billion in benefits for customers. The benefits were confirmed as part of an agreement with Georgia Public Service Commission (PSC) Staff and include approximately $130 million in reduced taxes on financing costs for the Vogtle nuclear expansion; $330 million in direct credits to customers as a result of lower federal income tax rates over the next two years and approximately $700 million in future benefits to be addressed in the company's next base rate case in 2019, which also includes the benefits of last week's reduction in state of Georgia income tax rates. If approved by the Georgia PSC, the typical residential customer using an average of 1,000 kilowatt-hours per month could receive approximately $70 in refunds over the two-year period.

Photo Credit: Kelly Kline


NY, NJ Dems Demand Tax Cut For Wealthy Constituents

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Posted by Alex Hendrie on Thursday, April 1st, 2021, 12:45 PM PERMALINK

The top priority of several New York and New Jersey Congressmen is a tax cut for wealthy blue state residents that will do little or nothing to help the middle class. 

The 2017 Tax Cuts and Jobs Act limited the deduction for state and local taxes to $10,000 in conjunction with lowering rates. This resulted in a net tax cut for the vast majority of American individuals and families across the country.

Now, House Democrats including Reps. Tom Suozzi (D-NY), Mikie Sherrill (D-NJ), Josh Gottheimer (D-NJ), and Rep. Bill Pascrell (D-NJ) are pushing to uncap the SALT deduction in President Biden’s next legislative package.

Rep. Suozzi even said he would not support any tax change in the upcoming package if this provision was not included. Suozzi has also previously said he would publish a “blacklist” of any New Yorker that donated to a candidate that opposed uncapping SALT.

Democrats routinely call for increasing taxes on “the rich” so that they pay their “fair share.” However, some Democrats are now calling for restoring SALT despite the fact that they have been vocal supporters for taxing “the rich.” For instance, in a March 25, 2021 press release, Rep. Jamaal Bowman (D-NY) called for restoring the SALT deduction arguing its absence “caused financial distress for so many of my constituents.”

However, this contradicts his many past statements where he called for higher taxes on the rich. In fact, just a few days ago he tweeted that we need to “end tax breaks for the wealthy.”

Evidently, he meant as long as they aren’t his constituents.

Repealing the SALT deduction is extremely regressive and would overwhelmingly benefit upper income earners. This has been noted by analyses conducted by nonpartisan and left-of-center organizations. For instance:

  • The left-of-center Tax Policy Center found that the top 1 percent of households would receive 56 percent of the benefit of repealing the SALT cap, and the top 5 percent of households would receive over 80 percent of the benefit. The bottom 80 percent of households would receive just 4 percent.
  • The Joint Committee on Taxation found that restoring an unlimited SALT Cap would give taxpayers earning over $500,000 per year a collective tax cut of almost $55 billion per year, while taxpayers earning less than $75,000 per year will collectively see a tax cut of about $100 million.
  • Senator Michael Bennet (D-CO) criticized efforts to repeal the SALT cap in 2019, arguing that it conflicted with Democrat ideals. He stated, “We can say we’re for a progressive tax bill and for fighting inequality, or we can support the SALT deduction, but it’s really hard to do both of those things.”
  • The left-leaning Center for Budget and Policy Priorities has stated that this proposal would be “regressive and costly.”
  • The Center for American Progress has stated that repeal of the SALT cap “should not be a top priority” as it would “overwhelmingly benefit the wealthy, not the middle class.”

 

Democrats falsely claim that when the unlimited SALT Cap was repealed, Americans in blue states like New Jersey and New York saw a massive tax hike and were hit with double taxation, as they now pay federal taxes on income that was already subject to state and local taxes.

First, a majority of Americans do not claim the SALT deduction, or any deduction. Instead, they claim the standard deduction. In 2018, 133 million American taxpayers (or 87% of filers) claimed the standard deduction. These taxpayers deduct zero state and local taxes, so they have no protection against double taxation.

The majority of Americans in blue states like New Jersey and New York saw a tax cut, not a tax increase from the TCJA.

According to IRS Statistics of Income Data, the average taxpayer in both New York State and New Jersey earning between $50,000 and $200,000 saw a tax cut between 2017 and 2018.

Taxpayers in both states with AGI of between $75,000 and $99,999 saw an average federal income tax cut of 10 percent, while taxpayers between $100,000 and $199,999 in AGI saw an average tax cut of between 6 and 7 percent. While this does not mean that every taxpayer in this income bracket saw a tax cut, it does mean the majority of taxpayers in blue states did not see a tax hike, as Democrats claim.

Blue state Democrats should explain why they are okay with cutting taxes for “the rich” when it is their constituents, but not when it’s voters across the country.

Change in Tax Liability of Average Taxpayer in New York State Between 2017 and 2018


Change in Tax Liability of Average Taxpayer in New Jersey Between 2017 and 2018

 

Photo Credit: New Jersey National Guard


Delaying 2021 Tax Day May Harm, Not Help Taxpayers

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Posted by Alex Hendrie on Thursday, March 11th, 2021, 1:00 PM PERMALINK

A year ago, the Coronavirus pandemic was beginning to impact Americans across the country through forced shutdowns and social distancing mandates. As part of the response to this crisis, the federal government postponed Tax Day from April 15 to July 15.

Today, some lawmakers including Ways and Means Chairman Richie Neal (D-Mass) are calling on the IRS to again delay Tax Day, arguing that Americans again need relief.

However, before moving Tax Day, policymakers need to carefully consider whether it is truly needed to help Americans file, or if alternatives already exist. In addition, policymakers must consider the fact that millions of Americans will needlessly delay filing their taxes and delay receiving thousands of dollars in tax refunds from the federal government.

Extending Tax Day is a costly and time-consuming process that may do little to help taxpayers, as noted by the Federation of Tax Administrators. Delaying this deadline requires a significant diversion of taxpayer dollars and a “distressingly long” list of changes including changes to software, tax forms and guidance, audit periods, underpaid taxes, late returns, and statutes of limitations.  

As it stands, any taxpayer can claim a six-month extension on filing their federal income tax return. This is generally a simple process that can be done online or by filing a paper form and providing a taxpayer’s name, address, and social security number. Some states even grant an extension without filing a form.

Supporters of moving the April 15 filing deadline cite the changes made to the taxation of unemployment benefits in the Biden $1.9 trillion spending plan. Under this legislation, $10,200 in unemployment income received in 2020 will not be taxable for most Americans.

However, it is not clear that moving the date is necessary to help these taxpayers. Those effected by this change will fall into two categories – those that have filed already and those that have not yet filed.

Taxpayers that have already filed, including those that receive a refund because they claim the Earned Income Tax Credit, child tax credit, or other tax provision, will have to file an amended return to receive an increased refund.

Those that have not yet filed can file now and file an amended return later or file an extension and wait until the IRS can has updated its forms for this change in tax law.

They can easily request an extension on their returns if they choose the latter option – there is no need to extend filing deadlines.

Rather than helping taxpayers, delaying the tax filing deadline could actually hurt millions of American families, as it would delay receiving tax refunds that they are owed.

According to  IRS data from last year, millions of taxpayers delayed filing even though they were owed a refund. By mid-June, the number of refunds issued was down by 12 percent compared to the year before, while the amount of refunds issued was down by $30 billion.

In other words, $30 billion was being held by the IRS for months, waiting to be refunded to taxpayers.

In any given year, almost 3 in 4 people receive a tax refund averaging $3,000. Delay the filing deadline and you delay that $3,000 to a family.

Many people have busy lives and wait until the last minute to file every year. Based on prior years, an estimated 35 million people (25% of all tax filers) wait until the last two weeks of tax season (April 1-15) to file. Of these 35 million taxpayers, more than half receive a refund averaging $2,000.

Last year's delay also resulted in a delayed start to this year, which has resulted in a slower pace of issuing refunds. Delaying Tax Day this year could therefore have a spill over effect into the 2022 tax filing season.  

The federal government has taken significant steps toward helping Americans through the pandemic. Where it is determined that more assistance is needed, the government should be sure to carefully examine the issue to ensure assistance is targeted and does not have adverse effects. As it relates to delaying the 2021 tax filing deadline, policymakers must scrutinize whether it is truly needed and what negative effects it may have on taxpayers.

Photo Credit: GotCredit


Four Reasons to Reject the Biden Public Option Government Healthcare Plan

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Posted by Alex Hendrie on Wednesday, March 10th, 2021, 3:55 PM PERMALINK

Congressional Democrats and President Joe Biden are expected to push for the “public option”  later this year – a government run, taxpayer funded healthcare plan competing with the private sector.

A public option is merely a step towards the Left’s ultimate goal of socialized healthcare, or “Medicare for All,” where the government sets prices for the entire healthcare system. The public option is the Left’s latest attempt to expand the power of the federal government, replacing patient-centered healthcare with one-size fits all care as dictated by federal bureaucrats. 

Advocates of the public option inaccurately claim it would increase competition. This is false – there is no true competition because socialized healthcare would “compete” with the private sector. The federal government would not have to be sensitive to prices or worry about turning a profit and could leverage its massive size to price out competitors. ​ For instance, a government health plan could keep premiums and deductibles artificially low and offer other incentives to enrollees that private plans could not.

By setting price controls and driving competitors out of the market, the public option would have significant negative effects on patients, taxpayers and providers. It would lead to massive tax hikes on American middle-class families, reduce access to quality care, and cut pay for doctors and hospitals.

Here are four reasons to reject the public option.

1. The Public Option Will Lead to Massive Tax Hikes

The public option will cost an estimated $800 billion per year, according to a study by Lanhee J. Chen, Tom Church, and Daniel L. Heil of the Hoover Institution. This equates to a tax hike of $2,000 per year on middle income families, could require a top income tax rate of 60 percent, or payroll taxes on families totaling $3,900 per year.

Given the public option is an incremental step toward increased government control over healthcare, this would be the first tax hike of many. By putting the country on the pathway to Medicare-for-All, it would lead to future middle-class tax increases in order to finance additional expansions of government healthcare.

In fact, instituting socialized healthcare would require $32 trillion in higher taxes over a decade, according to a study by the Urban Institute and Commonwealth Fund.

A majority of these taxes would be on the middle class, not “the rich.” The Committee for A Responsible Federal Budget finds that “impossibly high taxes on high earners” would raise just one third of the total cost. The rest—some $20 Trillion would come from us. 

Even Bernie Sanders admits that the middle class will take it on the chin to pay for Medicare-for-All. His plan includes a new, $3.9 trillion, 4 percent payroll tax on workers, as well as trillions of dollars in taxes on employer benefits and businesses. And it still falls trillions of dollars short of paying for the full cost of the program.

2. The Public Option Harms Doctors, Hospitals, and other Providers.

A public option health plan relies on the government setting arbitrarily low payment rates for providers. In other words, any reduction in costs is through the use of price controls that cut pay for doctors, hospitals, and other healthcare providers by reimbursing providers less than typical commercial plans.

This is already the case with government healthcare programs.

Compared to employer healthcare, hospitals could see a 50 percent pay cut if Medicare payment rates were adopted, while physicians could see a 30 percent pay cut, according to a study by the Kaiser Family Foundation reviewing 19 recent studies.

Medicaid payment rates are even lower. In 2016, Medicaid reimbursed 72 percent of what Medicare reimbursed, according to an analysis by Health Affairs.

As noted by former CMS administrator Seema Verma, the low reimbursement rates provided by Medicare and Medicaid are a major impediment to care and many providers opt out of serving these populations because they lose too much money from doing so. This will not just harm healthcare providers, it will harm Americans that receive this care.

3. The Public Option Could Lead to Healthcare Shortages

By relying on price controls and price setting, the public option will create healthcare shortages that harm American patients across the country.

Healthcare shortages occur often in developed nations with government-run health care systems. Many experience understaffed hospitals and long waiting lines for even basic treatment. 

In 2019, The United Kingdom had a shortage of 10,000 doctors and 43,000 nurses, with 9 in 10 managers in the National Health Service saying that too few doctors and nurses presented a danger to patients. At any one time, 4.5 million patients were waiting for hospitalization.

Closer to home, in Canada, the typical patient had to wait a record 21.2 weeks – or five months – to receive treatment from a specialist after being referred by their general practitioner in 2017. 

Before the pandemic, the U.S. had 35 intensive care unit beds per 100,000 people – nearly three times the 12 beds Italy and five times the 7 ICU beds in the UK.

The fact is, the majority of Americans are happy with the care they already receive. 180 million Americans currently receive high quality healthcare through employer provided health insurance plans. According to a survey by the Employee Benefit Research Institute (EBRI) and Greenwald & Associates, 81 percent of Americans were satisfied with their employer provided care.

4. A Public Option Has Failed to Offer Savings to Consumers Where it Has Been Tried

The public option has already been tried in parts of the U.S. as noted in a recent report by the Heritage Foundation. When competing on a level playing field with the private sector, a public option offers little to no savings to consumers.

For instance, New York City’s created the “MetroPlus Health Plan,” in 1969 a public benefit corporation owned and operated by the New York City Health and Hospitals Corporation. In some cases, the health plans offered by this corporation are marginally lower than private competitors, others, including its bronze plans are as much as 14 percent more expensive than the cheapest private option.

Similarly, Washington State’s recently launched “Cascade Care”  has proven to be a more costly option than private coverage available to workers. Some plans are almost 30 percent more expensive than traditional options.

Additionally, Obamacare created a form of public option over a decade ago through the creation of cooperative health insurers, or “co-ops,” designed to compete with private health plans on state exchanges. These non-profits were an alternative to private health insurers and were financed with $2.4 billion in taxpayer funding. Despite offering generous subsidies, most Obamacare co-ops failed. Of the 23 that were created, just 3 remain covering 128,000 Americans.

Photo Credit: Gage Skidmore


Lawmakers Should Reject Tax Hike on Carried Interest Capital Gains

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Posted by Alex Hendrie on Tuesday, February 16th, 2021, 11:29 AM PERMALINK

Representatives Bill Pascrell (D-NJ), Andy Levin (D-Mich.) and Katie Porter (D-Calif.) have released legislation, H.R. 1068, that would increase taxes on carried interest capital gains. This legislation, known as the “Carried Interest Fairness Act,” should be rejected by members of Congress.

The tax treatment of carried interest capital gains is not a loophole but is grounded in several longstanding norms of the tax code. The effort to undo this tax treatment is not about “fairness,” but is about the progressive left’s goal of taxing all investment income as high as possible.

In fact, Democrats such as Rep. Pascrell and Senator Elizabeth Warren (D-Mass) recently pitched a tax hike on carried interest capital gains as a solution to the Gamestop-Robinhood controversy despite the fact that private equity had no role in this event and does not even invest in short term equities.

A tax increase on carried interest capital gains is bad policy that will harm the economy, threaten the retirement savings of Americans across the country, and fail to raise any meaningful revenue.

Carried Interest is a Mainstay of the Tax Code

Private equity is an investment class structured as a partnership agreement between an expert investor and individuals with capital.  The tax treatment of the expert investor is known as carried interest capital gains. This tax treatment is grounded in two long-standing tax principles.

First, it is treated as partnership income, meaning taxation flows through to the individual taxpayers. In this case, carried interest is the investor’s share of partnership income they receive for providing expertise on investment decisions. All taxpayers involved in the partnership – those providing expertise and those providing capital – are taxed the same.

Second, it is treated as capital gains income as it is earned through long-term investment, not as ordinary income.  Portfolio companies owned by private equity are held for a significant period of time, often 5 to 7 years. There is no justification for treating this as ordinary income – the investor purchased an asset, grew the asset by making it more economically valuable, and sold the asset at a profit – exactly the same as other types of investment.

Undermining either of these two principles undermines the existing tax code as a whole by opening the door to arbitrarily higher taxes on American savers and investors.

A Tax Increase on Carried Interest Could Harm Retirees & Savers Across the Country

Raising taxes on carried interest capital gains will not just harm private equity – it will also harm the millions of Americans that are saving for retirement.

Private equity seeks to invest in companies with growth potential and, as a result, has the potential to deliver strong returns. In fact, according to a recent study, private equity returned gains exceeding 15 percent over 10 years.

Because of these strong gains, private equity is a popular and reliable investment strategy for Americans across the country. The largest investor in private equity is public pension funds, which have collectively invested an estimated $150 billion in private equity. As noted by one study, 165 funds representing 20 million public sector workers have invested an average of 9 percent of their portfolios in private equity.

The financial security these returns provide to American savers including firefighters, teachers, and police officers will be threatened if lawmakers raise taxes on carried interest capital gains.

Increasing Taxes on Capital Gains Will Harm Economic Growth

Raising taxes on carried interest is just one part of the left’s goal to raise taxes on all investment. In fact, President Joe Biden has vowed to raise taxes on all capital gains to 43.4 percent, a tax hike that would harm the 53 percent of American households that own stocks.

It is widely accepted that taxes on capital gains – including taxes on carried interest capital gains –  suppress growth and economic productivity, harm the creation of jobs and wages, and reduce other government revenue sources.

This same is true for carried interest – investment associated with carried interest capital gains drives significant economic growth across the country. Raising taxes on private equity investment will especially harm small businesses, innovators, and inventors that would find themselves increasingly shut out from investment money available to them from these partnerships.

A Tax Increase on Carried Interest Capital Gains Fails to Raise Meaningful Revenue

Not only is a tax hike on carried interest bad policy, it would fail to raise any significant revenue and is useless as a pay-for. In fact, taxing carried interest as ordinary income would raise just $14 billion over ten years, according to the Congressional Budget Office.

For context, the estimated price tag of Medicare for all is $32 trillion, while the price tag of the Green New Deal is at least $91 trillion. Carried interest is a drop in the bucket compared to these proposals.

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Lawmakers Should Reject Effort to Lift Medicaid Rebate Cap in Stimulus Package

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Posted by Alex Hendrie on Wednesday, February 10th, 2021, 4:00 PM PERMALINK

Multiple House Committees are this week marking up President Joe Biden’s $1.9 trillion bailout plan.

As part of this process, lawmakers in the House Energy and Commerce Committee are marking up healthcare legislation which includes a proposal to remove the existing 100 percent rebate cap that currently exists for medicines in Medicaid. If this cap is removed, it would force manufacturers to pay states every time a Medicaid beneficiary fills a prescription.

This provision, which is found in Subtitle B, Section 3107 of the Energy and Commerce section of the bill, should be removed.

It would create a perverse system where manufacturers pay Medicaid to supply their drugs to the states and could create incentives within the Medicaid system that could encourage gaming of the system and higher prices in Medicaid and the private market.

Under existing law, manufacturers must provide discounted medicines to Medicaid as a condition of participating in other federal programs including Medicare Part B and Veterans Affairs healthcare.

This rebate is provided in the form of rebates that are calculated through a two-step process:

First, Medicaid is entitled to a “basic rebate” which is the greater of 23.1 percent of the Average Manufacturer Price (AMP) or the difference between AMP and “best price.” AMP is calculated as the average price of selling to retail community pharmacies and wholesalers but excluding rebates and discounts negotiated by Pharmacy Benefit Managers, among others.

Second, the manufacturer is required to provide an inflation penalty rebate calculated based on the extent to which the drug’s price increases exceed the Consumer Price Index for all Urban Consumers (CPI-U).

This existing formula provides $42 billion every year in discounts to state Medicaid programs. However, the cap prevents the discount exceeding 100 percent of AMP, a situation where the product is free for Medicaid. There are currently over 2,500 drugs that are at 100 percent of AMP.

A rebate above 100 percent of AMP, as proposed by Sec. 3107, would create numerous instances where the manufacturer is paying Medicaid to supply the drug. While manufacturers are prohibited from leaving Medicaid, this policy could distort the commercial markets.

For instance, the proposal could result in higher prices in the commercial market because manufacturers would be incentivized to reduce rebates and discounts in order to avoid further decreasing “best price.” While this would reduce the Medicaid rebate, it would increase costs for plans and consumers. In turn, this would result in new medicines being launched at higher prices due to the subsidies required by Medicaid.

Lifting the cap would also encourage gaming of the system by turning a product into a revenue stream for the federal government and the states. In fact, the provision could create new slush funds for the states as there are no restrictions on how they can utilize funds generated from payments above 100 percent of AMP.

As members of the Energy and Commerce Committee take up their portion of the $1.9 trillion Biden stimulus plan, they should remove Sec. 3107 and retain the existing 100 percent rebate cap on medicines in the Medicaid system. Lifting the cap will create a perverse system where manufacturers are forced to pay the government every time they supply their product to Medicaid, a situation that will distort the market and incentivize higher prices.

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Dem Stimulus Plan Could Lead to Billions in New Fraudulent & Improper Payments

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Posted by Alex Hendrie on Wednesday, February 10th, 2021, 2:21 PM PERMALINK

As part of the Biden $1.9 trillion stimulus plan, Democrats are proposing to expand several refundable tax credits that have a significant history of waste, fraud, and abuse including the Additional Child Tax Credit (ACTC), the Earned Income Tax Credit (EITC), and the Obamacare Premium Tax Credit (PTC).

The Treasury Inspector General for Tax Administration (TIGTA) has found that the rate of improper payments for these refundable credits was anywhere from 25 percent to 40 percent of total payments. Improper payments are defined as “any payment that should not have been made, was made in an incorrect amount, or was made to an ineligible recipient.” As the report explains:

“The IRS estimates that approximately 25 percent ($18.4 billion) of EITC payments were issued improperly in FY 2018…

“The IRS estimates that nearly 33 percent ($8.7 billion) of ACTC payments made during TYs 2009 through 2011 were likely improper and that over 31 percent ($5.3 billion) of AOTC payments made during TY 2012 were likely improper….

“The IRS’s own analysis of its compliance data indicates that the estimated error rate for Net PTC payments was 41 percent ($440 million).”

As TIGTA explains, these refundable credits carry a significant risk of fraud:

“The unintended consequence of these credits is that they can be the targets of unscrupulous individuals who file erroneous claims. Refundable credits can result in tax refunds when no income tax is paid or withheld because these credits are allowed even if they exceed the amount of the individual’s tax liability. Consequently, they pose a significant risk as an avenue for those seeking to defraud the Government.”

The stimulus proposal significantly expands each of these credits. The child tax credit is expanded for 2021 so that the credit is fully refundable. In addition, the credit is increased from $2,000 to $3,600 for children under 6 and to $3,000 for children between 6 and 18 years of age. 

The proposal also expands the Earned Income Tax Credit for 2021 and expands the Obamacare advanced refundable premium tax credit for 2021 and 2022.  All told, these provisions reduce revenues by $180 billion, according to the Joint Committee on Taxation.

While it is unclear what portion of this $180 billion accounts for refundable payments, the provisions will likely lead to billions of dollars in new improper payments based on existing problems administering the credits.

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Democrat Senators Vote Against Tax Relief for Middle Class Families and Small Businesses

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Posted by Alex Hendrie on Friday, February 5th, 2021, 11:18 AM PERMALINK

All 50 Democrat Senators voted against permanent tax cuts for American families and small businesses during consideration of S.Res.5, the Fiscal Year 2021 budget resolution.

During consideration of the budget resolution, Senator Mike Crapo (R-Idaho) offered an amendment that would permanently extend income tax cuts for small businesses and individuals that were passed in the 2017 Tax Cuts and Jobs Act (TCJA). These tax cuts will expire in 2025 because of budget rules that prohibited the tax cuts from adding to the deficit outside the ten-year budget window.

All 50 Democrat Senators voted "no'' on this amendment, while all 50 Republican Senators voted "yes".

By voting against this amendment, Democrats voted against significant tax relief for taxpayers in their states and across the country.

The TCJA reduced taxes for middle income families. According to IRS data, the average American household earning between $50,000 and $100,000 saw their average tax liability drop over 13 percent:

  • Americans with adjusted gross income (AGI) of $50,000 to $74,999 saw a 13.2 percent reduction in average tax liabilities between 2017 and 2018. 
  • Americans with AGI of between $75,000 and $99,999 saw a 13.6 percent reduction in average federal tax liability between 2017 and 2018.

 

This tax cut was twice as large as the tax cut received by Americans with income of $1 million or more – these taxpayers saw a 5.8 percent reduction in federal income taxes.

Strong middle class tax reduction was seen in every state across the country including in states represented by Democrat Senators. For instance:

  • In Arizona, taxpayers earning between $75,000 and $99,999 saw their average tax liability drop from $8,920.40 in 2017 to $7,658.675 in 2018, a 14.1 percent reduction in federal tax liability.
  • In Georgia, taxpayers earning between $50,000 and $74,999 saw their average tax liability drop from $5,459.71 in 2017 to $4,829.49 in 2018, a 11.5 percent reduction in federal tax liability.
  • In Michigan, taxpayers earning between $75,000 and $99,999 saw their average tax liability drop from $8,960.20 in 2017 to $7,604.86 in 2018, a 15.1 percent reduction in federal tax liability.
  • In Colorado, taxpayers earning of between $50,000 and $74,999 saw their average tax liability drop from $5,997.71 in 2017 to $5,220.98 in 2018, a 13.0 percent reduction in federal tax liability.

 

The TCJA also reduced taxes for small businesses. For instance, the law created a new, 20 percent small business deduction for businesses filing as passthrough entities. According to IRS data, 18.6 million filers claimed the small business deduction in 2018.

Because many small businesses file through the individual code, the tax rate reductions passed by the TCJA also reduced taxes for small businesses across the country.

By voting against Sen. Crapo’s amendment, Democrats voted to deprive families and small businesses in their states and across the country from permanent tax relief.

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