Alex Hendrie

ATR Supports Rep. Hern's "Pro-Growth Budgeting Act"

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Posted by Alex Hendrie, Samantha Capriotti on Friday, November 1st, 2019, 9:00 AM PERMALINK

Congressman Kevin Hern (R-Okla) today introduced the “Pro-Growth Budgeting Act,” legislation that will require dynamic scoring of major-sized legislation.  Americans for Tax Reform urges all members of Congress to support Rep. Hern's bill. 

Dynamic scoring allows policymakers to forecast the effects of fiscal policy based on the predicted behavior of people and organizations. Dynamic scoring takes into account multiple estimates on a bill’s effect on employment, GDP, investment, labor supply, interest rates, and other major economic indicators.

This legislation requires the Congressional Budget Office (CBO) to use dynamic scoring to assess the fiscal impacts of any major-sized legislation in addition to the 10-year static score that CBO already releases.

All legislation that affects revenue, spending, deficits, or debts above 0.25 percent of current projected U.S. GDP is subject to dynamic scoring under Rep. Hern's legislation. If a bill does not reach the 0.25 percent threshold, The House Budget Committee Chairman and Ranking Member can still request an analysis. 

The CBO would be required to disclose its data sources and transformations and the models it used to determine the dynamic score.  This provision increases transparency and ensures that lawmakers are receiving reliable, unbiased information.

Dynamic scoring gives policymakers a more detailed picture of the economic impacts of legislation. For example, when forecasting the economic impact of raising the marginal income tax rate, the static score would assume that the government would raise more revenue with no distortions. 

A dynamic score would rightly take into account that the tax would create a disincentive to work. 

Static scoring has impeded lawmakers from considering the full effects of legislation in the past. Ignoring real-world economic indicators led the CBO to estimate that the Taxpayer Relief Act of 1997 would only create $120 billion in revenue over six years.  Once implemented, the legislation generated $2.52 trillion in revenue, surpassing the CBO’s static estimate by $2.4 trillion.

Ignoring the real-world economic impacts of legislation can lead to bad policymaking because the full impact that legislation has on the U.S. economy is not considered.

Congressman Kevin Hern's proposal rightly corrects this by making dynamic scoring available so that lawmakers can consider the full macroeconomic impact of major legislation.

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GILTI High Tax Rule Provides Important Relief, But Can Still Be Improved 

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Posted by Alex Hendrie on Monday, October 28th, 2019, 10:57 AM PERMALINK

The Tax Cuts and Jobs Act contained numerous reforms to the U.S. tax code. Among these reforms were several changes to the international tax system.

Implementing these reforms has been a complex process. To its credit, the Treasury Department has done a good job mitigating some of the more problematic aspects of this transition. However, there is more that can be done to promote American competitiveness and offer relief to businesses.

One of the major changes to the international tax system was the creation of the Global Intangible Low-Taxed Income (GILTI) provision. GILTI was designed to prevent taxpayers from eroding the U.S. tax base by assigning income to low tax jurisdictions.

However, GILTI was based off the pre-TCJA tax system which required companies to allocate a portion of domestic expenses to foreign income calculations. This resulted in a post-TCJA tax code where American businesses faced additional foreign tax liability because GILTI inadvertently taxed high-tax foreign income that was previously exempt from U.S. taxation.

To resolve this problem, Treasury has proposed rules that allow businesses to elect a high-tax exclusion (HTE) for a Controlled Foreign Corporation’s (CFC) income if this income is subject to foreign taxes above 90 percent of the corporate rate (18.9 percent based on the 21 percent corporate rate). This HTE ensures the integrity of the new, territorial tax system in a way that protects the U.S. tax base without subjecting taxpayers to double taxation or creating perverse incentives for businesses to restructure.

However, there are ways to improve this rule.

For one, the effective date of the HTE should be available back to when the GILTI provision first took effect. The proposed rule applies “beginning on or after the date that final regulations are published.” Ideally, this rule should also apply for 2018 and 2019 – the years that GILTI has been in effect.

Second, the ability to elect the HTE should be available year-to-year. Under the proposed rule, any HTE election must be retained for five years, an unnecessary limitation that can lock taxpayers into an election that can result in increased taxes due to the complex interaction of various credits and deductions at the international level. Ideally, the HTE should be made on a year-to year basis.

There should be little concern that a taxpayer could use this flexibility to game the system as that would require a taxpayer to go through the complex task of manipulating income in multiple foreign jurisdictions and across multiple taxable systems with different anti-abuse regimes.

As it stands, a five-year limitation requires a taxpayer to project business changes, changes to tax law, and economic trends over this five-year period – a difficult, if not impossible task. Companies are already required to report financial information and file taxes ever year, so all the information to model and comply with electing into the HTE should already be available.

Third, the GILTI HTE determination made at the QBU (Qualified Business Unit) level should be relaxed. While Treasury decided on the QBU-by-QBU approach to prevent blending low-tax and high-tax income within a CFC, the existing approach is too stringent. 

Taxpayers often do not have readily available information broken down at the QBU level so this could create extensive compliance burdens for taxpayers. In some cases, a taxpayer may have hundreds of QBUs in a single country.

A solution to this complexity could be allowing a taxpayer to aggregate QBUs in a single country for purposes of determining whether income is high-taxed. This solution would still uphold the integrity of the tax law as it would be difficult to blend high and low-tax income when aggregating income from the same country. Moreover, this approach is consistent with legislative intent of lawmakers to prevent allocating income to low-tax jurisdictions.

Lastly, the “All or nothing rule” should be removed from the proposal. The proposed rule applies the HTE broadly to each CFC in a group of commonly controlled CFCs. Like the QBU-by-QBU application, this all or nothing rule can result in extensive compliance burdens as it would require a taxpayer to compile (and the IRS to audit) new QBU-level data across all operations.

A better alternative is to follow the precedent set under the existing Subpart F high-tax exclusion. Under this exclusion, a taxpayer can make the election on an item-by-item basis. This will also significantly lessen compliance burden on taxpayers as reporting only has to be made on relevant QBUs.

To be clear, Treasury’s proposed GILTI rule is on the right path. A high-tax exclusion will mitigate unnecessary double taxation while upholding the integrity of the TCJA.

However, there remains some outstanding issues with the rule that should be resolved. Doing so will dramatically improve the GILTI high-tax exclusion to promote flexibility, ease compliance burdens, and ensure the international tax system remains strong.

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USMCA's Biologics Provision Is An Important Step Towards Stronger IP Protections

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Posted by Alex Hendrie, Tom Hebert on Monday, October 28th, 2019, 10:08 AM PERMALINK

The United States-Mexico-Canada Agreement (USMCA) represents a much-needed update to the 25-year-old North American Free Trade Agreement (NAFTA).

The global economy has changed significantly since the United States, Mexico, and Canada signed the NAFTA in 1992. The new USMCA recognizes this reality and modernizes trade relations between the three nations to better fit the new realities of the 21st century.

Importantly, the USMCA includes 10 years of data protection for lifesaving biologic medicines. This change will bring Mexico and Canada’s intellectual property protections up to U.S. standards that have existed for nearly a decade. 

Strong protection for biologics is critical. Biologics are the next generation of medicines, and are more costly and complex to produce than other cures. Data protection recognizes the extraordinary time, resources, and opportunity cost that innovators must devote to go through the FDA approval process. 

A recent study from the Tufts Center estimates that it costs an average of $2.6 billion over the course of 10 to 15 years to develop a new medicine. The USMCA’s 10-year period allows innovators to earn a positive rate of return on the immense costs associated with research, development, and the FDA approval process. The USMCA’s 10-year standard has bipartisan support and was signed into law by President Obama. 

America is a world leader in medical innovation. In 2017, the U.S. exported $51.2 billion in biopharmaceuticals. Such exports have grown 174 percent from 2002 to 2017. This research and development supports high-paying U.S. jobs across the country.

IP rights are also key to the U.S. economy at large. The U.S. Department of Commerce and U.S. Patent & Trademark Office found that IP-intensive industries contributed $6.6 trillion to the U.S. economy in 2014, or 38.2 percent of GDP. These industries directly and indirectly support 45.5 million jobs, account for $842 billion in merchandise exports, and generate $81 billion in service exports—well over half of all US exports.

While the USMCA will better ensure that North America remains a centerpiece of innovation, the agreement’s strong protection of IP rights is not universal. Many countries have policies that restrict innovation and punish ingenuity. 

As the Trump administration continues to negotiate better trade deals, the USMCA’s strong protections for biologics should serve as the model.

Photo Credit: Marco Verch

Report: Free File Tax Prep Program is Working

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Posted by Alex Hendrie on Tuesday, October 22nd, 2019, 2:41 PM PERMALINK

Despite the claims of the Left, the Free File tax preparation program is working as a solution to tax complexity for millions of Americans. This finding is based on a recent report conducted by the non-profit MITRE Corporation for the IRS.

The report found that the original goals of Free File have been met:

“The program objective of providing the venue for free tax filing for 70 percent of the population has been met. The e-filing objective has been met.”

Free File has offered this tax preparation option at a fraction of what it would cost the government to provide: 

“The [IRS] partnership with the [Free File] Alliance has allowed the IRS to fulfill a would-be-costly obligation at a fraction of the expenses….the program also increased the proportion of e-filings resulting in further cost savings to the IRS as electronic returns are far cheaper to process than paper forms.”

Free File was originally created 15 years ago as a public-private partnership between the IRS and tax preparation companies. Since its inception, the program has provided 70 percent of taxpayers (those with Adjusted Gross Income of below $66,000) with access to free online tax preparation software.

Throughout its history, Free File has been used by 53 million Americans and has resulted in $1.6 billion in savings. The average AGI of taxpayers using Free File is $23,247, so the benefits largely go toward lower income Americans.

Criticism of Free File Misses the Mark 

Despite this success, the Left has repeatedly claimed the program isn’t working. Critics point to the relatively low usage rate among eligible taxpayers as supposed proof that Free File isn’t working. However, this argument misses the mark. 

While only 3 million returns are filed through the Free File, tens of millions of returns are filed for free through other means.

In fact, the combined number of taxpayers using a paid preparer, self-filing through other means, or receiving free tax preparation software through other means totals over 90 million taxpayers, not far from the 103 million taxpayers that MITRE says is eligible for Free File. For instance:

  • 3 million taxpayer returns are processed through the Volunteer Income Tax Assistance Program, a free program offered by brick and mortar preparers.

  • An estimated 17.7 million taxpayers received tax preparation software for free outside the Free File program.

  • 8.7 million taxpayers self-prepared their own taxes using paper forms.

  • Nearly 10 million taxpayers participated chose to self-prepare their taxes and receive their refund immediately through a Refund Anticipation Check (RAC) or Refund Anticipation Loan (RAL).

  • Of those eligible for Free File, another 51 million used a paid preparer.  

The Left Wants to End Free File So the Government Can Take Over Tax Preparation 

The MITRE study was commissioned in part because of intense criticism from many on the Left that Free File was not working.  However, this criticism is borne from the Left’s desire to have the government file taxes.

Case in point – every April 15, far-left politicians such as Congresswoman Alexandria Ocasio-Cortez (D-N.Y.), Senator Bernie Sanders (I-Vt), and Senator Elizabeth Warren (D-Mass) call for the government to take over tax filing.

To be clear – this would be a terrible idea.

MITRE has previously noted that having the IRS file taxes would not be cost-beneficial and would not keep pace with innovation in the private sector. Similarly, Obama IRS Chief John Koskinen has said in the past that the IRS does not have the capability or interest in creating a government tax preparation system.

Even if they did, it would represent a huge conflict of interest. Under this system, the IRS assesses your taxes and then tells you how much you owe. Naturally, this creates an incentive to overcharge or withhold information from taxpayers. At the very least, it would empower the IRS to collect even more personal information and create a new pathway for the agency to target taxpayers.

The proposal is also unpopular. According to data by the Computer & Communications Industry Association, 60 percent of taxpayers oppose government tax preparation including 45 percent that “strongly oppose.” Just 8 percent of taxpayers strongly support government tax preparation.

Free File Should Be Improved, Not Ended 

While the MITRE report concludes that Free File is working, it points out areas of possible improvement. This is the right approach.

Throughout the history of Free File, the agreement between the IRS and tax preparation companies has successfully been updated seven times, so there is clear precedent for improvements.

Moving forward, MITRE suggests several ways to improve the program including having the IRS take steps to better promote Free File, conducting studies to better understand taxpayer filing preferences, and taking steps to improve taxpayer experience while utilizing Free File.

These and other reforms should be considered to build on the success of the program.

The recent MITRE study confirms that Free File is working. Since it’s inception, the program has promoted electronic filing and has assisted low-income Americans with tax complexity.

Critics on the Left desperately want to end the program as a first step toward having the government file taxes. This would not solve tax complexity, would needlessly waste government resources, and would open the door for the IRS to target taxpayers in new ways. 

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Lawmakers Should Ensure A Part D Benefit Redesign Does Not Disincentivize High Value Medicines

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Posted by Alex Hendrie on Tuesday, October 22nd, 2019, 2:22 PM PERMALINK

There are many areas of the healthcare system that lawmakers are currently striving to reform. (See full letter here.)

One of these areas is redesigning the Medicare Part D drug program with a number of systemic changes, including helping seniors better manage their out of pocket costs. 

Several months ago, the Senate Finance Committee advanced legislation – the Prescription Drug Reduction Act of 2019 – which among other things, included a proposal to redesign the Medicare Part D benefit.  The redesign, among other things, eliminates the current coverage gap, caps out of pocket costs for seniors at $3,100 and concerningly, places a new government liability on a select group of manufacturers. 

Efforts to reform Part D should be welcomed, however any reform should be done in a way that does not create winners and losers in the marketplace by disincentivizing high value, innovative medicines for seniors as the Finance Committee package risks doing with its redesign.

The Medicare Part D program has been successful due to its original design that relies on market forces. Part D is successful because it facilitates negotiation between different stakeholders. The system puts downward pressure on costs through competition between pharmacy benefit managers (PBMs), pharmaceutical manufacturers, plans, and pharmacies.

At the core of this program is the non-interference clause which prevents the Secretary of Health and Human Services (HHS) from interfering with these robust private-sector negotiations.

While this system is successful in maintaining low overall program costs, there is room to improve so the program remains competitive for innovation and manageable for seniors and their out of pocket expenses.

However, the existing Part D benefit structure is needlessly complex for seniors, manufacturers, payers and taxpayers, and creates distortions in the market place.

Under the existing system, seniors are required to pay a deductible up to $415. Once this amount is reached, a senior enters the initial coverage gap where they are required to pay 25% of costs throughout the initial coverage threshold. The plan is required to cover the remaining 75% so the senior’s maximum out of pocket cost up to this point is $1,266.25 ($415 + 25% of the initial coverage period).

Once the initial coverage threshold is exceeded, a senior enters the donut hole coverage gap.

Within the donut hole, consumers have been forced to pay out-of-pocket costs far exceeding other coverage thresholds.


In 2019, this coverage gap was hit at $8,139.54 in total spending and $5,100 in out-of-pocket costs. Past this threshold, seniors are required to pay 5% of the drug’s list price, the plan pays 15% and Medicare pays for 80%.

As noted by AEI, once a patient reaches the catastrophic phase of the design, there is limited liability for plans which can result in additional and unnecessary out of pocket costs for enrollees.

Figure 1 shows that distortions exist at each level of the current benefit design for patients, manufacturers, payers and taxpayers.

Lawmakers rightly want to improve this system. However, the proposed Senate Finance proposal does not adequately fix the existing distortions.

The Senate Finance bill contains several reforms:

  • This reform creates an out of pocket cap for seniors, which will help lower out of pocket spending for Americans.
  • A new catastrophic threshold of $3,100 in out of pocket costs is created, and patients would pay nothing after that cap is reached. 
  • To pay for this cap, starting in this catastrophic threshold, a new 20% liability is imposed on manufacturers whose patients enter the catastrophic phase, with the plan paying 60% of costs and Medicare paying 20%.
  • The new, 20 percent liability is similar to the 70 percent donut hole liability that is currently present in the benefit design. However, unlike the current donut hole design, this 20 percent liability is imposed on every dollar of new spending.


The Senate Finance Committee’s Part D redesign shifts manufacturer liabilities from many to a select and valuable few and does so by creating a new liability that only targets a segment of manufacturers whose patients enter the catastrophic phase.  While the goal of this reform is worthwhile, the policy it takes to get there creates new liabilities to the government and leaves distortions in the benefit and thus the marketplace.

The pay for mechanism for redesign disproportionately falls on manufacturers of high value, innovative drugs, as noted by Avalere, which could harm innovation in some disease areas, including diseases with little or no treatment options for seniors.

While the Senate Finance Committee’s out of pocket cap redesign appears to level the playing field, it does so with a dangerous side effect. As written, it is undeniable the Senate Finance Committee’s new 20 percent liability requirement will directly affect investment patterns present and future for companies that are pursuing high value therapies for Part D populations under the current benefit design.  

In fact, according to Avalere, the new increased liability in some classes of drugs could exceed 500%.

A better solution to reform the Part D benefit would be to reform it in a way that does not punish (and disincentivize) the development of high value treatments.

As lawmakers continue to look for ways to further improve the existing Finance Committee Part D redesign package, they should not overlook its damaging creation of new liabilities placed solely on one group of stakeholders.  A better option would not institute new liability that would greatly disrupt the marketplace which so many innovators have been working under. 

In considering any redesign for Medicare Part D, policy makers should ensure they do as much as possible to reduce distortions in the marketplace and ensure companies continue to compete and develop high value medicines for America’s seniors.

Photo Credit: Flickr

24 States Have Seen Record Low Unemployment Under Trump

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Posted by Alex Hendrie on Monday, October 21st, 2019, 11:30 AM PERMALINK

24 states have seen record low rates of unemployment since Donald Trump became President, according to data released last Friday by the Bureau of Labor Statistics.

The full list of states with record low unemployment rates under Trump includes Alabama, Alaska, Arkansas, California, Colorado, Hawaii, Idaho, Illinois, Iowa, Kentucky, Maine, Mississippi, Missouri, New Jersey, New York, North Dakota, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Vermont, Washington, and Wisconsin.

Many of these states have seen unemployment rates of 3 percent or lower under President Trump including Wisconsin (2.8 percent), Maine (2.9 percent), Iowa (2.4 percent), and Colorado (2.6 percent).

This low state unemployment should not be surprising – nationwide, the unemployment rate was 3.5 percent in September, a 50 year low.

Since President Trump took office, over 6.4 million jobs have been created and the unemployment rate for Hispanics, African Americans, Asian Americans, and adult women has hit historic lows.

In August, there was over 7 million job openings and over 5.8 million people started a new job.

In addition, the ratio of unemployed persons to job openings is just 0.9 as of August 2019, according to recent Labor Department Job Openings and Labor Turnover Data.

Wages are also growing.

Real median household income has grown by $4,144, or 6.8 percent since the start of the Trump presidency, according to data published in the Wall Street Journal. 

This is the highest real median household income ever and dwarfs wage growth under Barack Obama’s presidency which was around $1,000 as noted by Stephen Moore.

Clearly, the economy is strong for American workers and businesses. However, the Trump administration is not resting on its laurels and continues to push policies that build on this success. For instance: 

  • President Trump recently negotiated a new, U.S.-Japan Trade Agreement with Japanese Prime Minister Shinzo Abe. This agreement will lower barriers to trade and reduce tariffs, increase U.S. exports to Japan, grow the agricultural sector, and promote jobs.


  • The administration is making progress on a phase one of a trade agreement with China. The agreement is expected to include a deal for China to buy U.S. agricultural products and a suspension of planned tariffs.


  • The administration continues to push Congress to take up the United States-Mexico-Canada trade agreement (USMCA). The USMCA would raise U.S. real GDP by $68.2 billion and create 176,000 American jobs, according to the International Trade Commission. The agreement will increase U.S exports to Canada by $19.1 billion and increase U.S. exports to Mexico by $14.2 billion.

List of states with record low unemployment under President Trump 

Source: Bureau of Labor Statistics Data – October 18, 2019 [link]


Historic Low Rate

Historic Low Date


3 percent

September 2019


6.2 percent

September 2019


3.4 percent

August 2019


4 percent

September 2019


2.6 percent

June 2017


2.2 percent

November 2017


2.7 percent

October 2018


3.9 percent

September 2019


2.4 percent

June 2019


4 percent

May 2019


2.9 percent

September 2019


4.7 percent

January 2019


3 percent

October 2018

New Jersey

3.1 percent

September 2019

New York

3.8 percent

October 2018

North Dakota

2.3 percent

June 2019


4 percent

August 2019


3.8 percent

June 2019

South Carolina

2.9 percent

September 2019


3.2 percent

April 2019


3.4 percent

September 2019


2.1 percent

August 2019


4.4 percent

October 2018


2.8 percent

May 2019


Photo Credit: Gage Skidmore

Pelosi Drug Plan Could Impose 95% Tax on Cures for Cancer, Hep-C, MS and More

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Posted by Alex Hendrie on Monday, October 21st, 2019, 10:00 AM PERMALINK

The House Democrat drug pricing plan championed by House Speaker Nancy Pelosi (D-Calif.) could impose a 95 percent tax on hundreds of life-saving and life-preserving drugs including cures for cancer, hepatitis C, epilepsy, and multiple sclerosis.

The legislation (HR 3 - the Lower Drug Costs Now Act) imposes a retroactive, 95 percent excise tax on up to 250 drugs. This tax is imposed on the sales of a drug if the manufacturer does not agree to government-imposed prices. The tax starts at a 65 percent rate, increasing by 10 percent every quarter a manufacturer is out of “compliance.”

Under the Pelosi drug plan, 250 medicines including 125 of the top Medicare Part D drugs (by total spending) are eligible to be selected by the HHS Secretary, meaning they could face the 95 percent tax. 

Based on research by Americans for Affordable Prescription Drugs, the 95 percent tax could hit the following Part D treatments:

  • Leukemia: 5 drugs to treat leukemia (Imbruvica, Imatinib Meslyate, Gleevac, Sprycel, Tasigna)
  • Cancer: 6 drugs to treat other forms of cancer including breast cancer, liver cancer, prostate cancer, and kidney cancer (Ibrance, Imbruvica, Zytiga, Xtandi, Afinitor, Tarceva)
  • MS: 7 drugs to treat multiple sclerosis (Copaxone, Tecfidera, Avonex, H.P. Acthar, Ofev, Gilenya, Avonex Pen)
  • Schizophrenia: 2 drugs to treat Schizophrenia (Invega Sustenna, Aripiprazole)
  • Bipolar: 2 drugs to treat bipolar (Latuda, Aripiprazole)
  • Epilepsy: 2 drugs to treat epilepsy (Lyrica, Vimpat)
  • Lung disease: 6 drugs to treat lung disease (Advair Diskus, Spiriva, Symbicort, Spiriva Respimat, Anoro Ellipta, Incruse Ellipta)
  • High Blood Pressure: 2 drugs to treat high blood pressure (Zetia, Bystolic)
  • Diabetes: 19 drugs to treat diabetes (Januvia, Lantus Solostar, Lantus, Novolog Flexpen, Levemir Flextouch, Humalog Kwikpen U-100, Tradjenta, Invokana, Novolog, Trulicity, Janumet, Humalog, Toujeo Solostar, Levemir, Novolog Mix 70-30 Flexpen, Tresiba Flextouch U-200, Jardiance, Humalog Mix 75-25 Kwikpen, Welchol)
  • HIV/AIDS: 7 drugs to treat HIV/AIDS (Genvoya, Triumeq, Tivicay, Truvada, Atripia, Prezista, Isentress)
  • Hepatitis C: 3 drugs to treat Hepatitis C (Harvoni, Eclupsa, Zepatier)
  • High cholesterol: 2 drugs to treat high cholesterol (Crestor, Welchol)

If the entire 125 top Part D drugs were selected, it would amount to a $90 billion tax increase on seniors' medicines over ten years based on the above research.

The 95 percent Pelosi tax applies to the entire market, not just Medicare Part D, so the overall tax hike would be far greater. 

Because the Pelosi drug tax would not be deductible from income taxes, the nonpartisan Congressional Budget Office estimates that it could result in a manufacturer being taxed more than their total sales:

“the combination of income taxes and excise taxes on the sales could cause the drug manufacturer to lose money if the drug was sold in the United States.”

As an alternative to paying the tax, the CBO analysis stated that manufacturers could withdraw a drug from the market resulting in no revenue from the Pelosi tax:

“CBO and JCT anticipated that manufacturers would discontinue sales in the United States if the excise tax was levied on a drug, resulting in no revenue in that case.”

The 95 percent tax led over 70 groups and activists to write in opposition to the Pelosi plan.

As they noted, if the Pelosi plan were to become law it would dramatically change the American healthcare system in a way that will harm patients, innovators and providers.

Photo Credit: Gage Skidmore

Study: Medicare for All Requires $32 Trillion in Tax Hikes

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Posted by Alex Hendrie on Wednesday, October 16th, 2019, 2:14 PM PERMALINK

Medicare for All will require $32 trillion in higher taxes over the next decade, according to a report by the Urban Institute and the Commonwealth Fund. 

The study analyzes several healthcare reform options including socialized healthcare. The report describes this plan: 

Single Payer Enhanced: This plan covers all U.S. residents, including undocumented immigrants, and features a broader set of benefits than Single Payer “Lite,” including adult dental, vision, and hearing care as a well as a home- and community-based long-term services and supports benefit. In addition, there are no cost-sharing requirements. There is no private insurance option

The report lists four cost estimates for this reform ranging from $29.031 trillion to $34.884 trillion over a decade:

  • Single-payer enhanced with broad benefits and no cost sharing - $32.015 trillion
  • Single-payer enhanced assuming higher provider payments - $34.884 trillion
  • Single-payer enhanced assuming state maintenance of efforts - $29.031 trillion
  • Single-payer enhanced assuming lower administrative costs - $30.568 trillion

As Joe Biden tweeted, this will require significant tax increases on the middle class:

Let’s put this in perspective: if you eliminate every single solitary soldier, tank, satellite, nuclear weapon, eliminate the Pentagon and it would only pay for 4 months of Medicare for All. 4 months.

Where do the other 8 months come from? Your paycheck.

Biden has pointed out before that Medicare for All will require middle class tax increases. On Sept. 23 Biden said: "It’s going to cost a lot of money and she's going to raise people's taxes doing it.”

Despite this, Elizabeth Warren has refused to answer whether Medicare for All will raise taxes on the middle class at least 17 times.

There is no way to come close to paying for Medicare for All without dramatic tax increases on the middle class. The proposal released by Bernie Sanders contains $14 trillion in tax hikes, roughly 40% of the total cost of Medicare for All.

It is also important to note that a significant portion of Sanders’ $14 trillion tax increase relies on eliminating healthcare options for American families ($4.2 trillion) and a 7 percent tax on employers large and small ($3.5 trillion).

Regardless, taxes on “the rich” will not come close to paying for Medicare for All.

For instance, a “wealth tax,” a financial transactions tax, a 10 percent surtax on “the wealthy,” a 70 percent top rate, and doubling the tax rate on capital gains would pay for roughly 20 percent of the cost of Medicare for All according to the best-case scenario estimates by the left.

These estimates assume no negative economic feedback, no changes in behavior, and do not account for any revenue loss from the co-mingling of taxes: 

  • A wealth tax (2% annual tax on $50 million in wealth, 3% annual tax on $1 billion) – a $2.75 trillion tax increase
  • A financial transactions tax (0.1 percent on every transaction) – a $777 billion tax increase
  • A 10 percent surtax on the wealthy ($2.9 mil in income and above) -- an $800 billion tax increase
  • 70 percent top marginal income tax rate – a $353 billion tax increase
  • Doubling tax rates on capital gains -- a $1.5 trillion tax increase

 Total: $6.17 trillion (19 percent to 21 percent of the $32 - $36 trillion cost of “Medicare For All.”)

"Elizabeth Warren won’t admit the obvious. She will impose broad-based tax hikes on the middle class,” said Americans for Tax Reform president Grover Norquist.

Photo Credit: GotCredit

Pelosi Drug Pricing Plan Contains 95% Manufacturer Excise Tax

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Posted by Alex Hendrie on Tuesday, October 15th, 2019, 1:00 PM PERMALINK

House Speaker Nancy Pelosi’s drug pricing legislation, HR 3, the “Lower Drug Costs Now Act,” imposes a new excise tax on manufacturers of up to 95 percent of sales for refusing government price setting.

This 95 percent tax is imposed on the sales of a drug. In addition, it can be applied retroactively, and is imposed in addition to income taxes. 

As noted by The Congressional Budget Office, this tax is used by the government to enforce price controls on manufacturers: 

"If manufacturers did not enter into negotiations or agree to prices by specified dates or if they did not meet other conditions, they would be subject to an excise tax of up to 95 percent of the sales of those drugs."

CBO offers no projection on the total revenue score of this tax. They assume that a manufacturer will either comply with government price setting (which will not trigger the tax) or leave the U.S. market entirely (resulting in a zero liability as the tax is on US sales):

“CBO and JCT anticipated that manufacturers would discontinue sales in the United States if the excise tax was levied on a drug, resulting in no revenue in that case.”

So, how does this tax work? 

  • This tax is described in the legislation as a “Drug Manufacturer Excise Tax” under Section 102 of the legislation and is imposed “on the sale by the manufacturer, producer, or importer of any selected drug during a day.”
  • This tax applies to between 25 and 250 drugs as selected by the Secretary of the Department of Health and Human Services. Eligible drugs include the 125 most expensive “Covered Part D drugs” under Sec. 1860D–2(e) of the Social Security Act, the 125 most expensive drugs in the US, and approved insulin drugs.
  • The tax rate is set at 65 percent for the first 90 days of non-compliance, 75 percent for the 91st to 180th days of non-compliance, 85 percent for the next 181st and 270th days of non-compliance, and 95 percent beginning the 271st day of non-compliance.
  • The tax is triggered under the following “non-compliance periods”:
    • If a manufacturer is out of compliance with the selected drug publication date – defined as April 15 of a plan year that begins 2 years prior to such year – and refuses to enter into negotiations;
    • If a manufacturer does not agree to the government set price – described in the bill as the “maximum set price;”
    • If a manufacturer fails to provide information on domestic and foreign sales of their drugs as requested by the HHS;
    • If a manufacturer fails to provide a retroactive penalty to Treasury for having higher prices than in six countries (Australia, Canada, France, Germany, Japan, and the United Kingdom). Higher price is calculated as both net average price and volume weighted price;
    • If the HHS Secretary asks for renegotiation of the price of a drug and the manufacturer does not comply;
  • The HHS Secretary is given the authority to apply the tax to sales outside of this period “in the case of a sale which was timed for the purpose of avoiding the tax.”
  • Unlike many other taxes in the code, this tax is not deductible when determining income taxes.
  • This tax is problematic for a number of reasons:
    • It is imposed at such a high rate that it will result in income taxes above 100 percent of income even if applied to a portion of a business’s sales.  
    • It imposed retroactively, rather than prospectively. Taxes are typically imposed prospectively in order to promote consistency, certainty and fairness. All taxpayers deserve to make decisions based on a reasonable interpretation of the law with the expectation that the future changes to the law will not be applied looking backwards.
    • It is imposed on sales, not income. Businesses are typically taxed on their income as it allows them to deduct expenses such as wages and other employee benefits, equipment, and machinery. A tax on sales is imposed irrespective of whether a business made any money. 


Photo Credit: Brookings Institution - Flickr

ATR Leads Coalition Opposed to Pelosi's 95% Drug Tax

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Posted by Alex Hendrie on Tuesday, October 15th, 2019, 6:00 AM PERMALINK

ATR today released a coalition letter signed by 71 groups and activists in opposition to the Pelosi drug pricing proposal to create a 95 percent tax on pharmaceutical manufacturers.

As noted in the letter, this bill calls for a retroactive tax on sales that is imposed in addition to existing income taxes:

Under Speaker Pelosi’s plan, 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.

The tax is used to enforce price controls on medicines that will crush innovation and distort the existing supply chain as the signers note:

“The alternative to paying this tax is for the companies to submit to strict government price controls on the medicines they produce. While the Pelosi bill claims this is “negotiation,” the plan is more akin to theft.”

This proposal will create significant harm to American innovation to the detriment of jobs, wages, and patients, as the letter notes:

”[The Pelosi] proposal would crush the pharmaceutical industry, deter innovation, and dramatically reduce the ability of patients to access life-saving medicines.

The full letter is found here and is below:

Dear Members of Congress:

We write in opposition to the prescription drug pricing bill offered by House Speaker Nancy Pelosi that would impose an excise tax of up to a 95 percent on hundreds of prescription medicines.

In addition to this new tax, 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.

Under Speaker Pelosi’s plan, 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 alternative to paying this tax is for the companies to submit to strict government price controls on the medicines they produce. While the Pelosi bill claims this is “negotiation,” the plan is more akin to theft.

If this tax hike plan were signed into law, it would cripple the ability of manufacturers to operate and develop new medicines.

It is clear that the Pelosi plan does not represent a good faith attempt to lower drug prices. Rather, it is a proposal that would crush the pharmaceutical industry, deter innovation, and dramatically reduce the ability of patients to access life-saving medicines.

We urge you to oppose the Pelosi plan that would impose price controls and a 95 percent medicine tax on the companies that develop and produce these medicines.


Grover Norquist
President, Americans For Tax Reform

James L. Martin
Founder/Chairman, 60 Plus Association

Saulius “Saul” Anuzis
President, 60 Plus Association           

Marty Connors
Chair, Alabama Center Right Coalition                      

Bob Carlstrom
President, AMAC Action

Dick Patten
President, American Business Defense Council

Phil Kerpen
President, American Commitment

Daniel Schneider
Executive Director, American Conservative Union

Steve Pociask
President/CEO, The American Consumer Institute Center for Citizen Research

Lisa B. Nelson
CEO, American Legislative Exchange Council

Michael Bowman
Vice President of Policy, ALEC Action

Dee Stewart
President, Americans for a Balanced Budget

Tom Giovanetti
President, Americans for a Strong Economy

Norm Singleton
President, Campaign for Liberty

Ryan Ellis
President, Center for a Free Economy

Andrew F. Quinlan
President, Center for Freedom & Prosperity

Jeffrey Mazzella
President, Center for Individual Freedom

Ginevra Joyce-Myers
Executive Director, Center for Innovation and Free Enterprise

Peter J. Pitts
President, Center for Medicine in the Public Interest

Olivia Grady
Senior Fellow, Center for Worker Freedom

Chuck Muth
President, Citizen Outreach

David McIntosh
President, Club for Growth

Curt Levey
President, The Committee for Justice

Iain Murray
Vice President, Competitive Enterprise Institute

James Edwards
Executive Director, Conservatives for Property Rights

Matthew Kandrach​​​​​​​
President, Consumer Action for a Strong Economy

Fred Cyrus Roeder​​​​​​​
Managing Director, Consumer Choice Center

Tom Schatz ​​​​​​​
President, Council for Citizens Against Government Waste

Katie McAuliffe​​​​​​​
Executive Director, Digital Liberty

Richard Watson
Co-Chair, Florida Center Right Coalition

Adam Brandon
President, Freedomworks​​​​​​​

George Landrith ​​​​​​​
President, Frontiers of Freedom

Grace-Marie Turner
President, Galen Institute

Naomi Lopez
Director of Healthcare Policy, Goldwater Institute

The Honorable Frank Lasee ​​​​​​​
President, The Heartland Institute

Jessica Anderson
Vice President, Heritage Action for America

Rodolfo E. Milani ​​​​​​​
Trustee, Hispanic American Center for Economic Research
Founder, Miami Freedom Forum

Mario H. Lopez
President, Hispanic Leadership Fund

Carrie Lukas
President, Independent Women’s Forum

Heather R. Higgins
CEO, Independent Women’s Voice

Merrill Matthews
Resident Scholar, Institute for Policy Innovation

Chris Ingstad​​​​​​​
President, Iowans for Tax Relief

Sal Nuzzo​​​​​​​
Vice President of Policy, The James Madison Institute

The Honorable Paul R LePage ​​​​​​​
Governor of Maine 2011-2019

Seton Motley
President, Less Government

Doug McCullough
Director, Lone Star Policy Institute

Mary Adams
Chair, Maine Center Right Coalition

The Honorable Bruce Poliquin
Maine Congressman 2nd District, 2015-18

Matthew Gagnon​​​​​​​
CEO, The Maine Heritage Policy Center

Victoria Bucklin ​​​​​​​
President, Maine State Chapter - Parents Involved in Education

Charles Sauer ​​​​​​​
President, Market Institute

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

The Honorable Tim Jones
Leader, Missouri Center-Right Coalition

Brent Mead
CEO, Montana Policy Institute

Pete Sepp ​​​​​​​
President, National Taxpayers Union

The Honorable Bill O'Brien
The Honorable Stephen Stepanek​​​​​​​
Co-chairs, New Hampshire Center Right Coalition

The Honorable Beth A. O’Connor
Maine House of Representatives

The Honorable Niraj J. Antani​​​​​​​
Ohio State Representative

Douglas Kellogg
Executive Director, Ohioans for Tax Reform

Honorable Jeff Kropf ​​​​​​​
Executive Director, Oregon Capitol Watch Foundation

Daniel Erspamer ​​​​​​​
CEO, Pelican Institute for Public Policy

Lorenzo Montanari​​​​​​​
Executive Director, Property Rights Alliance

Paul Gessing ​​​​​​​
President, Rio Grande Foundation

James L. Setterlund​​​​​​​
Executive Director, Shareholder Advocacy Forum

Karen Kerrigan
President and CEO, Small Business Entrepreneurship Council

David Miller & Brian Shrive
Chairs, Southwest Ohio Center-right Coalition

Tim Andrews
Executive Director, Taxpayers Protection Alliance

Judson Phillips
President, Tea Party Nation

David Balat ​​​​​​​
Director, Right on Healthcare - Texas Public Policy Foundation

Sara Croom ​​​​​​​
President, Trade Alliance to Promote Prosperity

Kevin Fuller
Executive Director, Wyoming Liberty Group

Photo Credit: AFGE - Flickr