Alex Hendrie

ATR Leads Coalition Opposing H.R. 3, Bill to Impose Price Controls on American Medical Innovation

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Posted by Alex Hendrie on Wednesday, June 2nd, 2021, 4:00 AM PERMALINK

ATR today released a coalition letter signed by 71 organizations and activists urging members of Congress to oppose H.R. 3, the Lower Drug Costs Now Act

This legislation imposes new taxes and government price controls on American medical innovation. It creates a 95 percent excise tax on manufacturers and imposes an international reference pricing scheme that directly imports foreign price controls into the U.S. 

The letter outlines several ways in which this bill will harm American patients and degrade America’s world-leading role in medical innovation. 

H.R. 3 would impose price controls from socialized medicine systems. Countries like Australia, the United Kingdom, and Canada would be able to dictate the terms of the American marketplace for medicines. Our patients and innovative research and development would pay the price. 

H.R. 3 would weaponize the tax code and enact a discriminatory 95 percent excise tax on manufacturers. Under the legislation, pharmaceutical manufacturers that do not agree to foreign price controls 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. 

This package of foreign price controls with a punitive excise tax on medicines will harm American patients by limiting access to new cures. Countries like Australia, the United Kingdom, and Canada often have to wait years before accessing the same treatments Americans get right away. 

According to a study by the Galen Institute, patients in the U.S. had access to nearly 90 percent of new medical substances launched between 2011 and 2018. By contrast, other developed countries had a fraction of these new cures. Patients in the United Kingdom had 60 percent of new substances, Japan had 50 percent, Canada had 44 percent, and Spain had 14 percent. In many cases, Americans are able to buy less expensive generics before countries with socialized medicine can even access the underlying new medicines. 

H.R. 3 will threaten high-paying manufacturing jobs across the country at a time when we are just emerging from the economic wreckage from the pandemic. According to a 2017 study by TEConomy Partners, pharmaceutical manufacturers invest $100 billion in the U.S. economy every year, directly supporting 800,000 jobs including jobs in every state. These jobs are high-paying – the average compensation is $126,000 – more than double the average wage in the U.S. When accounting for indirect and induced jobs, medical innovation supports more than four million jobs. 

The need for free market policies that promote American medical innovation is clear now more than ever. Thanks to American ingenuity, some of the most effective vaccines in history have been developed to fight the Coronavirus pandemic, at the fastest rates ever. In fact, vaccines developed by Pfizer and Moderna are both over 90 percent effective– a groundbreaking improvement over the typical flu vaccine, for example, which is 40 to 60 percent effective. 

Far-left politicians are committed to imposing socialist policies on the entire American healthcare system. Price controls on medicines are just the first step. 

Click here to view the letter. 

Photo Credit: Marco Verch Professional Photographer


IRS Employee Shortage is Not Due to Lack of Federal Funding

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Posted by Alex Hendrie on Monday, May 17th, 2021, 4:00 PM PERMALINK

The IRS has a well-documented workforce shortage. However, this problem is not due to a lack of federal funding but because of the agency’s disorganization, incompetence, and the existence of labor union rules that promote needless bureaucracy.

As noted in the 2020 National Taxpayer Advocates Report to Congress notes, the IRS has failed to hire 5,000 full time employees between 2017 and 2019 which it has been allocated funding for:

“The IRS has been unable to meet its projected hiring each year. Between FYs 2017 and 2019, the IRS failed to hire over 5,000 FTEs for which it had allocated funding.”

One culprit of the hiring problem is the existence of a union contract that requires the IRS to first consider internal applicants before hiring externally. This requirement leads to a “waste of time and resources” and often results in the agency “shuffling existing employees around.” As the report notes:

“In addition to focusing on recruitment efforts, the IRS needs to expand its ability to hire externally. Under the current union contract, the IRS is required to consider internal applicants first for any bargaining unit position vacancy announcement. The result is that the IRS often finds itself simply shuffling existing employees around between positions rather than bringing in new employees. The time spent announcing a position internally first and then having to go through the external process is significant and can be a waste of time and resources.”

The IRS workforce shortage is also due to the inefficient, outdated hiring process run by the IRS Human Capital Office (HCO). As the report notes, this office has not updated its workforce plan in 15 years:

“IRS HCO (Human Capital Office) has known about these human capital challenges for some time, but the IRS had not taken an indepth look at an IRS-wide strategic human capital plan or workforce plan since 2005-2006.”

As a result, the HCO takes an average of 120 days to hire a new employee. This is 50 percent longer than its target goal:

“IRS’s HCO has also adopted this goal of an 80-day hiring cycle time as one of its “Key Performance Measures” for FY 2020.27 This is a reasonable goal, but the IRS continues to fall short. According to information set forth in HCO’s FY 2020 Business Performance Review, its actual hiring cycle time for FY 2020 was approximately 120 days, nearly 50 percent longer than its target goal for the year.”

 While many on the Left argue that the IRS is in dire need of more federal funding, the agency is a poorly run and is in desperate need of reform, not more taxpayer dollars.

Photo Credit: Shashi Bellamkonda


Biden’s Tax Hike on 1031s Should be Rejected

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Posted by Alex Hendrie on Wednesday, May 12th, 2021, 9:00 AM PERMALINK

President Joe Biden has proposed capping Section 1031 “Like-kind exchanges” as part of a multi-part “infrastructure” spending plan that raises taxes by $3.5 trillion. Biden would disallow taxpayers from utilizing 1031s if they had gains exceeding $500,000.

This tax hike is misguided and should be rejected. 1031s are not a tax loophole as some claim but are important tax provisions promoting reinvestment and liquidity. Repealing this provision would harm smaller real estate investors by forcing them to forego new investments or go into debt to finance transactions. It would also fail to raise significant revenue and is almost useless as a “pay-for” for the Biden spending plan.

What are 1031s?

1031s promote investment in residential and non-residential property by allowing taxpayers to defer taxes on their capital gains if they reinvest these earnings in a new property. 

Section 1031 has existed in the tax code for 100 years. It allows investors to defer paying taxes on the sale of real property if they reinvest the earnings into a substantially similar asset. This can be done, again and again, provided the transaction involves a similar type of property.

Because investors don’t have to pay tax until they cash out, Section 1031 eliminates a potential barrier to investment, which in turn promotes the more efficient allocation of capital resources.

For many years, 1031s were widely used for assets including real estate, machinery for farming and mining, and equipment such as trucks and cars.  

As of the 2017 Tax Cuts and Jobs Act, like-kind exchanges can only be used for real property. Other assets are no longer eligible because they instead qualify for “full business expensing,” which incentivizes capital expenditure by allowing businesses to deduct the cost of new investments immediately.

However, Congress affirmatively retained like-kind exchanges for real estate in acknowledging the importance of Section 1031 as a provision to incentivize capital formation and investment in property.

1031s are not a tax loophole

Critics of 1031s often falsely allege that they are a loophole that allows taxpayers to avoid taxes. This is not true because the provision defers rather than eliminates tax liability. A taxpayer that utilizes Section 1031 will eventually pay taxes on the asset when they cash out.

In many cases, the tax deferral period is shorter than many assume because taxpayers do not utilize 1031s indefinitely. As noted in a study conducted by David C. Ling and Milena Petrova, the vast majority of 1031 acquired assets are later disposed of in a taxable sale:

“In contrast to the common view that replacement properties in an exchange are frequently disposed of in a subsequent exchange to potentially avoid capital gain and depreciation tax liability indefinitely, we find that in 88 percent of the cases in our dataset, investors dispose of properties acquired in a 1031 exchange through a taxable sale.”

How do 1031s benefit the economy?

There are significant benefits to the tax deferral offered by 1031s.

Recent studies have found that 1031s help provide taxpayers with liquidity that they can use to invest and create jobs. For instance, a study conducted by EY found that 1031s contribute $55.3 billion in GDP in 2021 and support 568,000 jobs and $27.5 billion of labor income.

By providing additional liquidity, 1031s allows investors to avoid taking on debt and becoming over-leveraged. This also helps with the financing of new real estate projects, promoting a competitive and affordable housing market.

1031s are typically used for smaller real estate transactions. According to the National Association of Realtors, 1031s were used in about 12 percent of real estate sales. Almost 85 percent of these transactions were from smaller investors such as sole proprietorships or S corporations.

Repealing 1031s would harm investment in property. It would increase holding periods as taxpayers would be encouraged to retain assets longer to avoid paying capital gains taxes.

In fact, due to the added complexities of financing projects and taking on debt, an estimated 40 percent of real estate transactions would not have occurred without 1031s.

Repealing 1031 raises very little revenue

In addition to having significant negative economic impacts, repealing 1031s would raise very little revenue.

During the presidential campaign, Biden called for using revenue raised from repealing 1031s to finance $775 billion in new spending on childcare and elder care over the next decade. However, repeal of 1031s does not come close to paying for the total cost of this new spending.

According to the Joint Committee on Taxation’s tax expenditure report, like-kind exchanges reduce revenue by $51 billion over five years.

However, this number should not be confused with the amount of revenue that would be gained from repealing the provision. As the JCT notes, tax expenditure calculations should not be confused for revenue estimates, in part because they fail to account for behavioral changes:

“A tax expenditure calculation is not the same as a revenue estimate for the repeal of the tax expenditure provision…unlike revenue estimates, tax expenditure calculations do not incorporate the effects of the behavioral changes that are anticipated to occur in response to the repeal of a tax expenditure provision.”

Before the TCJA narrowed 1031s to real estate, the JCT estimated that this tax expenditure was $98.6 billion over five years. In contrast, revenue raised from repealing 1031s was just $9.3 billion over five years, just 10 percent of tax expenditure value.

This significant difference is due to the fact that repealing like-kind exchanges would significantly alter the behavior of taxpayers leading them to forego new investments, which would reduce future taxes paid when the asset is sold, and reduce revenues from higher wages and more jobs created by 1031s.

Extrapolating this number based on today’s tax expenditure estimate would suggest that the score of repealing 1031s currently would be just $5 to $6 billion over five years. Extending this estimate further to the ten-year window would suggest revenue raised of just $10 to $12 billion – a fraction of the of Biden’s $775 billion in new spending.

Photo Credit: Mark Moz


Five Reasons to Reject Biden’s Capital Gains Tax Increase

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Posted by Alex Hendrie on Friday, April 30th, 2021, 2:25 PM PERMALINK

President Joe Biden has proposed doubling the capital gains tax as part of his so-called “American Families Plan.” Under his proposal, the top federal capital gains tax will be 43.4 percent including a 39.6 percent long-term capital gains rate and the 3.8 percent Obamacare net investment income tax. Biden also calls for increasing taxes on carried interest capital gains.

Here are five reasons Biden’s capital gains tax should be rejected:

1. Biden’s Capital Gains Tax Hikes Will Harm the Economy

The capital gains tax is really a tax on investors and savers. Increasing the tax will increase the cost of capital, decreasing new investment. In turn, this will harm business creation, business expansion, and entrepreneurship, and threaten jobs and wages.

Capital gains taxes are imposed when a taxpayer sells an asset, such as stocks, bonds, or real estate. The tax is imposed on the difference between the purchase price, or cost basis, and the sale price.

Capital gains taxes create double taxation on corporate income as it is an additional layer of tax on business income. First, businesses pay the corporate income tax on their earnings. Second, the investor pays the capital gains tax on dividends received or stocks when they are sold. This double taxation discourages savings, suppresses productivity, and discourages investment. It acts as a barrier to job creation, wage growth, and economic growth.

2. Doubling the capital gains rate would make the United States less competitive

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

OECD Simple Average: 18.4% 

OECD Weighted Average: 23.2% 

China's Capital Gains Rate: 20% 

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

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

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

3. Biden’s Carried Interest Tax Hike Would Harm Savers across the Country

In addition to raising the capital gains tax, Biden would increase taxes on carried interest capital gains. Not only would this have the same negative impact as the capital gains tax increase, but it will also threaten the retirement savings of Americans across the country.

Carried interest is simply the tax treatment for investment made by private equity investors. Private equity is an investment class structured as a partnership agreement between an expert investor and individuals with capital.

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.

4. Biden’s capital gains tax hike could reduce revenues                

The capital gains tax creates a “lock-in” effect. Because the tax only applies when a taxpayer sells the asset, a high capital gains rate discourages individuals from selling in order to delay having to pay the tax.  

As noted by Lawrence Lindsey in a Wall Street Journal op-ed, raising the capital gains tax rate to 43.4 percent would make the cap gains rate significantly higher than the revenue-maximizing rate. The revenue-maximizing rate is the highest rate a tax can be before government starts losing revenue.

While there is dispute over what this rate is, there is broad agreement that it is significantly higher than Biden’s 43.4 percent. For instance, the Joint Committee on Taxation puts the revenue-maximizing capital gains rate at 28 percent, while others, including Lindsey argue it is 10 points lower, at around 18 percent.

Case in point - an analysis by the Penn Wharton Budget Model found that raising the capital gains tax rate to 43.4 percent in isolation would reduce federal revenues by $33 billion over the next decade.

Historically, when the capital gains tax was cut, revenue increased. When the capital gains tax is low, investment increases, stock prices increase, and revenue goes up. The inverse is of course true.  

In 1997, Congress cut the capital gains tax rate from 28 to 20 percent. Revenue estimators expected to collect $285 billion of capital gains tax revenue for fiscal years 1997-2000. However, tax revenues came in at $374 billion, 31 percent higher than revenue estimators suggested.  

Similarly, as part of a larger tax bill in 2003, the capital gains tax rate was reduced from 20 to 15 percent. In 2003, JCT/CBO anticipated the government would collect $327 billion of capital gains tax revenue over the next 5-years. However, the government collected $537 billion. Not only does this mean that tax revenues were “higher than expected,” but tax revenues exceeded the pre-tax cut forecast. During that time there was no loss to the Treasury.  

5. Democrats have recognized the damage caused by a high capital gains tax rate

In recent years, President Barack Obama and Senator Chuck Schumer railed raising the capital gains rate to the 43.4 percent rate proposed by Biden.

In a 2008 CNBC interview with Maria Bartiromo, President Obama said he opposed raising the capital gains tax to “confiscatory rates” which he defined as above 28 percent. As he noted:

“Here's my belief, that we can't go back to some of the, you know, confiscatory rates that existed in the past that distorted sound economics. And I certainly would not go above what existed under Bill Clinton, which was the 28 percent… My guess would be it would be significantly lower than that.” 

Similarly, in 2012, Senator Chuck Schumer (D-NY) rejected doubling the capital gains tax rate to 39.6 percent, the same rate that President Joe Biden is expected to soon propose. As Schumer noted: 

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

Photo Credit: jlhervas


One Million Small Businesses Will See Higher Taxes Under Biden Plan to Raise Corporate Tax

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Posted by Alex Hendrie on Friday, April 30th, 2021, 11:00 AM PERMALINK

Biden’s plan to raise the corporate tax rate from 21 percent to 28 percent could raise taxes on 1 million small businesses across the country.

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

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

Raising the corporate rate will also harm American workers and families in the form of fewer job opportunities, lower wages, and reduced life savings.

As noted by Stephen Entin of the Tax Foundation, labor (or workers) bear an estimated 70 percent of the burden of corporate tax hikes. There is debate over how much workers bear of this tax, with some economists arguing just 20 percent is borne by labor, while others argue 50 percent or even 100 percent of the tax hits workers.  But even if we assume that workers bear just 20 percent of the corporate tax, workers will collectively be hundreds of billions of dollars worse off. 

These tax hikes will also harm millions of middle class Americans that are invested in publicly traded corporations through the stock market including the 53 percent of American households’ own stock, the 80 to 100 million Americans that have a 401(k) and the 46.4 million households that have an individual retirement account.

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Biden Plan to Impose Second Death Tax Will Harm US Economy and Family-Owned Businesses

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Posted by Alex Hendrie on Wednesday, April 28th, 2021, 11:31 AM PERMALINK

President Joe Biden is proposing to create a second Death Tax by repealing step-up in basis. This will impose the capital gains tax (which Biden has proposed raising to 43.4 percent) on the unrealized gains of every asset owned by a taxpayer when they die and will be imposed in addition to the existing 40 percent Death Tax.

Repeal of step-up in basis, which has been proposed as part of Biden’s “American Families Plan,” will create new complexity for many taxpayers including family-owned businesses. It will force businesses to downsize and liquidate assets, leading to fewer jobs, lower wages, and reduced GDP. 

Repealing step-up in basis will disproportionately fall on family-owned businesses, many of which are asset rich, but cash poor. These businesses are already forced to liquidate structures, equipment, land, and other assets because of the Death Tax. Repealing step-up in basis will compound this problem and force family-owned businesses to sell a significant portion of their business or go into significant debt to pay their tax liability.

Repealing step-up in basis will create new complexity for taxpayers. Because of this tax increase, taxpayers would have to determine the cost basis of all assets owned, many of which may have been owned for decades. As noted by an Ernst and Young study, if the taxpayer is unable to provide sufficient evidence to prove the cost basis, then it may set to $0. In other words, the 43.4 percent tax would be applied to the entire value of taxpayer assets:

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

In addition, repealing step-up in basis will harm the economy, costing jobs and wages. As noted by the Ernst and Young study, repeal of step-up basis will increase the cost of capital and discourage new investment. This negative economic impact will cost 80,000 jobs each year for the first ten years, increasing to 100,000 jobs each year thereafter.

One third of the tax will also fall on American workers in the form of lower wages. In other words, every $100 in federal revenues raised will result in $32 in lower wages by workers. Because of these negative economic effects, repeal of step-up in basis will reduce GDP by $10 billion per year.

Repealing step-up in basis has already been tried and failed. In 1976 congress eliminated stepped-up basis but it was so complicated and unworkable it was repealed in 1980 before it took effect.

As noted in a July 3, 1979 New York Times article, it was "impossibly unworkable":

“Almost immediately, however, the new law touched off a flood of complaints as unfair and impossibly unworkable. So many, in fact, that last year Congress retroactively delayed the law's effective date until 1980 while it struggled again with the issue.”

As noted by the NYT, intense voter blowback ensued:

“Not only were there protests from people who expected the tax to fall on them -- family businesses and farms, in particular -- bankers and estate lawyers also complained that the rule was a nightmare of paperwork.”

Biden’s plan to repeal step-up in basis will hit families and small businesses hard. It will harm the economy and job creation, and create new complexity in the tax code. It also has a history of failure as it was quickly repealed the last time it was tried.

Photo Credit: jlhervas


Obama IRS Chief Thinks Biden IRS Funding is Excessive

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Posted by Alex Hendrie on Wednesday, April 28th, 2021, 10:26 AM PERMALINK

Even Obama IRS chief John Koskinen – a longtime advocate of increasing the IRS budget – thinks President Joe Biden’s proposal to increase IRS funding by $80 billion is too much.

As reported by the New York Times, Koskinen thinks $25 billion, or roughly 30 percent of Biden’s proposal would be a more appropriate funding increase:

“I’m not sure you’d be able to efficiently use that much money,” Mr. Koskinen said in an interview. “That’s a lot of money.”

Mr. Koskinen said he thought an extra $25 billion over a decade would help bring the I.R.S. budget back to where it was around 2010, allowing it to hire enforcement agents who have been lost to attrition and revamp the agency’s customer service capabilities.

IRS Fiscal Year 2021 funding is $11.9 billion, including $5.2 billion for enforcement (audits, criminal investigations etc.) and just $2.5 billion for taxpayer services (taxpayer advocacy, assistance, education etc.). Assuming all new IRS funding goes to enforcement, Biden would be increasing spending on audits and investigations by 150 percent.

This funding is clearly excessive and will grant the IRS new tools to target taxpayers, including middle class Americans and small businesses. The agency has a history of mismanagement, ineptitude and abuse. Rather than fixing these problems, Biden’s funding will provide the IRS with new funding to target taxpayers.

Photo Credit: Brookings Institution


Biden Must Reimburse Taxpayers for “Aggressive” Tax Avoidance

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Posted by Alex Hendrie on Wednesday, April 28th, 2021, 10:22 AM PERMALINK

President Joe Biden repeatedly utilized a tax “loophole” that allowed him to avoid paying taxes on $13 million of income including the 3.8 percent Obamacare Medicare Surtax on net investment income. Even left-leaning tax experts describe Biden’s avoidance as “aggressive.” Biden is now proposing to end the same loophole that he utilized.

Given this development, President Biden should explain why he used this loophole and should set an example and agree to reimburse taxpayers. After all, this is a man who once said paying higher taxes is “patriotic.”

As noted in a recent letter by Republican Study Committee Chairman Jim Banks (R-Ind.), President Biden avoided paying $500,000 in payroll taxes including $121,000 in Obamacare taxes by sheltering $13 million of income in several S-corporations:

“Your 2017, 2018, and 2019 tax returns show that you and the First Lady sheltered over $13 million of income in two S-corporations: the CelticCapri Corporation and the Giacoppa Corporation. Press reports indicate that you both directed revenue from book royalties and speaking appearance fees into these two corporations.”

One of these taxes he avoided paying was the 3.8 percent Obamacare Medicare Surtax on net investment income. Biden’s recently released American Families Plan calls on ensuring all high-income Americans pay this tax. As the plan notes: 

“High-income workers and investors generally pay a 3.8 percent Medicare tax on their earnings, but the application is inconsistent across taxpayers due to holes in the law. The President’s tax reform would apply the taxes consistently to those making over $400,000, ensuring that all high-income Americans pay the same Medicare taxes.”

It is clear hypocrisy that Biden used the same loophole that he now wants to close. Moreover, Biden supports expanding Obamacare and routinely says “the rich” need to pay their fair share.

Biden’s decision to shelter $13 million of income was done for the sole purpose of avoiding tax. As the letter by Rep. Banks notes:

“Tax experts have questioned the propriety of diverting funds raised from one’s own intellectual property through an S-corporation. One accountant interviewed by the Wall Street Journal said ‘there’s no reason for these [earnings] to be in an S-corp – none, other than to save on self employment tax.”

Joe Biden has repeatedly railed against the “rich” using tax loopholes. For instance, during his speech at the 2020 Democrat National Committee he said loopholes should be repealed and the wealthy need to pay their fair share:

"We can pay for these investments by ending loopholes, unnecessary loopholes... Because we don’t need a tax code that rewards wealth more than it rewards work. I’m not looking to punish anyone. Far from it. But it’s long past time the wealthiest people and the biggest corporations in this country paid their fair share.”

Joe Biden has also said that paying taxes is a "patriotic" act. By this standard, Biden’s tax avoidance is clearly unpatriotic. This hypocrisy is made worse by the fact that Medicare faces significant funding shortfalls as the letter explains:

“Just this year, the Congressional Budget Office estimated its Hospital Insurance Trust Fund will face insolvency in the middle of Fiscal Year 2026—roughly five years from now.” 

The Biden tax dodge was first reported in the Wall Street Journal:

Democratic presidential candidate Joe Biden used a tax loophole that the Obama administration tried and failed to close, substantially lowering his tax bill.

Mr. Biden and his wife, Dr. Jill Biden, routed their book and speech income through S corporations, according to tax returns the couple released this week. They paid income taxes on those profits, but the strategy let the couple avoid the 3.8% self-employment tax they would have paid had they been compensated directly instead of through the S corporations.

As noted by WSJ, even left-leaning tax experts called out Biden for his "pretty aggressive" tax maneuvers:

To the extent that the Bidens’ profits came directly from the couple’s consulting and public speaking, “to treat those as other than compensation is pretty aggressive,” said Steve Rosenthal, a senior fellow at the Tax Policy Center, a research group run by a former Obama administration official.

Biden should explain why he avoided paying taxes and should be made to answer whether he intends to undo this hypocrisy and pay the funds back to the American people.

Photo Credit: U.S. Secretary of Defense


New Poll Shows Voters Support Using Tax Cuts to Promote Manufacturing and Innovation, Support Full Business Expensing

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Posted by Alex Hendrie on Tuesday, April 27th, 2021, 2:17 PM PERMALINK

Voters overwhelmingly support using tax cuts to promote manufacturing products in the U.S. and using tax cuts to promote innovation in the U.S, according to a new poll released by HarrisX. The poll, which was commissioned by Americans for Tax Reform, also found that voters support full business expensing, a key reform included in the 2017 Tax Cuts and Jobs Act.

These findings should be instructive to lawmakers given that a number of important, pro-growth tax cuts will soon expire. For instance, full business expensing will begin phasing down in 2022 and fully expires in 2026. Senator Pat Toomey (R-Pa.) and Congressman Jodey Arrington (R-Texas) have introduced legislation making expensing permanent. 

In addition, a $100 billion tax hike on research and development will go into effect at the end of the year if lawmakers fail to act. Senators Maggie Hassan (D-N.H.) and Todd Young (R-Ind.) and Representatives John Larson (D-Conn.) and Ron Estes (R-Kan.) have introduced legislation preventing this tax hike. 

The poll was conducted by HarrisX between March 31 to April 6 among 4,577 registered voters. The margin of error of this poll is plus or minus 1.45% and the results reflect a nationally representative sample of U.S. adults weighted for age by gender, region, race/ethnicity, and income where necessary to align them with their actual proportions in the population. 

Key findings include: 

Voters Support Using Tax Cuts to Promote Manufacturing Products in the United States 

  • 78 percent of voters support using tax cuts to promote manufacturing products in the United States. 28 percent of voters strongly support this policy and 49 percent somewhat support this policy. Just 17 percent somewhat oppose the policy and only 6 percent strongly oppose the policy. 
  • 84 percent of Republicans support using tax cuts to promote manufacturing in the U.S, while 73 percent of Democrats and 77 percent of Independents support this policy.
  • 78 percent of suburban voters and 78 percent of urban voters support using tax cuts to promote manufacturing. 

Voters Support Using Tax Cuts to Promote Innovation in the United States 

  • 77 percent of voters support using tax cuts to promote innovation in the United States. 28 percent of voters strongly support this policy and 49 percent somewhat support this policy. Just 17 percent somewhat oppose the policy and only 6 percent strongly oppose the policy. 
  • 81 percent of Republicans support using tax cuts to promote innovation, along with 75 percent of Democrats and 77 percent of Independents.  
  • 77 percent of suburban voters and 79 percent of urban voters support using tax cuts to promote innovation. 

Voters support full business expensing, a provision which was included in the Republican Tax Cuts and Jobs Act  

  • 64 percent of voters indicated their support for allowing businesses to immediately deduct investments instead of spreading it over multiple years. 
  • Support for full business expensing included 69 percent of Republicans, 60 percent of Democrats, and 63 percent of Independents.  
  • 62 percent of suburban voters supported this provision, along with 69 percent of urban voters, and 61 percent of rural voters.

Lawmakers Should Oppose Dem Bill to Impose Tax Hikes and Price Controls on American Medicines

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Posted by Alex Hendrie on Thursday, April 22nd, 2021, 11:05 AM PERMALINK

House Democrats led by Energy and Commerce Committee Chairman Frank Pallone (D-NJ), Ways and Means Committee Chairman Richard Neal (D-Mass.), and Education and Labor Committee Chairman Bobby Scott (D-Va.) today reintroduced H.R. 3, the “Lower Drug Costs Now Act.”

This legislation should be rejected by members of Congress. It would impose foreign price controls and a new, 95 percent excise tax on American medicines. This plan will harm patients, manufacturers, and the American healthcare system.

H.R. 3 Adopts Foreign Price Controls from Countries That Have Healthcare Shortages

H.R. 3 arbitrarily sets the prices of medicines based off the prices in six countries - Australia, Canada, the United Kingdom, France, Germany, and Japan.

These countries utilize socialist price controls on their healthcare systems, which in turn reduce access to care. Because there is no way to compete on price, supply is reduced, which ends up harming patients in the form of less access to healthcare.

For instance, Canadian patients wait an average of 19.8 weeks from referral to treatment. By comparison, 77 percent of Americans are treated within four weeks of referral, while just 6 percent wait more than two months.

At any one time, one million Canadians are waiting for treatment according to some estimates.

In the UK, there was a shortage of 10,000 doctors and 43,000 nurses in 2019, 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 to see a doctor or receive care.

France has been forced to make significant spending cuts to its “free” socialist healthcare system and there have been significant shortages of basic supplies. Australia has also experienced problems with shortages of medicines and healthcare professionals.

H.R. 3 will Lead to Fewer New Cures and Treatments

Adopting foreign price controls will create the same problems that foreign healthcare systems suffer from. It will lead to less medical innovation leading to fewer cures and healthcare shortages for American patients.

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

H.R. 3 will directly undermine this medical innovation. In fact, it could lead to 100 fewer lifesaving medicines over the next decade and could reduce life expectancy of the average American by four months, according to a study by the Council of Economic Advisors.

H.R. 3 Imposes a 95 percent, Retroactive Excise Tax on Hundreds of Medicines

H.R. 3 enforces its price controls through a 95 percent, retroactive tax on hundreds of life-saving and life-preserving drugs, including cures for cancer, hepatitis C, epilepsy, and multiple sclerosis. 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.”

This tax is concerning 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 is 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. 

 

H.R. 3 Could Cost High-Paying Jobs Across the Country

President Biden has repeatedly promised to create millions of new high paying manufacturing jobs in America. However, H.R. 3 would threaten existing jobs by imposing taxes and price controls on American businesses.

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

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

Photo Credit: Chemist 4 U


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