Alex Hendrie

Senate Should Pass Bilateral Tax Treaties

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Tuesday, April 30th, 2019, 9:00 AM PERMALINK

Update (7/16/19): The Senate is set to take up four tax treaties this week: bilateral treaties with Spain, Switzerland, Japan, and Luxembourg. ATR urges passage of each treaty. 

For the past 80 years, the U.S. has pursued bilateral tax treaties with foreign trading partners.

These treaties promote investment and certainty for American businesses operating abroad by mitigating double taxation on investment.

Although the U.S. is part of roughly 60 such treaties, there are several pending before the U.S. Senate that must be approved including treaties with Chile, Hungary, Japan, Luxembourg, Poland, Spain, and Switzerland.

These seven countries invest $1.2 trillion in foreign investment in all 50 states, so hundreds of thousands of jobs are directly or indirectly tied to ratification of these treaties. 

They should be swiftly taken up and ratified by the Senate through unanimous consent, as previous treaties have been.

Tax Treaties Reduce Taxes for American Businesses and Foreigners Investing in the U.S.

Tax treaties reduce withholding taxes on a reciprocal basis when U.S. taxpayers invest overseas and when foreign taxpayers invest in the U.S.

They protect against double taxation by clarifying which country has the right to tax types of income such as interest, dividends, and royalty income. This promotes economic efficiency by allowing U.S. businesses to operate overseas and grants certainty to foreign investors doing business in the U.S.

Each treaty will be substantially beneficial to American businesses. For instance, the proposed treaty with Chile is an new treaty that will help American businesses compete in South America. This agreement is especially important because Chile has a higher corporate rate for businesses from countries that it does not have a tax treaty with.

Other treaties, such as the proposed treaties with Hungary and Poland, update treaties that were ratified decades ago in order to stimulate increased investment with the U.S.

Tax Treaties Are Consistent with the Fourth Amendment

While some have raised concerns that the pending tax treaties do not contain adequate Fourth Amendment protections,  the standards in these treaties are similar to domestic U.S. law and are identical to existing treaties.

They contain provisions allowing the sharing of taxpayer information only under certain, clearly defined circumstances and contain stringent controls that explicitly prevent information sharing for non-tax purposes and safeguards against unlawful disclosure.

In addition, these treaties are unrelated to the broad and burdensome information exchange provisions contained within the Foreign Account Tax Compliance Act (FATCA).

The Senate must move quickly to pass all seven tax treaties. Failure to ratify the pending tax treaties could leave the U.S. behind by making it harder for American businesses to operate overseas and jeopardize new investment opportunities into the U.S.

 

Photo Credit: Prayitno


Open Letter to Congress: 50 Groups and Activists Oppose Foreign Reference Pricing Legislation

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Tuesday, April 30th, 2019, 6:00 AM PERMALINK

In a letter to members of Congress, Americans for Tax Reform led a coalition of 50 groups and activists in opposition to any legislation that would impose foreign price controls on American medicine.

Click here to read the full letter. 

Foreign reference pricing legislation has been introduced by Senator Rick Scott (R-Fla.) and co-sponsored by Senator Josh Hawley (R-MO). Similar legislation has been introduced by self-avowed socialist Senator Bernie Sanders (I-Vt.) and Progressive Caucus Vice Chair Ro Khanna (D-Calif.)

Both pieces of legislation attempt to artificially lower the cost of lifesaving medicine using government force. Foreign countries often use a range of market-distorting tools to lower the cost of drugs. These proposals are similar to the International Pricing Index plan released by the Department of Health and Human Services.

Importing foreign price controls on medicine would reduce prescription drug access for American health care consumers. Foreign reference pricing would also suppress market competition, innovation, and investment. Congress should reject any legislation that attempts to implement foreign reference pricing.

Read the full letter here or below.

Dear Member of Congress:

We write in opposition to proposals that import foreign price controls on medicines into the U.S. through international reference pricing.

Reference pricing legislation has been introduced by Senator Rick Scott (R-Fla.) and co-sponsored by Senator Josh Hawley (R-MO). Similar legislation has been introduced by self-avowed socialist Senator Bernie Sanders (I-Vt.) and Progressive Caucus Vice Chair Ro Khanna (D-Calif.).

Both bills are similar – they reference price U.S. drugs based on the prices in Canada, the United Kingdom, France, Germany, and Japan.

Foreign countries frequently utilize a range of arbitrary and market-distorting policies to determine the cost of medicines – by definition, such approaches are price controls.

We have long opposed price controls because they utilize government power to forcefully lower costs in a way that distorts the economically-efficient behavior and natural incentives created by the free market.

These pieces of legislation are similar to the International Pricing Index proposal released by the Department of Health and Human Services. 

This proposed payment model modifies the reimbursement rate for Medicare Part B drugs so that it is calculated based off the prices set by 14 countries.

When imposed on medicines, price controls suppress innovation and access to new medicines. This deters the development and supply of new life saving and life improving medicines to the detriment of consumers, patients, and doctors.

There is no negotiation and foreign governments often force innovators to accept lower prices in a “take-it-or-leave it” proposition.

This results in reduced or restricted access to new medicines and higher prices for those medicines that enter the market.

This is not hypothetical. As noted in a study by the Galen Institute, roughly 290 new medical substances were launched worldwide between 2011 and 2018. Of these medicines, the U.S. had access to 90 percent.

In contrast, foreign countries have access to far fewer. The United Kingdom had 60 percent of medicines, Japan had 50 percent, and Canada had just 44 percent.

The U.S. is a world leader in research & development because the healthcare system rejects price controls and encourages innovation. As a result, a majority of new medicines are developed and launched in America.

This innovative environment is enormously beneficial to the long-term well-being of Americans and the efficiency of the U.S. healthcare system. In addition, the investment required for research and development of medicines leads to more high-paying jobs and a stronger economy.

Importing price controls will undermine this system by basing U.S. prices on the prices of socialized foreign healthcare systems. This will inevitably suppress innovation and harm American competitiveness.

The administration has recognized the damage that adopting foreign pricing would have on American innovation in a report released in February 2018 by the president’s Council of Economic Advisors:

 “If the United States had adopted the centralized drug pricing policy in other developed nations twenty years ago, then the world may not have highly valuable treatments for diseases that required significant investment.”

Instead of fighting these price controls, we are concerned that both the Sanders-Khanna legislation and the Scott-Hawley legislation adopts them.

Proposals to import foreign price controls will suppress competition and innovation, harm American competitiveness and investment, and should be rejected by Congress.

Sincerely,

Grover Norquist
President, Americans for Tax Reform

James L. Martin
Founder/Chairman, 60 Plus Association

Saulius “Saul” Anuzis
President, 60 Plus Association

Lisa Nelson
CEO, ALEC Action

Dick Patten
President, American Business Defense Council

Phil Kerpen
President, American Commitment

Steve Pociask
President/CEO, The American Consumer Institute

Michi Iljazi
Director of Government Affairs, American Conservative Union

Dee Stewart
President, Americans for a Balanced Budget

Rick Manning
President, Americans for Limited Government

Kevin Waterman
Chair, Annapolis Center-Right Coalition

Ryan Ellis
President, Center for a Free Economy

Andrew F. Quinlan
President, Center for Freedom and 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

Iain Murray
Vice President for Strategy, Competitive Enterprise Institute

James Edwards
Executive Director, Conservatives for Property Rights

Matthew Kandrach
President, Consumer Action for a Strong Economy

Fred Roeder
Health Care Economist/Managing Director, Consumer Choice Center

Yaël Ossowski
Deputy Director, Consumer Choice Center

Joel White
President, Council for Affordable Health Coverage

Thomas Schatz
President, Council for Citizens Against Government Waste

Katie McAuliffe
Executive Director, Digital Liberty

Rick 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 Bauman
Director of Healthcare Policy, Goldwater Institute

Rodolfo E. Milani
Trustee, Hispanic American Center for Economic Research (HACER)

Mario H. Lopez
President, Hispanic Leadership Fund

Heather R. Higgins
CEO, Independent Women’s Voice

Andrew Langer
President, Institute for Liberty

Tom Giovanetti
President, Institute for Policy Innovation

Sal Nuzzo
Vice President of Policy, James Madison Institute

Seton Motley
President, Less Government

Charles Sauer
President, Market Institute

Ted Tripp
Chair, Massachusetts Center-Right Coalition

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

Pete Sepp
President, National Taxpayers Union

William O’Brien
Former Speaker, New Hampshire House of Representatives
Co-Chair, New Hampshire Center-Right Meeting

Doug Kellogg
Director, Ohioans for Tax Reform

Jeff Kropf
Executive Director, Oregon Capitol Watch Foundation

Sally Pipes
President, Pacific Research Institute

Lorenzo Montanari
Executive Director, Property Rights Alliance

Paul Gessing
President, Rio Grande Foundation

Karen Kerrigan
President & CEO, Small Business & Entrepreneurship Council

David Williams
President, Taxpayer Protection Alliance

Sara Croom
Executive Director, Trade Alliance to Promote Prosperity

C. Preston Noell III
President, Tradition, Family, Property, Inc.

Photo Credit: Matt Wade


H&R Block: Taxes Down 25 Percent This Year

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Thursday, April 11th, 2019, 4:35 PM PERMALINK

Biweekly paychecks have increased by $50 per check​

Taxes are down 24.9 percent on average following passage of the Tax Cuts and Jobs Act, according to a report released today by H&R Block based on their clients’ tax returns.

The report states: “overall tax liability is down 24.9 percent on average.”

Tax refunds are also up, contrary to the line being pushed by Democrats and the establishment media. “Refunds are up 1.4 percent,” according to the H&R Block report.

The GOP’s Tax Cuts and Jobs Act reduced taxes for Americans at every income level. The majority of this tax relief has been felt by Americans in the form of higher paychecks throughout the year.

Biweekly paychecks went up by $50, as noted by the report:

“With tax liability down nearly $1,200 on average, but refunds up just $43, an average of $1,156 went into paychecks during the year, or about $50 a biweekly paycheck starting in March of 2018.

The report also breaks down change in tax liability by state. Taxpayers in every state have seen average tax reduction of at least 18 percent:

“all 50 states and D.C. saw their average tax liability decrease anywhere from 18.0 percent to 29.1 percent.”

This data reinforces the success of the Tax Cuts and Jobs Act, which has also grown the economy, made America a more competitive place to do business, and simplified tax filing for millions of Americans.

See also: 800 examples of pay raises, bonuses, 401(k) match increases, expansions, benefit increases, and utility rate reductions due to the Republican tax cuts.

 

Photo Credit: Gage Skidmore


List of Tax Hikes in Sanders “Medicare for All” Plan

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Wednesday, April 10th, 2019, 5:36 PM PERMALINK

Self-avowed socialist and Democrat presidential candidate Bernie Sanders has released his proposal for a government takeover of the American healthcare system. The proposal, which Sanders calls “Medicare for All,” replaces private insurance with government as the single payer.

Rather than including financing mechanisms in the legislation, Sanders released a set of tax hike “options” that would be paired with the proposal.

These tax hikes would hit American families at every income level and businesses large and small. The proposal increases taxes by $14.3 trillion over the next decade, according to an estimate of Americans for Tax Reform.

This would pay for roughly half of the cost of single payer healthcare, which costs between $32 trillion and $36 trillion according to estimates.

The list of proposed tax hikes are below:

A New, 4 Percent Employee Payroll Tax

Sanders would impose another 4 percent payroll tax which on employees which he calls an “income-based premium paid by employees.”

According to Sen. Sanders’ estimates, this increases taxes on American families and individuals by $3.9 trillion.

A New, 7 Percent Employer Payroll Tax

Sanders would impose another 7 percent payroll tax which on employees which he calls an “income-based premium paid by employers.”

This is a $3.5 trillion tax increase over ten years.

Eliminating Health Tax “Expenditures”

The proposal would ban employer-provided insurance and repeal the deduction for health care, increasing taxes on businesses by over $3 trillion over a decade.

This proposal would also repeal Health Savings Accounts, which are utilized by an estimated 25 million American families. These tax advantaged savings accounts largely benefit the middle class – roughly half of all HSAs are owned by families earning between $60,000 and $200,000.

The deduction for cafeteria plans and the medical expense deduction is also eliminated.

In all, Sanders estimates this will increase taxes on families and businesses by $4.2 trillion.

70 percent Top Tax Bracket for Ordinary Income and Capital Gains Income

This would give America the highest income tax rate in the world.

According to the Tax Foundation, a top 70 percent rate for ordinary income and capital gains income above $10 million will raise $51.4 billion over a decade. After accounting for macroeconomic effects, the proposal would actually cost the government $63.5 billion because of the proposal suppresses investment and economic growth.

77 Percent Death Tax

Sanders proposes raising the death tax rate to 77 percent for inheritances. Under the proposal, the death tax would kick in at $3.5 million with a rate of 45 percent.

Currently, the death tax applies to estates over $11 million and applies a 40 percent rate.

This proposal will increase taxes by $315 billion over ten years.

Wealth Tax
Sanders proposes an annual wealth tax of 1 percent kicking in above $21 million in assets. Sanders estimates the proposal will increase taxes by $1.3 trillion over ten years.

Bank Tax
Sanders proposes a tax on financial institutions totaling $800 billion over ten years.

Broaden the Self Employment Tax
Sanders would require business owners to report more of their business income as salary, increasing the amount of self-employment tax owed. This would increase taxes by $247 billion over ten years.

Photo Credit: Gage Skidmore


ATR Urges Support for Rep. Foxx’s Spending Safeguard Amendment

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Tuesday, April 9th, 2019, 1:46 PM PERMALINK

Congressman Virginia Foxx (R-NC) has introduced an amendment to H.R. 2021, the Investing in the People Act, to control runaway mandatory spending.

The amendment, titled the Spending Safeguard Amendment, will inject much needed government oversight into mandatory spending programs which operate on autopilot and have driven the increase in government spending.

This legislation creates a mechanism for the Office of Management and Budget to direct the Treasury Department to halt a mandatory program’s operations if it exceeds its spending limit, defined as 110% of the amount CBO estimates its cost to be when Congress approves it or 120% of that cost estimate for Social Security, health, poverty, or veterans’ programs.

This mechanism will create an important safeguard against mandatory spending and will force Congress to make tough decisions rather than ignoring them.

As it stands, mandatory spending comprise the bulk of growth in government spending according to the Congressional Budget Office. Currently, mandatory spending compromises 12.7 percent of GDP, roughly double the level of defense and nondefense discretionary spending which sits at 6.3 percent.

By 2028, mandatory spending will increase to 15.1 percent of GDP, while CBO projects discretionary spending will be lower for 5 percent. Over the long-term, this problem will get worse. CBO projects mandatory spending will total 17.3 percent of GDP between 2040 and 2049, meaning it will consume almost all revenue taken in by the federal government.

Photo Credit: Virginia Foxx


The IRS Must Stop Harassing Taxpayers Over the Conservation Easement Deduction

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie, Tom Hebert on Monday, April 8th, 2019, 9:00 AM PERMALINK

In 1976, Congress created a charitable deduction under section 170(h) of the tax code to encourage taxpayers to conserve their property for future generations. Congress has consistently reaffirmed this provision, known as the conservation easement deduction, in legislation over the past several decades.  

In recent years, the IRS has targeted taxpayers that claim the deduction. In a clear violation of Congressional intent, the agency has sought to make it more difficult for taxpayers to claim the deduction and has taken taxpayers to court over their use of this deduction.

While the IRS has a responsibility to go after bad actors, it is unacceptable for the agency to harass law-abiding taxpayers for claiming a deduction provided by Congress. Unfortunately, that is exactly what appears to be occurring.

Moving forward, policymakers should ensure that the deduction is being properly administered by the IRS and is being used to expand private conservation as intended by Congress. Congress should debate and consider reforms through regular order to ensure that the IRS is not subjecting taxpayers that are properly taking the deduction to undue scrutiny.

What is the Conservation Easement Deduction?

The conservation easement deduction has existed for decades and incentivizes property owners to conserve land and historic sites by offering a charitable deduction. 

In order to claim the deduction, the taxpayer must agree to restrict their right to develop or alter the property. Organizations known as land trusts agree to monitor the restrictions placed on the property. 

Essentially, the taxpayer agrees to have the land conserved for the benefit of future generations. The amount of the tax deduction is based on the value of what was donated – a value determined by an independent appraiser.

The taxpayer typically can deduct up to 50 percent of adjusted gross income (AGI) in any given year and carry forward any unused deductions for up to 15 years.  

Congress Has Consistently Reaffirmed Its Commitment to Easement Deductions

It is important to note that the conservation easement deduction has bipartisan Congressional support.

Congress initially codified the provision in 1976 and extended the provision in 1977. It was then made permanent in the Tax Treatment and Extension Act of 1980.

More recently, in 2006, Congress narrowed the definition of conservation easements. At the same time, Congress temporarily expanded the easement deduction to 50 percent of AGI. This expansion was routinely extended by Congress and made permanent in 2015.

The IRS is Targeting Taxpayers Over the Conservation Easement Deduction

Despite the long history of the conservation easement deduction, the IRS has recently taken aim at taxpayers subjecting them to burdensome new filing requirements and onerous costs. 

On December 23, 2016, the IRS published Notice 2017-10, making partnership donations of conservation easements “listed transactions,” which means the IRS suspects tax avoidance. This notice was implemented in the final days of the Obama administration without any opportunity for public comment.

The Notice ignores the fact that partnerships syndicated to multiple individuals are an extremely common form of financing real estate investments. As a result of the Notice, partnership conservation easement donations are being more heavily scrutinized, and taxpayers are exposed to a flurry of complex paperwork and compliance requirements. For instance, taxpayers wishing to claim an easement deduction covered by the Notice must now fill out Form 8886, a “Reportable Transaction Disclosure Statement.” This form takes approximately 20 hours to complete and has a top penalty of $100,000 for failing to properly complete it.  

Adding insult to injury, Notice 2017-10 was applied retroactively all the way back to tax year 2010, so the complexity and potential liability is significant. In fact, if an individual fails to comply with the new listed transaction disclosure requirements, they could be hit with penalties up to $100,000 with no reasonable cause exception. 

Notice 2017-10 does nothing to address the problem it identifies — overvaluation of the conservation easement. Instead of addressing potential overvaluation, the Notice just makes it harder for taxpayers to claim an easement deduction by burdening them with excessive paperwork and threat of audit. 

The IRS has also used Section 6695A of the code to constrain the use of easement deductions. Section 6695A attempts to ensure that appraisals are accurate and applies a penalty of 125% of the appraiser’s fee if the appraised value is 150 percent above the IRS’s determined value.

There are several issues with this penalty as it relates to easement deductions. The IRS now routinely asserts on audit that conservation easements have little or no value – no matter how carefully prepared. The unreasonable threat of the penalty has the unfortunate effect of deterring competent appraisers that would otherwise appraise conservation easements. In Colorado, for example, there are now only five appraisers who are willing to work on valuing conservation easements. The recent Department of Justice action seeking an injunction and disgorgement of all past income from one conservation easement appraiser (whose appraisals have been upheld in court) only adds to difficulties of taxpayers in finding a competent and willing appraiser.

In addition, the penalty inherently assumes a bad faith motive on the behalf of the appraiser. Two competent appraisers can have different opinions on the highest-use value of a donation while still acting in good faith.

The IRS is Hauling Taxpayers to Tax Court

The IRS is also taking taxpayers to court to deny conservation easement deductions by asserting that longstanding and common easement grant deed provisions violate the rules. The IRS is also routinely alleging (without the benefit of qualified appraisals) that conservation easement donations have little or no value and that taxpayer easement appraisals are inflated. While there is nothing inherently wrong with the IRS challenging taxpayers that may be abusing the law, the IRS should not be routinely challenging tax benefits that Congress has specifically provided, particularly when there is no evidence of abuse.

Under these cases, the burden of proof typically falls on the accused, not the accuser, flipping the entire notion of American justice on its head.

Reforms Are Needed, But Law-abiding Taxpayers Must Be Protected

To be clear, it is important that the conservation easement deduction is not abused by taxpayers. There are several simple fixes that would strengthen and protect the easement deduction from potential abuse. 

One possible solution is adding additional requirements specific to conservation easements to ensure the accuracy of appraisals by both taxpayers and the IRS.

Congress could also introduce more transparency into the process by requiring public disclosure of easement donations and the resulting benefits to the public.

These reforms would uphold the integrity of the conservation easement deduction while it remains in law for all taxpayers.

Photo Credit: Martin Haesemeyer


Senators Should Reject Sen. Rick Scott Legislation To Import Foreign Price Controls

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Wednesday, April 3rd, 2019, 5:19 PM PERMALINK

Senator Rick Scott (R-Fla) has introduced legislation that would import foreign price controls into the U.S. ATR urges Senators not to cosponsor this legislation. 

The legislation, known as the Transparent Drug Pricing Act, would institute a price control on medicines so that the list price of a drug cannot exceed the lowest price of the drug in Canada, France, the United Kingdom, Japan, or Germany.

Foreign countries frequently utilize a range of arbitrary and market-distorting policies to determine the cost of medicines – by definition such approaches are price controls. There is no negotiation and foreign governments often force innovators to accept lower prices in a “take-it-or-leave it” proposition. This results in reduced or restricted access to new medicines and higher prices for those medicines that enter the market.

In contrast, the U.S. is a world leader in research & development because the system of healthcare rejects price controls and encourages innovation. As a result, a majority of new medicines are developed and launched in America.

This innovative environment is enormously beneficial to the long-term well-being of Americans and the efficiency of the U.S. healthcare system. In addition, the investment required for research and development of medicines leads to more high-paying jobs and a stronger economy.

Conservative opposition to foreign reference pricing is strong. Nearly 60 groups and activists wrote in opposition to the proposal in a coalition letter led by ATR late last year.

In addition, the administration has recognized the damage that adopting foreign pricing would have on American innovation in a report released in February 2018 by the president’s Council of Economic Advisors:

 “If the United States had adopted the centralized drug pricing policy in other developed nations twenty years ago, then the world may not have highly valuable treatments for diseases that required significant investment.”

Importing price controls is the wrong approach. This proposal will suppress competition and innovation and harm American competitiveness and investment. It should be rejected by Senators.

 

Photo Credit: Gage Skidmore


The Tax Cuts and Jobs Act is Working for the Middle Class

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Wednesday, March 27th, 2019, 8:00 AM PERMALINK

The House Ways and Means Committee is holding a hearing entitled, “The 2017 Tax Law and Who it Left Behind.”  While the Democrats argue that the tax cuts are overwhelmingly benefiting the wealthy, nothing could be further from the truth.

The Tax Cuts and Jobs Act has grown the economy, reduced taxes for the middle class, given workers a pay raise and new employee benefits, reduced utility costs, and given families relief from Obamacare.

The Economy is Strong Following the Tax Cuts

  • GDP growth was 3.1 percent between Q4 of 2017 and Q4 of 2018, according to the Bureau of Economic Analysis.
     
  • Over 2.6 million jobs were created in 2018 and over 5.1 million jobs have been created since the beginning of 2017 according to the Bureau of Labor Statistics.
     
  • Nominal wages have grown by 3.4 percent over the last year, a ten-year high.
     
  • Job openings sit at almost 7.6 million, a record high.
     
  • The unemployment rate is at 3.8 percent. In September, the unemployment rate hit 3.7 percent, a 50 year-low.
     
  • In October, the U.S. was named the most competitive economy in the world, according to the World Economic Forum.
     
  • Gross private domestic investment grew by over 7 percent between Q4 of 2017 and Q4 of 2018.
     

Middle Class Families are Seeing Strong Tax Reduction

  • A family of four with annual income of $73,000 (median family income) will see a tax cut of more than $2,058, a 58 percent reduction in federal taxes.
     
  • A single parent with one child with annual income of $41,000 will see a tax cut of $1,304, a 73 percent reduction in federal taxes.
     
  • 91 percent of taxpayers with annual income between $64,000 and $108,000 saw an average federal tax cut of $1,400 in 2018, according to the left of center Institute for Taxation and Economic Policy.
     
    • Similarly, 90 percent of taxpayers with annual income of between $40,000 and $64,000 saw an average federal tax cut of $810, while 87 percent of taxpayers with annual income between $108,000 and $232,000 saw an average federal tax cut of $2,710.
       
  • The Tax Cuts and Jobs Act doubled the standard deduction for an individual from $6,000 to $12,000 and for a family from $12,000 to $24,000. 105 million Americans took the standard deduction in 2015 according to the IRS statistics of income (SOI) database.
     
  • The Tax Cuts and Jobs Act doubled the child tax credit from $1,000 to $2,000 per child, benefiting 22 million families that took the Credit.
     
  • The Tax Cuts and Jobs Act raised the threshold of the Alternative Minimum Tax so fewer taxpayers are forced to comply with the provision. 4,464,430 families and individuals paid the Alternative Minimum Tax in 2015.
     

Businesses Have Created New Employee Benefit Programs.

  • Walmart and Lowes now provide $5,000 to help cover the cost of adopting a child.
  • Express Scripts in Missouri has 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 receive $1,500 worth of tuition assistance every year per year.

Businesses Have Also Increased Wages and Given Bonuses to Their Employees.

  • Wichita Railway Services is giving its five employees tax reform bonuses of between $3,000 and $6,000.
  • Wells Fargo raised base wages from $13.50 to $15.00 per hour.
  • Anfinson Farm Store – a family owned business in Cushing, Iowa (population 223) – has given its employees a $1,000 tax reform bonus and raised wages by 5 percent.
  • AT&T provided $1,000 bonuses to 200,000 employees. 
  • Kentucky-based Turning Point Brands, Inc. will give 107 employees a $1,000 tax reform bonus.Cigna raised base wages to $16 per hour.
  • Apple provided $2,500 employee bonuses in the form of restricted stock.
     

Utility Companies in All 50 States Are Passing on the Tax Savings in the Form of Lower Rates for Customers.

This means lower electric bills, lower gas bills, and lower water bills for Americans than if the corporate rate cut had not occurred. For example: 

Tax Reform Gave Middle Class Families Relief From the Obamacare Individual Mandate Tax Penalty

  • Obamacare imposed a tax penalty of $695 for an individual and $2,085 for a family of four for failing to buy “qualifying” health insurance as defined by the federal government. The Tax Cuts and Jobs Act repeals this unfair tax.
     
  • The Obamacare individual mandate tax penalty is one of the most regressive taxes in the code as it disproportionately impacts low and middle-income families:
     
    • In tax year 2016, 4,953,490 households paid a total of $3,628,017,000 in individual mandate tax penalties. 77 percent of those paying the mandate had annual income of less than $50,000. 34 percent of those paying the mandate had annual income of less than $25,000.
    • In tax year 2015, 6,665,480 households paid a total of $3,079,255,000 in individual mandate tax penalties. 79 percent of those paying the mandate had annual income of less than $50,000. 37 percent of those paying the mandate had annual income of less than $25,000.
       

Photo Credit: Gage Skidmore


Increasing Taxes on Carried Interest is A Terrible Idea


Posted by Alex Hendrie on Wednesday, March 13th, 2019, 10:44 AM PERMALINK

Democrats have vowed higher taxes on the American people across every income level and on businesses large and small.

Already, they have proposed repealing the entire GOP passed Tax Cuts and Jobs Act, raising the corporate rate to 28 percent, increasing the top income tax rate to 70 percent, and instituting a financial transactions tax on the sale of every stock, bond, or derivative.

The latest Democrat tax hike proposal comes from Senator Tammy Baldwin (D-Wis.) and Congressman Bill Pascrell (D-NJ) and would increase taxes on carried interest capital gains.

This is a terrible idea.

 “The left’s stated long-term goal is to tax all capital gains as ordinary income. Taxing carried interest is the opening salvo in this goal,” said Grover Norquist, President of Americans for Tax Reform. “On principle, carried interest should be taxed as capital gains not at artificially higher rates.”

There is no justification for increasing taxes on carried interest. The tax treatment of carried interest capital gains is based on long-standing principles of the tax code and is simply a trojan horse toward raising taxes on all capital gains.

Increasing taxes on carried interest is bad policy that fails to raise any significant amount of revenue and undermines pro-growth tax reform.

A Tax Increase on Carried Interest Capital Gains Would Harm Economic Growth

The goal of Democrats is to increase taxes on all capital gains. Many view a tax increase on carried interest is just the first step.

For instance, 2016 presidential candidate Hillary Clinton wanted dramatic tax increases on capital gains including a tax increase on carried interest.

Capital gains taxes are a tax on investment and negatively impact pension funds, retirement savings, charities, and colleges that depend on robust investment in order to meet savings goals. Small businesses would also be badly affected as investment money would dry up.

This same is true for carried interest – investment associated with carried interest capital gains drives significant economic growth across the country.

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 reduces other government revenue sources.

Carried interest is a Mainstay of the Tax Code

Carried interest is grounded in two long-standing tax principles.

It is treated as partnership income, meaning taxation flows through to 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.

It is also treated as capital gains income as it is earned through long-term investment, not as ordinary income. 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.

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 so 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.

The Tax Treatment of Carried Interest Was Settled During Debate over the Tax Cuts and Jobs Act

Republicans should not be fooled into increasing taxes on carried interest as the issue has already been litigated.

The Tax Cuts and Jobs Act was developed under an extensive regular order process that involved six years of debate and more than 40 hearings in the House Ways and Means Committee.

After significant debate, lawmakers chose to maintain the tax treatment of carried interest as partnership income that is treated as a capital gain.

Choosing to increase taxes on carried interest capital gains by arbitrarily changing the tax treatment of this type of income would undermine the treatment of all capital gains and erode the gains of the tax reform.

 

More from Americans for Tax Reform


Trump Budget Expands Health Savings Accounts

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Monday, March 11th, 2019, 4:20 PM PERMALINK

President Trump’s 2020 budget proposal calls for expanding tax advantaged Health Savings Accounts.

Most notably, the proposal will expand HSAs to millions of American families by integrating healthcare plans with an actuarial value of up to 70 percent with HSAs.

Since they were created in 2004, HSAs have become a popular and successful vehicle that promotes patient choice in health care. HSAs are used in conjunction with low premium, high deductible health insurance plans and provide a vehicle for individuals to spend and control their own money on their own health needs. Today, HSAs are used by over 25 million American families and individuals. 

HSAs contribute to lower healthcare spending by promoting consumer driven healthcare. HSA funds are completely controlled by the individual and follow them between jobs creating an incentive to spend funds wisely.

Research shows that families and individuals that utilize HSAs spend less on health care and use fewer medical services without forgoing necessary primary and preventative care.

HSAs are a significant vehicle to pay for healthcare expenses. An HSA user can accumulate as much as $360,000 after contributing to an account for 40 years assuming a rate of return of just 2.5 percent, according to the Employee Benefit Research Institute. With a rate of return of 5 percent, an HSA user can accumulate $600,000 over 40 years.

HSAs also reduce taxes for American families. HSAs offer triple tax benefits to users – contributions made are tax free, interest and investment is earned tax free, and payments made to qualifying health expenses are tax free. Expanding HSAs will provide additional tax reduction for American families and will promote saving and investment.

By giving millions of American families access to HSAs, the Trump budget proposal will expand healthcare freedom and access for Americans across the country.

Photo Credit: Gage Skidmore


Pages

×