Alex Hendrie

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.

Sincerely,

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


Unemployment Rate Hits 50 Year Low

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Posted by Alex Hendrie on Friday, October 4th, 2019, 10:12 AM PERMALINK

The unemployment rate dropped to 3.5 percent and 135,000 jobs were created in September according to the September jobs report released by the Bureau of Labor Statistics. 

This is the lowest unemployment rate since December 1969 – a near 50 year low.

This report shows that the Trump economy remains strong for American workers. In fact, since President Trump took office, over 6.4 million jobs have been created.

The number of jobs created in August was revised up 38,000 from last month’s figure of 130,000 to 168,000. Similarly, the July jobs report was revised up by 7,000 from 159,000 to 166,000.

Moreover, the unemployment rate for Hispanics (3.9 percent), African Americans (5.5 percent), Asian Americans (2.5 percent), and adult women (3.1 percent) is at historic lows.

Wage growth over the past year is at 2.9 percent – a slight decline from previous growth. While this decline is disappointing, wage growth over President Trump’s first term has been strong.

According to a recent Wall Street Journal op-ed, real median household income has grown by $4,144 or 6.8 percent since President Trump took office.

As noted in the op-ed, authored by Stephen Moore, real median household income is at an all-time high:

“Real median household income—the amount earned by those in the very middle—hit $65,084 (in 2019 dollars) for the 12 months ending in July. That’s the highest level ever and a gain of $4,144, or 6.8%, since Mr. Trump took office. By comparison, during 7½ years under President Obama—starting from the end of the recession in June 2009 through January 2017—the median household income rose by only about $1,000.”

Photo Credit: Flickr


Thanks to Trump, Median Household Income at Highest Level Ever

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Posted by Alex Hendrie on Monday, September 30th, 2019, 2:22 PM PERMALINK

Real median household income has grown by $4,144 or 6.8 percent since President Trump took office, according to an op-ed published in the Wall Street Journal.

This data is based on a report released by Sentier Research analyzing the Census Bureau’s monthly Current Population Survey.

As noted in the op-ed, authored by Stephen Moore, real median household income is at an all-time high:

“Real median household income—the amount earned by those in the very middle—hit $65,084 (in 2019 dollars) for the 12 months ending in July. That’s the highest level ever and a gain of $4,144, or 6.8%, since Mr. Trump took office. By comparison, during 7½ years under President Obama—starting from the end of the recession in June 2009 through January 2017—the median household income rose by only about $1,000.”

The below chart highlights the strong Trump wage growth.

                     

This new data is one of many signs the Trump economy remains strong.

  • According to recent Labor Department Job Openings and Labor Turnover Data, the ratio of unemployed persons to job openings is just 0.8 in July of 2019 an all-time low since this data was first collected in 2000.
     
  • Hiring and job openings also remain strong – 6 million people started a job in July and there are 7.2 million openings.
     
  • 3.6 million workers voluntarily quit their jobs In July indicating there is strong confidence in finding other employment.

                       

  • The unemployment rate remains low at 3.7 percent and over 6 million jobs have been created since President Trump took office.
     
  • The unemployment rate for African Americans has hit a record low of 5.5 percent and the Hispanic unemployment rate has matched record lows of 4.2 percent.
     
  • The civilian labor force increased by 571,000 according to the BLS household data, the largest such gain since October 2018 and the fourth consecutive month of labor force growth.


While the economy is strong, the Trump administration is taking further steps to promote economic growth.

The administration recently announced a U.S.-Japan trade agreement that will increase American exports to Japan and lower barriers to trade.

The administration is also pressuring Congress to take up the United States-Mexico-Canada Trade Agreement (USMCA) which will raise real GDP by $68.2 billion and create approximately 176,000 American jobs, according to a report released by the U.S. International Trade Commission.

This stands in stark contrast to Democrats in Congress and on the campaign trail that have proposed trillions of dollars in tax increases that will undo the existing economic growth that has benefited American families and businesses across the country.

 

Photo Credit: Gage Skidmore


ATR Opposes Pelosi Drug Pricing Plan

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Posted by Alex Hendrie on Thursday, September 19th, 2019, 3:57 PM PERMALINK

Today, House Speaker Nancy Pelosi unveiled H.R. 3, the “Lower Prescription Drugs Now Act.” This proposal imposes new government price controls, a 95 percent tax on manufacturers, imports foreign pricing schemes, and imposes a new charge on manufacturers in Medicare. Members of Congress should oppose the Pelosi plan.

 “Pelosi’s drug pricing plan imposes a confiscatory tax in the service of price controls that will end innovation and inevitably lead to a collapse of the healthcare system and put everyone into one sized fits all government monopoly,” said Grover Norquist, President of Americans for Tax Reform.

Pelosi’s bill contains an excise tax on manufacturer sales of between 65 and 95 percent. The proposal allows government bureaucrats to set the prices of the top 250 prescription medicines. If a manufacturer does not agree with this price, refuses to “negotiate” or tries to walk away, they are hit with a 65 percent tax, or “non-compliance fee” on the gross sales of their drug. This tax increases by ten percent every quarter topping out at 95 percent.

Foreign price controls would be imposed on medicines. Under the proposal, no drug in the US can be more than 1.2 times the volume-weighted average price in six countries – Australia, Canada, France, Germany, Japan, and the United Kingdom.

H.R. 3 would also impose retroactive inflationary rebate penalty for all drugs covered under Medicare Part B and Part D. This would require manufacturers to pay the government for any price increase that was greater than inflation since 2016 and for any future price increase. 

Finally, the proposal imposes a 30 percent charge on manufacturers in Medicare. This charge is imposed at the catastrophic phase of the Part D coverage benefit and distorts the insurance program while doing nothing to directly help seniors. It will fall disproportionately on high cost medicines.  

The Pelosi plan is not a good faith effort to negotiate lower prescription drug prices. It will end innovation in the US and prevent the development of the next generation of life-saving and life-preserving medicines.

At present, the U.S. is the world leader in medical innovation with almost 60 percent of drugs being developed in the country. 

This innovation benefits the U.S. in the form of high-paying jobs, a stronger economy R&D, and access to more life-saving medicines.

In fact, of the 290 new medical substances that were launched worldwide between 2011 and 2018, the U.S. had access to 90 percent. By contrast, the United Kingdom had 60 percent of medicines, Japan had 50 percent, and Canada had just 44 percent. The socialist style policies used in Europe delay new drugs coming to market by an average of 14 months, according to one study.

American innovation does not come easily – on average, it takes more than a decade to bring a new drug to market. Of all the experimental drugs under development, 90% do not receive approval from the Food and Drug Administration and never come to market. In 2016 alone, American drug companies invested $90 billion for therapy research and development of drugs, more than three times the R&D money spent by the National Institutes of Health.

Rather than promote new innovation and improve the healthcare system, H.R. 3 will serve as a stepping stone to Medicare for All.

By implementing government price controls and taxes, the Pelosi plan will smooth the pathway for a complete takeover of the healthcare system with dramatically higher spending and taxes, and narrower choice and access. This plan will end healthcare for over 150 million Americans and is already supported by a majority of House Democrats and several leading Democrat presidential candidates.

Photo Credit: AFGE


Pelosi Drug Plan Will Destroy U.S. Healthcare System

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Posted by Alex Hendrie on Tuesday, September 10th, 2019, 5:27 PM PERMALINK

According to a leaked draft, House Democrats will propose drug pricing legislation that imposes broad government price controls, imports foreign pricing, and imposes on a new tax on manufacturers.

The draft summary falsely claims that this proposal will facilitate “negotiation” between the government and manufacturers. In reality, manufacturers have little recourse and no ability to walk away under the legislation.

Non-compliance with this faux negotiation would result in an imposition of a 75 percent excise tax. This tax would be calculated as a percentage of a drug’s annual gross sales of the previous year. This scheme would apply to the top 250 drugs. 

In addition to the threat of an excise tax, the proposal contains an international pricing index which would prohibit the “negotiated” price from rising above 1.2 times the volume weighted average price of six countries (Australia, Canada, France, Germany, Japan and the UK). This allows the pricing proposals adopted in foreign countries to be imported into the U.S.

Finally, the legislation calls for an inflationary rebate penalty for Medicare Part D and Part B retroactive to 2016. This would punish manufacturers for past decisions made and would create further distortions in the Medicare system that will harm existing private sector negotiation. 

In sum, these provisions will mean that no actual negotiation will take place. Rather, prices will be set by the government and manufacturers will be forced to submit to the decisions made by bureaucrats.

This proposal is not the way to lower drug prices. Rather than delivering meaningful results for seniors, it represents a government takeover of the system that will ultimately suppress innovation and lead to shortages and higher prices. 

Photo Credit: Ted Eytan


Indexing Capital Gains Taxes to Inflation is an Idea Supported By Many

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Posted by Alex Hendrie on Friday, August 30th, 2019, 1:28 PM PERMALINK

In a recent tweet, President Donald Trump asked whether indexing capital gains taxes to inflation, an idea he has previously supported, is an “idea liked by many.”

There is significant support for indexing capital gains taxes to inflation including almost two dozen Senators, the Vice President, the President’s Chief Economic Advisor, conservative leaders, and business groups.

Indexing capital gains taxes to inflation would also benefit Americans across the country from workers saving for retirement to farmers and ranchers selling off a parcel of land to acquire capital for new equipment and machinery that would help grow their family business.

Inflation makes up a significant portion of capital gains taxes paid. For instance, a taxpayer who purchased one share of Coca-Cola stock in 1998 paid $32.38. If they sold the stock earlier this year at $48.13, they would have a nominal gain of $15.76 and pay $3.75 in tax. The inflation-adjusted basis in today’s dollars, however, would be $50.50 meaning the taxpayer would have to pay $3.75 in taxes on a $2.38 loss.

A list of supporters is below:

  • Senator Ted Cruz (R-Texas) and 20 other Senators released a letter in July urging the administration to index capital gains taxes to inflation.
  • Cruz was joined by Senators Kevin Cramer (R-N.D.), Jim Inhofe (R-Okla.), Marsha Blackburn (R-Tenn.), Thom Tillis (R-N.C.), Pat Toomey (R-Pa.), John Boozman (R-Ark.), James Lankford (R-Okla.), Steve Daines (R-Mont.), John Barrasso (R-Wyo.), John Kennedy (R-La.), Mike Braun (R-Ind.), Ron Johnson (R-Wis.), Cindy Hyde-Smith (R-Miss.), John Cornyn (R-Texas), Rand Paul (R-Ky.), Richard Burr (R-N.C.), Roy Blunt (R-Mo.), Roger Wicker (R-Miss.), Jim Risch (R-Idaho), Ben Sasse (R-Neb.).
  • The President’s Chief Economic Adviser Larry Kudlow wrote in support of the policy in a CNBC in August 2017.
  • Vice President Mike Pence introduced legislation in 2007 indexing capital gains taxes to inflation. This legislation was sponsored by 88 Members of Congress including Ways and Means Republican Leader Kevin Brady (R-Texas).
  • The National Federation for Independent Business endorsed the policy in July 2018.
  • The Chamber of Commerce wrote a letter supporting indexing capital gains taxes to inflation in July 2019.
  • Then-Congressman Chuck Schumer (D-N.Y.) endorsed indexing in a 1992 floor speech. Schumer correctly stated that indexing would increase growth and lead to more savings and borrowing.
  • The Small Business and Entrepreneurship Council wrote in support of indexing capital gains taxes in a July 2019 letter.
  • The Republican Study Committee called for indexing capital gains taxes to inflation in their recent budget proposal.
  • The Farm Bureau supports indexing capital gains taxes to inflation.
  • Conservative activists including former Senator Jim DeMint and former Attorney General Ed Meese endorsed indexing in a July 2019 Conservative Action Project memo.
  • 51 conservative groups including ATR, the American Conservative Union, American Commitment, the Club for Growth, FreedomWorks, and National Taxpayers Union urged Trump to end the inflation tax in a January 2019 letter.
  • The Asian American Hotel Owners Association released a letter in July in support of indexing capital gains taxes to inflation.

 

Photo Credit: Gage Skidmore


ATR Opposes Retroactive Changes to Conservation Easement Deduction

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Posted by Alex Hendrie on Friday, August 16th, 2019, 9:22 AM PERMALINK

ATR has released a letter in opposition to retroactive changes to the conservation easement deduction. As the Senate Finance Committee continues its inquiry into potential abuses of the conservation easement charitable deduction, they should reject retroactive tax increases that undermine confidence in the tax system and harm taxpayers that have relied on current law. 

Read the letter here or below. 

Dear Members of the Senate Finance Committee:

As the Committee continues its inquiry into potential abuses of the conservation easement deduction under IRC Section 170(h), I write to oppose any retroactive changes to the provision. ATR opposes retroactive tax increases that undermine confidence in the tax system and harm taxpayers that have relied on current law.

One legislative proposal referred to the Finance Committee, S. 170, has called for retroactive changes to the conservation easement deduction effective for tax years ending after December 23, 2016.  Such an effective date would disallow deductions for donations made as far back as January 2016 – more than 3-1/2 years ago. ATR believes there is no basis for a retroactive change, especially since the conservation easement deduction has been reaffirmed and strengthened by Congress in recent years. Any changes to the deduction rules should be made prospectively only – for donations after the date of enactment.

Retroactivity is Bad Tax Policy

The tax code relies on consistency, certainty, and fairness. Taxpayers routinely 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.

Legislation that retroactively changes the tax code would violate this principle by affecting activity (in this case irrevocable conservation easement donations made and resulting deductions claimed) that has already occurred. This would also undermine confidence in the tax system and discourage taxpayers from taking advantage of explicit tax incentives (e.g., for charitable contributions, business investments, and energy efficiency) if they fear Congress might retroactively eliminate these incentives in the future.

Generally, even when Congress has determined a statutory provision is being used inconsistent with its original intent, Congress has disallowed or modified the provision on a prospective basis. For instance, when paper manufacturers claimed a credit for mixing diesel with alternative biomass fuels, or “black liquor,” Congress disagreed with this outcome and repealed the credit prospectively.

The Conservation Easement Deduction Has Routinely Been Reaffirmed By Congress

The conservation easement deduction was first created in 1976 and allowed taxpayers to claim a deduction for the donation of conservation easements to qualified land trusts. In 2006, the deduction was temporarily enhanced with strong bipartisan, bicameral support to allow taxpayers to deduct up to 50 percent of their adjusted gross income and carry forward any unused deductions for up to 15 years.  Congress made this enhancement permanent in 2015. 

This legislative history demonstrates clear, bipartisan support for the conservation easement deduction as an incentive for taxpayers to conserve their property for future generations. 

IRS Notice 2017-10 Does Not Justify Retroactive Legislation

Some have incorrectly suggested that IRS Notice 2017-10 released on December 23, 2016, would justify a retroactive legislative change as set forth in S. 170.

There is no justification for this claim. The IRS Notice required taxpayers and others to give the IRS additional information regarding certain conservation easement donations.

In no way did it change the law regarding the ability of taxpayers to take the conservation easement deductions.

Conclusion

Moving forward, lawmakers should conduct their review of potential abuses of IRS Section 170(h) in a way that gives stakeholders ample opportunity to weigh in on possible legislative solutions.

Any such legislative solutions should respect prior Congressional intent and avoid retroactive tax changes for those have relied on current law.

Onward, 

Grover G. Norquist
President, Americans for Tax Reform

Photo Credit: Henry Burrows


Democrats Are Wrong to Push A Tax on Stock Trades

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Posted by Alex Hendrie on Thursday, August 1st, 2019, 4:55 PM PERMALINK

It is six months until voters cast their first ballots in the Democrat presidential primary, but candidates have already rolled out a slew of tax increases on the American people.

One of these taxes, a financial transactions tax (FTT), is gaining traction among an increasing number of left-wing presidential candidates. FTTs would be imposed on the sale of any stocks, bonds, and derivatives.Kamala Harris’ plan for socialized healthcare included an FTT as one of the pay-fors. 

She is not alone – Bernie SandersElizabeth WarrenPete Buttigeg, and Kirsten Gillibrand have all floated an FTT of some form. 

These Democrats are wrong to push an FTT – this type of tax has failed when it has been tried before, would harm economic growth and investment, and would fail to raise any significant revenue.  

A financial transaction tax would harm investment & economic growth

An FTT will have broad, negative economic effects. By imposing a barrier to trades, this tax will increase the cost of capital and reduce productivity which would in turn harm wages and jobs. 

This tax would also increase market volatility as there would be fewer buyers and sellers and therefore more price jumps.

An FTT would especially impact fund managers that are responsible for 401(k)s, pensions, and index funds and make frequent trades. As a result, returns on pension funds and other savings would be lower because of the increased the costs of buying and selling and the reduction in value of shares.

In fact, BlackRock has previously estimated a financial transaction tax of 0.1 percent would result in an investor losing $2,300 in returns on a $10,000 investment in a global equity fund over ten years.

A financial transactions tax is bad tax policy

Ideal tax policy should be economically neutral by taxing income once (ideally at the point of consumption).

The FTT violates this principle by imposing an additional layer of taxation on top of existing capital gains taxes, individual income taxes, and corporate taxes. 

Because it is levied on a transaction, this tax could be imposed on the same financial instrument multiple times. In addition, the FTT would often be imposed at the same time as the capital gains tax – tax would be paid on the act of selling the asset and also on the gain of the asset.

A financial transactions tax fails to raise the revenue supporters claim

This tax would have the indirect effect of reducing income tax and capital gains tax revenue because it would reduce trades and cause capital to flee.

Case in point - an analysis by the Congressional Budget Office found that imposing a FTT would “decrease the volume of transactions and would make some types of trading activity” and “probably reduce output and employment.” 

In fact, some have predicted that a financial transactions tax would raise little, if any, net revenue because of these negative impacts.

A financial transactions tax has failed in the past

In 1984, Sweden imposed a financial transaction tax, a proposal that lasted just six years. Even though investors were restricted in moving capital to foreign markets, most trading migrated to London to avoid the tax. 

Not only did this mean the FTT raised little revenue, capital gains tax revenue dropped because of a reduction in sales. When it was abolished in 1990, investment began to return to Sweden.

This is not an isolated incident.

When Italy and France imposed FTTs in 2012, both countries raised less than a quarter of expected revenues.

study of New York State’s FTT that was in effect between 1932 and 1981 found that the tax increased the cost of capital, reduced trading and increased market volatility.

Photo Credit: Sam Valadi


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