Alex Hendrie

ATR Leads Coalition Urging President Trump to Index Capital Gains Taxes to Inflation

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Posted by Alex Hendrie on Tuesday, January 22nd, 2019, 5:00 AM PERMALINK

ATR President Grover Norquist today led a coalition of 51 conservative, free-market, pro-business, and pro-family activists and organizations in calling for President Trump to end the inflation tax on capital gains.

Click here to read the full letter.

Indexing capital gains taxes to inflation would end the unfair taxation of inflationary gains. As the letter notes:

When a family or a business saves money and buys a stock, real estate, or any other asset, the investment grows in value over time. Some of that growth is due to the asset appreciating in real terms, and some of that growth is merely due to the effect of inflation making everything more expensive.

Our tax system does not distinguish between these two increases in savings – the economic growth increase, and the merely inflationary increase. The whole gain is taxable. According to the non-partisan Tax Foundation, fully one-third of all unrealized capital gains are due only to inflation.

With Democrats in control of the House of Representatives, any attempt to pass further tax cuts for the American people is highly unlikely. However, as the letter notes, President Trump has the authority to end the inflation tax through the executive branch’s regulatory authority:

According to legal scholarship going back decades, the executive branch can define cost basis in an investment in such a way that the inflation tax on savings can be eliminated. Rather than having to pay tax on both real and inflationary gains, a family or business selling an asset would only pay tax on the real gain, or the gain derived from economic growth.

Indexing capital gains taxes to inflation will also give the economy a booster shot help bolster every 401(k), IRA, and 529 plan in America.

Click here to read the full letter.

Photo Credit: matt2181 - Flickr


ATR Supports Legislation to Repeal the Obamacare Health Insurance Tax


Posted by Alex Hendrie on Thursday, January 17th, 2019, 12:00 PM PERMALINK

If Congress fails to act soon, the Obamacare health insurance tax (HIT) will go into effect at the end of the year. This will mean higher taxes on more than 141 million consumers, including those in the individual market, large and small group plans, Medicare Advantage and Medicare Part D plans.

Thankfully, Senators John Barrasso (R-WY), Cory Gardner (R-CO), and Kyrsten Sinema (D-Ariz.) have introduced the "Jobs and Premium Protection Act" (S. 80), legislation that will repeal the HIT once and for all. ATR has released a letter of support for this legislation urging all Senators to co-sponsor. 

If lawmakers allow the HIT to go into effect, this tax will increase premiums by 2.2 percent per year and almost $6,000 over the next ten years for a typical family of four with small or large group insurance.

The HIT is also highly regressive, with over half of those paying it making less than $50,000 a year.

The HIT also directly impacts approximately 1.7 million small businesses, and could cost small businesses 286,000 jobs and $33 billion in lost sales by 2023.

One of the top priorities of the new Congress should be to enact health care reform that benefits all Americans. Repealing Obamacare’s harmful HIT is an excellent first step towards this goal. All members of Congress should support the “Jobs and Premium Protection Act.”

*Read ATR's letter in support of S. 80 here*

 

More from Americans for Tax Reform


Don’t Replace Free Market Competition in Medicare Part D With Government Forced Negotiation

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Posted by Alex Hendrie on Wednesday, January 16th, 2019, 10:00 AM PERMALINK

In a letter to members of Congress, ATR President Grover Norquist expressed opposition to H.R. 275, legislation that replaces the free market competition in Medicare Part D with government forced negotiation.

This legislation was introduced by Congressman Peter Welch (D-Vt.) and co-sponsored by a number of Democrats and Congressman Francis Rooney (R-Fla.) as the lone Republican.

Despite Congressman Rooney’s completely misguided co-sponsorship, this is not bipartisan legislation. The far-left has been attempting to dismantle Medicare Part D for years in order to enact more government control over the American health care system.

Click here to read the full letter.

Medicare Part D works because it promotes free-market competition in order to deliver the best, lowest-cost outcomes for taxpayers and patients alike. As the letter notes:

“Rather than having the government negotiate, Part D allows negotiation between pharmacy benefit managers (PBMs), pharmaceutical manufacturers, and pharmacies. This system works because Congress created a non-interference clause when Part D was created which prevents the secretary of Health and Human Services (HHS) from interfering with the robust private-sector negotiations.”

Medicare Part D has been a success. It has saved taxpayers billions of dollars and has granted patients access to medicines at lower costs. It has also been a financial success, with federal spending consistently coming in at 45 percent below projections according to the CBO. This program is successful precisely because of the negotiations between pharmacy benefit managers, pharmaceutical manufacturers, and pharmacies.

By injecting forced government competition into the process, H.R. 275 would disrupt this successful program:

H.R. 275 would destroy this successful system by allowing the government to set prices and override existing negotiation.Prices would be set on an arbitrary basis rather than through the free market. This would have several adverse consequences.”

This would have a number of adverse consequences to the healthcare system as the letter notes:

“First, it would harm the incentive for manufacturers to innovate because there are fewer profits available to finance the next generation of life-saving and life-improving prescription medicines. In turn, this will result in higher long-term healthcare costs because illnesses need to be treated in a reactive, not proactive way.

Second, restricting innovation will also harm access. The U.S. is currently a world leader in medical innovation and access because it promotes innovation and free market competition. As a result, the majority of cures are developed in the United States and are launched years before other developed nations have access to them.

For instance, the US had access to 95 percent of the dozens of cancer drugs launched between 2011 and 2018. By comparison, the U.K had access to 74 percent, Japan had access to 49 percent, and Greece had access to 8 percent of these cancer drugs.

Finally, government-controlled pricing will harm the high-paying jobs that come from research and development of new medicines."

Medicare Part D is a program already delivers medicines to seniors in an efficient way that balances cost and access. Replacing the free market competition of Medicare Part D with top down government control will lead to reduced access, higher prices, and less innovation.

All members of Congress should reject the Welch-Rooney bill and support private sector negotiation in Medicare Part D.

Photo Credit: Jonathan Colman - Flickr


Congress Should Reject Legislation Lifting the Medicaid Rebate Cap


Posted by Alex Hendrie on Wednesday, January 16th, 2019, 8:00 AM PERMALINK

In a letter to Members of Congress, ATR urged opposition to H.R. 107, legislation to lift the existing Medicaid rebate cap for outpatient drugs.

The current 100 percent rebate cap is a reasonable safeguard for manufacturers to ensure the subsidies they pay Medicaid are no higher than the price of the drug.

There are currently over 2,500 drugs that hit the cap so this legislation would create numerous instances where the manufacturer is paying Medicaid to supply the drug.

[Read the full letter here]

Lifting the cap would also likely create perverse incentives within the market.

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

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

ATR urges all Members of Congress to oppose this legislation as a stand-alone proposal or as part of any broader healthcare legislation.


Pelosi Wants to “Replace” the Repealed Obamacare Individual Mandate Tax

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Posted by Alex Hendrie on Tuesday, January 8th, 2019, 11:37 AM PERMALINK

In an interview with MSNBC on Friday, House Speaker Nancy Pelosi said, “We have to replace” the repealed Obamacare individual mandate tax penalty. The individual mandate was one of the most regressive taxes in the code before it was repealed in 2017 by the Republican passed Tax Cuts and Jobs Act. Reinstating this tax will undoubtedly disproportionately fall on low and middle-income families.

Prior to repeal, the mandate forced individuals to purchase government approved health insurance or pay a tax totaling almost $700 for an individual and $2,000 for a family.

Official IRS data found that low-income Americans shouldered the burden of this tax.

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.


So what tax increase does Pelosi have in mind?

 

Photo Credit: Gage Skidmore


Dems Eye 33% Corporate Rate Hike

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Posted by Alex Hendrie on Monday, January 7th, 2019, 2:09 PM PERMALINK

House Budget Chairman John Yarmuth (D-Ky.) has announced that the forthcoming budget blueprint will call for a 33 percent corporate income tax rate increase by hiking the rate from 21 percent to 28 percent. This would make the U.S. a less competitive place to do business and make the U.S. statutory rate higher than many developed competitors.

State corporate taxes average 6 percent across the U.S, so this planned tax hike would give the U.S. an average top corporate rate of 34 percent.

The current combined corporate rate across the 36 member Organisation for Economic Development and Cooperation (OECD) is currently 23.7 percent.

This proposed tax hike would make the U.S. rate higher than major competitors such as the United Kingdom (19 percent), China (25 percent), Canada (26.8 percent), Germany (29.8 percent), and Ireland (12.5 percent).

"Hiking the tax rate on American businesses will kill jobs, lower wages, and reduce new investment in America," said Grover Norquist, president of Americans for Tax Reform. "Why do the Democrats want to damage American competitiveness and job creation?"

Not only will raising the 21 percent rate make America less globally competitive, it will also harm today’s strong economic growth, growing wages, record job openings, and lower utility bills.

Just last week, it was announced that the U.S. economy added 312,000 jobs in December. Over the past 12 months, wages have grown 3.2 percent and 2.6 million jobs being created.

The U.S. has been named the most competitive economy in the world. Manufacturers just had their most successful year since 1997 and small business optimism is at record highs.

Raising the corporate rate, as House Democrats are proposing, would undo these gains. 

Americans for Tax Reform recently launched a special project, Defend21.org, to stand firm against any and all attempts to raise the corporate tax rate. 

Photo Credit: Flickr


The Top 20% of Households Pay 88% of Federal Income Taxes

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Posted by Alex Hendrie on Monday, January 7th, 2019, 2:02 PM PERMALINK

Congresswoman Alexandria Ocasio-Cortez (D-NY) recently proposed a 70 percent top federal income tax rate. This would nearly double the current top tax bracket, which is currently at 37 percent. Ocasio-Cortez fails to mention that the tax code is already steeply progressive.

According to the Congressional Budget Office

-The top one percent of households pay 39.4 percent of federal income taxes and 26.2 percent of total federal taxes.

- The top 20 percent of households pay 88.1 percent of federal income taxes and 69.5 percent of total federal taxes.

- The top one percent of households pay an average income tax rate of 24 percent while the middle quintile pays an average income tax rate of 3 percent.

- The top one percent of households pay an average total tax rate of 33.3 percent while the middle quintile pays an average total tax rate of over 14 percent.  

- The top 20 percent of households pay an average total tax rate of 26.7 percent while the middle quintile pays an average total tax rate of 14 percent. 

The data is shown below: 


Photo Credit: Wikimedia Commons


Ocasio-Cortez Tax Plan Creates 82.7% Top Income Tax Rate for New Yorkers

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Posted by Alex Hendrie on Friday, January 4th, 2019, 11:20 AM PERMALINK

In an upcoming 60 Minutes interview, Congresswoman Alexandria Ocasio-Cortez (D-N.Y.) will call for federal income tax rates of up to 70 percent as part of a proposal to create vast new government spending programs.

The current top federal income tax rate is 37 percent, so the Ocasio-Cortez plan will nearly double the tax rate for the top bracket.

New York State has a top income tax rate of 8.82 percent while New York City has a top rate of 3.876 percent. So under this proposal, her constituents would pay a top combined income tax rate of 82.7 percent:

Federal income tax rate:   70.0%
NY state income tax rate: 8.82%
NYC income tax rate:       3.876%
TOTAL:                           82.696%

New Yorkers would not be the only ones suffering under the Ocasio-Cortez plan. California taxpayers would pay a top rate of 83.3 percent (70 percent plus the California rate of 13.30 percent).

In addition to this high income tax rate, taxpayers would remain impacted by other taxes including payroll taxes, taxes on capital gains income and dividends, and the death tax.

Further, while Ocasio-Cortez has not released details of any other tax hikes to pay for her plan, this would likely not be the only income tax increase if she had her way. For instance, Senator Bernie Sanders (I-Vt.) proposed a $2 trillion 2.2 percent payroll tax on all families and a $10 trillion 6.2 percent payroll tax on all businesses as part of his socialized healthcare plan.

Congresswoman Rosa DeLauro (D-Conn.) and Congresswoman Jan Schakowsky (D-Ill.) have proposed numerous tax hikes including a new, 5 percent surtax on those making $500,000 per year and an increase in the Obamacare payroll tax from 0.9 percent to 4 percent.

Regardless of the specific proposal, it is clear that Democrats want higher taxes on the American people as they made clear when they changed the House rules to make it easier to raise taxes.

Just last night, Democrats rejected a proposal to make permanent the $2,000 child tax credit (up from 1,000) and the $24,000 standard deduction for families (up from $12,000).

Based on their record this will not be the first of many cases where Democrats oppose middle class tax relief and advocate for higher taxes on the American people.

Photo Credit: Wikimedia Commons


Senior House Democrats Ended 2018 with Massive Tax Hike Proposal

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Posted by Alex Hendrie on Wednesday, January 2nd, 2019, 3:35 PM PERMALINK

When most Americans were preparing for the Christmas season in the second half of December, a number of House Democrats released a massive tax hike proposal.

Congresswoman Rosa DeLauro (D-CT) and Congresswoman Jan Schakowsky (D-IL) introduced the Medicare for America Act, legislation that would increase taxes on American families and businesses large and small.

To start, the legislation introduced by Reps. DeLauro and Schakowsky repeals the entire Tax Cuts and Jobs Act passed by the GOP in 2017. This would impose significant tax increases on individuals:

-The proposal would restore pre-TCJA tax brackets resulting in a tax increase for Americans at every income level.

The TCJA reduced taxes for a family of four with annual income of $73,000 by $2,058, a 58 percent reduction in federal taxes. A single parent with one child with annual income of $41,000 has seen a tax cut of $1,304, a 73 percent reduction in federal taxes.

-The proposal would cut the child tax credit in half from $2,000 to $1,000. According to IRS data, over 23 million families take the credit.

-The proposal would cut the standard deduction in half from $12,000 to $6,300 ($24,000 to $12,600). An estimated 93 percent of filers will take the standard deduction when filing their 2018 taxes.

-The proposal would increase the Alternative Minimum Tax – increasing the number of filers who pay the tax from 200,000 taxpayers to 4 million.

In addition, the proposal would reinstate the State and Local Tax Deduction, a provision which overwhelmingly benefits upper income earners.

The legislation also imposes significant tax increases on businesses:

-The proposal would repeal the 20 percent small business deduction available to entities organized as pass-through entities (LLCs, sole-properties, S-corps). This is a $415 billion tax cut.

-The proposal would raise the corporate rate from 21 percent to 35 percent. This would again make the U.S. corporate rate the highest in the developed world.

-The proposal would restore the outdated, worldwide system of taxation. This would make the U.S. one of the few developed countries in the world to double tax foreign source income.

-The proposal would repeal 100 percent, full business expensing which gives businesses a zero percent rate on new investment.

In addition to full repeal of the TCJA, the legislation includes several new tax hikes. 

-The legislation would create a new, 5 percent surtax on taxpayers earning $500,000 per year, resulting in a top income tax bracket of 44.6 percent. This provision is not indexed to inflation, so it will each grow to hit more and more Americans over time.

-The Obamacare payroll tax will increase from 0.9 percent to 4 percent and the Obamacare net investment income tax on individual and small business capital gains will increase from 3.8 percent to 6.9 percent. Neither of these provisions are indexed to inflation so it will each grow to hit more and more Americans over time.

-The legislation also repeals tax-preferred Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). 25 million families and individuals currently utilize HSAs and 30 million utilize FSAs. These accounts empower healthcare choice by allowing to save and spend their own funds for healthcare expenses tax free. HSAs have triple tax benefits – dollars are tax free when funds are contributed, tax free when they are spent, and any gains accrued by investing dollars are tax free.

-The legislation increases taxes on alcohol and tobacco products.

-The legislation creates a new tax on sugary drinks equal to one cent per 4.2 grams of sugar. Funds from this tax will be sent to the Obamacare Prevention and Public Health Slush fund, a fund that was used by the Obama administration to push blatantly partisan, politicized policies.

This legislation is far from an outlier within the House Democrat conference.

Democrats plan to change the rules of the House to remove the three-fifths majority requirement to raise taxes and incoming Speaker Nancy Pelosi (D-Calif) has repeatedly promised that House Democrats will raise taxes. Incoming House Budget Chairman John Yarmuth (D-KY) has voiced support for a tax hike on businesses and new members such as Rep. Alexandria Ocasio-Cortez (D-NY) have called for sweeping tax increases.

Photo Credit: Flickr


Rep. Holding Releases Bill Ending the Double Taxation of Overseas Americans

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Posted by Alex Hendrie on Wednesday, January 2nd, 2019, 1:00 PM PERMALINK

Every year, American citizens residing overseas are taxed twice on their income: once by the IRS, and once by the country that they reside in. This double taxation increases the tax burden on overseas Americans and exposes them to needless complexity and bureaucracy.

Addressing this problem is simple. The U.S. should move toward a territorial tax system for individuals, as has proposed by Congressman George Holding (R-NC).

Late last year, Rep. Holding released the Tax Fairness for Americans Abroad Act, legislation that would ensure American citizens overseas would not have to pay U.S. taxes on foreign earned income.

The legislation creates a streamlined system to exempt foreign earned income of American citizens provided they can certify that they reside overseas and have been in compliance with U.S. tax law for the past three years.

Any gains attributable to foreign property sold that was acquired while an individual resided overseas is shielded from U.S. taxation.

To prevent tax avoidance, U.S. source income earned by a foreign resident (including any gains from the sale of foreign property while the individual was residing in the U.S.) would remain subject to U.S. taxation under the legislation.

Today, the U.S. is one of the only countries (with the African nation Eritrea) that has a citizenship-based system of taxation.

This has significant consequences for the roughly 9 million American citizens living overseas as they must pay U.S. taxes on their income even if this income was earned and taxed in a foreign country. Although a foreign earned income exclusion (up to $100,000) and a housing exclusion exist, these are insufficient in protecting taxpayers.

Not only does the current system create undue hardships for American taxpayers overseas, it also puts U.S. workers at a disadvantage in competing with workers from other developed countries.

The Tax Cuts and Jobs Act passed in 2017 moved to a territorial system for businesses. This reform will allow businesses to compete on a more level playing field when operating overseas.  This reform was also long overdue as the majority of the developed world had already moved toward a system that taxes based on where the income was earned.

However, American individuals are still subject to U.S. taxation on their overseas earnings.

This must be fixed and can be achieved by passing the Tax Fairness for Americans Abroad Act. The legislation creates a simpler, more equitable, and more competitive tax system for overseas Americans. As Congress considers further changes to the tax code, this legislation should be at the top of the list.

Photo Credit: Wikimedia Commons


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