Alex Hendrie

ATR Urges Passage of House GOP Tax Legislation

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Posted by Alex Hendrie on Tuesday, December 11th, 2018, 1:45 PM PERMALINK

Later this week, the House of Representatives is expected to vote on the “Retirement, Savings, and Other Tax Relief Act, legislation being proposed as a House Amendment to the Senate Amendment to H.R. 88.

This legislation offers relief from several Obamacare taxes, strengthens retirement savings, reforms the IRS, and promotes entrepreneurship.

All Members of Congress should support and vote “YES” on this legislation.

Relief From Obamacare Taxes

H.R. 88 includes key relief from Obamacare taxes. The legislation delays the health insurance tax for an additional two years (through 2022), delays the medical device tax for an additional five years (through 2025), delays the Cadillac tax on employer provided health insurance for one additional year (through 2023), and fully repeals the tanning tax.

These taxes increase the cost of healthcare for families, individuals, and small businesses.

For instance, the health insurance tax will harm more than 141 million consumers, including those in the individual market, large and small group plans, Medicare Advantage and Medicare Part D plans if it takes effect.  The tax will increase premiums by 2.2 percent per year and by almost $6,000 over the next decade for a typical family of four with small or large group insurance. In addition, the tax is estimated to directly impact as many as 1.7 million small businesses. 

The 2.3 percent medical device tax is similarly harmful to small businesses. Research indicates that the tax reduced medical device investment by $34 billion in 2013 and cost almost 22,000 jobs when it was in effect between 2013 and 2015.

The Obamacare 10 percent tanning tax has wiped out an estimated 10,000 tanning salons, many owned by women. Industry estimates show that 30 million Americans visit an indoor tanning facility in a given year, and over 50 percent of salon owners are women. 

Lastly, the Cadillac tax on employer provided health insurance tax will be devastating to employers if it is allowed to go into effect. The Tax could harm up to half of all employers by 2027 if Congress fails to act.

Adopts Key Tax Reform 2.0 Provisions

The tax bill adopts key portions of the Tax Reform 2.0 package passed by the House in September.

Individual retirement accounts are updated so that businesses have more flexibility to fund employee plans and individuals have more flexibility to contribute and save. For instance, the reforms will repeal the prohibition on contributing to an IRA for individuals aged 70 ½ and older.

Retirees with less than $50,000 in their account are exempt from the required distribution rules, while small businesses will see an increase in the employer retirement plan start-up credit.

The legislation also grants start-up businesses important flexibility and tax reduction so they can recover of their initial expenses and bring in new investors to retain access to important tax benefits like the research and development tax credit.

Implements Taxpayer Protections from the IRS 

Finally, the legislation includes key reforms from the Taxpayer First Act that was passed earlier this year based around creating a modern IRS that has improved service, independent appeals process, and protects taxpayer data.

For instance, the legislation increases the protection over confidential taxpayer data by prohibiting the IRS from outsourcing taxpayer information to outside contractors unless necessary for expert evaluation of the information at hand.

The designated summons process is reformed by requiring the IRS to disclose a documented history of reasonable requests of information from the taxpayer to the head of the relevant operating division and its division counsel.

Adjustments are made governing the contact of third parties so that the IRS has to give taxpayers a 45-day notice before contacting a third party to collect taxpayer liabilities.

While more remains to be done, these reforms move in the right direction toward ensuring taxpayers are protected from IRS overreach. 

One of the most egregious examples of IRS abuse in recent memory is when the agency broke federal law to hire a Democrat white-shoe law firm to audit Microsoft. Quinn Emmanuel’s services, which cost taxpayers $1,000 an hour, could have easily been performed by the IRS’s 40,000 in-house enforcement officers. The IRS’s decision to hire an outside law firm to audit Microsoft calls the agency’s judgment into question as well as its use of limited resources.

Photo Credit: Kevin Schofield - Flickr


Senate Should Reject Senate Dems Schedule B CRA

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Posted by Alex Hendrie on Tuesday, December 11th, 2018, 10:06 AM PERMALINK

Senate Democrats are expected to soon force a vote on S.J.Res.64, a congressional resolution of disapproval of the Trump administration rule rolling back the Schedule B disclosure requirements for non-profits. 

ATR urges all Senators to vote “NO” on this resolution.

The Trump admin decision to roll back reporting requirements for the Schedule B form earlier this year was a major win for free speech and efforts to protect non-profits. The rule also in no way limited or curbed transparency in politics as the same information on non-profits will continue to be available to the public.

S.J.Res 64 would undo this progress and again chill political free speech.

Congress first required section 501(c)(3) organizations to send the IRS to personal information of their donors 50 years ago. This information, which includes the names and addresses of donors, is submitted to the IRS on the Schedule B form. The agency later extended this requirement to all other tax-exempt organizations including 501(c)(4)s and 501(c)(6)s.

Schedule B forms are not used for any official purpose and the IRS is prohibited from sharing or disclosing this sensitive information. Instead of serving a legitimate purpose, the disclosure requirement creates needlessly compliance costs on both non-profits and the IRS.

In fact, the Schedule B form has recently become a tool for unelected bureaucrats to chill political speech.

Under the Obama administration, there were several cases where agency officials leaked the sensitive information contained on Schedule B forms for political purposes, such as leaking of the schedule B belonging to the National Organization for Marriage.

The IRS record of protecting taxpayers is poor in this space – a 2016 report by the Government Accountability Office warned that the IRS may still be unfairly targeting non-profits “based on an organization’s religious, educational, political, or other views.”

The Trump rule ending the collection of Schedule B forms is a step in the right direction toward protecting free speech in a way that also upholds transparency in the political process. Senators should stand with this rule and vote NO on S.J.Res 64.

Photo Credit: Ted - Flickr


Conservatives Urge Lame Duck Action on Health Care Reform

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Posted by Alex Hendrie on Thursday, December 6th, 2018, 9:30 AM PERMALINK

In a letter to House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell, Americans for Tax Reform and 17 other conservative groups urged Congress to take lame duck action on health care reform.

Click here to read the full letter.

Specifically, the groups called for Congress to repeal the health insurance tax, expand Health Savings Accounts and roll back the medical device tax before Democrats regain control of the House in January.

The Health Insurance Tax is one of Obamacare’s most harmful, with an annual cost of $16 billion levied on the health insurance premiums of American families. More than 141 million consumers will be damaged by this new tax: consumers in the individual market, large and small group plans, Medicare Advantage, and Medicare Part D plans. Furthermore, 1.7 million small businesses would be harmed. Premiums could increase by as much as 2.2 percent per year, equating to almost $6,000 over the next decade for a typical family of four with small or large group insurance, and those earning less than $50,000 a year pay more than half the tax.

Expanding HSAs should also be a priority of this lame duck Congress. Today, 25 million families and individuals (and counting) utilize tax-advantaged Health Savings Accounts to save and spend their own money tax-free on a variety of healthcare expenses. Congress should expand HSAs to individuals with a bronze or catastrophic health care plan, double the contribution limit, allow working seniors enrolled in Medicare Part A to contribute to an HSA, and allow individuals to purchase over-the-counter medicine. These much-needed reforms would update HSAs for the benefit of millions of American families.

Finally, Congress should delay or roll back the medical device tax, the 2.3% excise tax on thousands of small businesses and manufacturers. This tax has been proven to suppress investment and cost jobs.  When it was last in effect, medical device investment dropped by $34 billion in 2013 and almost 22,000 jobs were lost between 2013 and 2015.

Congressional Republicans can draw a sharp contrast with Obamacare’s top-down, command and control model of healthcare by using the lame-duck session to pass free-market reforms that lower the cost of healthcare for families, increase consumer choice and access, and get the federal government out of the healthcare business.

In the long term, Congress should work to dismantle all of Obamacare’s taxes. In the short term, Congress has a prime opportunity to expand HSAs and repeal  some of Obamacare’s most harmful taxes for the benefit of American families. 

Click here to read the entire letter. Which is also reprinted below.

The Honorable Paul D. Ryan
Speaker
United States House of Representatives
H-232, The Capitol
Washington, D.C. 20515

The Honorable Mitch McConnell
Majority Leader
United States Senate 
S-230, The Capitol
Washington, D.C. 20510

Dear Speaker Ryan & Leader McConnell:

We write to urge that Congress acts to repeal or delay existing Obamacare taxes during the lame duck period including the health insurance tax, medical device tax, and restrictions on Health Savings Accounts (HSAs).

First, Congress should act to repeal or further delay the Obamacare health insurance tax, which is scheduled to go into effect in 2020. The House has already put forward proposals to repeal and delay this tax, which should be taken up and signed into law by the President.

Insurers plan their prices months in advance so Congress must act soon to stop this $16 billion per year tax from hitting American families.

More than 141 million consumers could be negatively impacted by the health insurance tax, including consumers in the individual market, large and small group plans, Medicare Advantage and Medicare Part D plans.

If it does go into effect, the tax will increase premiums by 2.2 percent per year, according to research by Oliver Wyman.

This could increase premiums by almost $6,000 over the next decade for a typical family of four with small or large group insurance.

77 percent of registered voters support delay or full repeal of the Health Insurance Tax, according to polling released by Morning Consult.

Lawmakers should also expand tax advantaged health savings accounts. Today, 25 million American families and individuals save and spend their own money tax free on a variety of healthcare expenses — more than double the number of individuals that use Obamacare exchanges.

The House has already passed legislation that would nearly double the contribution limit for an HSA from $3,450 to $6,650 for an individual and $6,900 to $13,300 for a family and allow individuals with a bronze or catastrophic health plan to be eligible for an HSA. The proposal expands access to HSAs by allowing working seniors enrolled in Medicare

Part A to contribute to an HSA and allows HSAs to be used to purchase over-the-counter medications and fitness expenses.

These HSA reforms draw a strong contrast to the top-down, command and control model of Obamacare by empowering individuals, lowering healthcare costs, strengthening retirement security, and further reducing taxes for middle class families.

Finally, lawmakers should further roll back the Obamacare medical device tax, which is scheduled to go into effect in 2020.

The medical device tax is imposed as a 2.3 percent excise tax on all manufacturers including the thousands of small businesses. Ultimately, this tax suppresses investment and costs jobs.

This is not hypothetical – research indicates that the tax reduced medical device investment by $34 billion in 2013 and cost almost 22,000 jobs when it was in effect between 2013 and 2015.

When it was signed into law, Obamacare imposed a trillion dollars in new or higher taxes on the American people over a decade. These taxes including a tax on Americans facing high medical bills, taxes on health savings accounts, a tax on innovative medicines, and a tax for failing to buy health insurance. They have all caused significant harm to middle-class and low-income families across the country.

Over the long-term, lawmakers must continue working to repeal all one trillion in Obamacare taxes as part of reforms that increase access to care, lower costs, and get the government out of health care.

In the short term, Congress can take a strong step toward achieving this goal by repealing or delaying the health insurance tax, expanding HSAs, and rolling back the medical device tax.

Sincerely, 

Grover Norquist
President, Americans for Tax Reform

James L. Martin
Founder/Chairman, 60 Plus Association

Saulius “Saul” Anuzis
President, 60 Plus Association

Dan Weber
President, Association of Mature American Citizens

Norm Singleton
President, Campaign for Liberty

Ryan Ellis
President, Center for a Free Economy

Jeff Mazella
President, Center for Individual Freedom

Thomas Schatz
President, Council Against Government Waste

Katie McAuliffe
Executive Director, Digital Liberty

Palmer Schoening
Chairman, Family Business Coalition

Jason Pye
Vice President of Legislative Affairs, FreedomWorks

Grace-Marie Turner
President, Galen Institute (Affiliation listed for identification purposes only)

Daniel Perrin
Executive Director, HSA Coalition

Carrie Lukas
President, Independent Women’s Forum

Heather R Higgins
CEO, Independent Women’s Voice

Brandon Arnold
Executive Vice President, National Taxpayers Union

Karen Kerrigan
President/CEO, Small Business & Entrepreneurship Council

Tim Andrews
Executive Director, Taxpayers Protection Alliance

Photo Credit: Mark Fischer


ATR Urges the IRS to Return Transition Tax Overpayments to Taxpayers

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Posted by Alex Hendrie on Wednesday, December 5th, 2018, 5:59 PM PERMALINK

In a letter to Treasury Secretary Steve Mnuchin, ATR President Grover Norquist urged the IRS to change its guidance in regards to transition tax overpayments under IRC Section 965. 

Under the Transition tax, companies must pay tax on foreign earnings and profits that have been deferred and not yet paid in the United States. However, the IRS has taken the position that any overpayment of deferred foreign income tax liability must be applied to the Transition tax instead of refunded to the company, depriving companies of much-needed cash flow. 

Read the letter here or below: 

The Honorable Steven Mnuchin
Secretary
U.S. Treasury Department
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Dear Secretary Mnuchin:

I write regarding the IRS guidance issued for overpayments made when paying the transition tax under IRC Section 965. The current interpretation by the IRS is harming taxpayers and economic growth and should be reversed in a way that promotes flexibility and matches Congressional intent.

Under the Transition tax, foreign earnings and profits that have been deferred and not yet taxed in the US must be repatriated and tax paid. Taxpayers have an option to pay the Transition tax over eight years with the following installments – 8 percent of total liability for years one through five, 15 percent of total liability in year six, 20 percent in year seven, and 25 percent in year eight.

However, the IRS has taken the position that then any overpayment of deferred foreign income tax liability must be applied to the Transition tax rather than refunded to the company. This position directly contradicts the provisions and intent of the bill to allow companies to pay their Transition tax liability over eight years.

The IRS position is depriving taxpayers of badly needed cash flow which in many cases was the basis for businesses to invest in factories, on new equipment, or pay their employees bonuses or increase their wages.

The IRS position is also stifling the economic growth the Administration and Congress promised and that the tax bill was designed to deliver. 

I urge you to immediately intervene and direct the IRS to change its policy and return any overpayments to taxpayers so that they can continue to create good paying jobs for Americans.

Thank you for your consideration. If you have any questions, please do not hesitate to contact me or ATR’s Director of Tax Policy Alex Hendrie at ahendrie@atr.org or at 202-785-0266.

Onward,

Grover Norquist
President, Americans for Tax Reform

 

 

Photo Credit: David Boeke


Sherrod Brown is Wrong: The GOP Tax Cuts Have Not Given Companies An Outsourcing Coupon

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Posted by Alex Hendrie on Monday, December 3rd, 2018, 9:47 AM PERMALINK

Senator Sherrod Brown (D-OH) has claimed that the Tax Cuts and Jobs Act passed by Congressional Republicans has led to companies outsourcing jobs and factories overseas. He has seized on the recent announcement that GM will shutter several plants and lay off workers as proof of this claim. 

Senator Brown is wrong – there is no outsourcing “coupon” or similar tax break in the TCJA.

The provision cited by Senator Brown actually makes it more difficult for companies to outsource jobs and wages.

Instead of harming American workers and families, the tax bill has grown the economy and made America a more competitive place to do business. Thanks to tax reform, wages are up, job openings are at a high, unemployment is low, business optimism is strong, and workers are seeing increased employee benefits.

The Tax Cuts and Jobs Act Discourages Outsourcing

Senator Brown has repeatedly claimed that the TCJA gives companies a 50 percent coupon off their 21 percent corporate rate when they relocate overseas. He cites the new GILTI (Global Intangible Low-Tax Income) and FDII (Foreign-Derived Intangible Income) provisions under Section 250 of the tax code.

These provisions actually make it more difficult for companies to outsource jobs and factories because they target erosion of the U.S. tax base by going after new types of income that were previously not taxed  by the U.S. system.

GILTI and FDII apply a “carrot and stick” approach to the taxation of intangible income (income derived from rents, royalties etc.) that is easily allocated to low-tax jurisdictions.

GILTI is the stick – it is designed to impose taxation on low-tax IP-derived income of foreign subsidiaries. Any GILTI income is included in a company’s taxable income but with a 50 percent deduction, resulting in an effective rate of 10.5 percent.

This approach aims to incentivize companies to locate capital and profits within America, while clamping down on companies that relocate their assets overseas. 

Post-TCJA, if a company chooses to relocate assets overseas, they receive a higher tax rate on their income than they would have before tax reform (10.5 percent versus zero) because of GILTI.

In fact, this so-called “outsourcing tax break” is a $112.4 billion tax increase over the ten-year window (as a whole the bill is a $1.45 trillion tax cut).

Senator Brown has stated that he wants President Trump to step in and remove the 50 percent outsourcing coupon. In reality, there is nothing to fix - GILTI is not a coupon or outsourcing benefit and actually makes it harder for companies to relocate overseas.

The U.S. Economy is Strong Because of Tax Reform

Although Senator Brown claims the GOP tax cuts are a negative for America, nothing could be further from truth.

Tax reform has made the U.S. system competitive again – the bill lowered the federal corporate tax from 35 percent (where it was the highest in the developed world) to 21 percent, a rate that puts the U.S. close to foreign competitors.

Tax reform also modernized the U.S. international tax system so that businesses will now be able compete globally and can reinvest trillions of dollars in foreign earnings into America.

Because of these policies, the U.S. was named the most competitive economy in the world earlier this year, according to the IMD World Competitiveness Center.

The economy grew by 3.5 percent in Q3 of 2018 and we are on track for the strongest annual growth in 13 years. The unemployment rate is at a near-50 year low

Small business optimism is at the highest level in 45 years, with owners reporting more investment and spending. Similarly, manufacturer optimism is at a record high over the past year, with capital investment, employment, and sales all increasing.

At least 90 percent of wage earners are seeing higher take home pay because of tax reform. Consumers are seeing lower utility bills in all 50 states and workers are seeing bonuses, 401(k) match increases, and new employee benefits.

Photo Credit: Flickr


Conservatives Oppose HHS International Pricing Index for Medicare Part B Drugs


Posted by Alex Hendrie on Tuesday, November 27th, 2018, 3:00 PM PERMALINK

In a letter to the Department of Health and Human Services, ATR and 56 other conservative groups and activists expressed opposition to HHS’s “International Pricing Index” (IPI) payment model for drugs administered under Medicare Part B.

Click here to read the full letter. 

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

America’s innovative environment for medicines is enormously beneficial to the U.S. healthcare system. Investment in the research and development of medicines is critical to the growth of high-paying jobs and a stronger economy.

In sharp contrast, socialized foreign healthcare systems put price controls on their medicine, eschewing America’s free market approach. Time and time again, price controls has been proven to suppress innovation. Price controls utilize government power to forcefully lower costs in a way that distorts free-market incentives to lower costs through efficiency and innovation.

As the letter notes, the proposed HHS rule simply imports foreign price controls into the US: 

“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.”

The letter also notes that Medicare Part B is currently based on market prices, and explains how that system led to a price decrease in the cost of top 50 Part B drugs: 

“Instead of relying on government price setting, Medicare Part B is currently calculated based on market prices. The formula, which is based on the “Average Sales Price” (ASP) in the U.S. market, includes the discounts negotiated between payers, hospitals and health plans. Recently this system led to a 0.8 percent decrease in the cost of the top 50 Part B drugs.”

Finally, the letter notes that the IPI is being proposed through the Obamacare Center for Medicare and Medicaid Innovation (CMMI), an agency that is funded outside of the Congressional appropriations process in violation of Article I of the constitution.

The Trump administration has repeatedly identified price controls as being harmful to innovation. If implemented, the proposed IPI model for Medicare Part B drugs will stifle innovation and harm American competitiveness and investment.

Click here to read the full letter. Which can also be found below.

The Honorable Alex Azar
Secretary
Department of Health and Human Services
200 Independence Avenue SW
Washington, DC 20201

Dear Secretary Azar:

We write in opposition to the administration’s Advanced Notice of Proposed Rule Making (ANPRM) to create an “International Pricing Index” (IPI) payment model for drugs administered under Medicare Part B.

The proposed payment model imports foreign price controls into the U.S. by modifying the Part B reimbursement rate so that it is calculated based off the prices set by 14 countries.

Instead of relying on government price setting, Medicare Part B is currently calculated based on market prices. The formula, which is based on the “Average Sales Price” (ASP) in the U.S. market, includes the discounts negotiated between payers, hospitals and health plans. Recently this system led to a 0.8 percent decrease in the cost of the top 50 Part B drugs.

In contrast, 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.

Conservatives 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.

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 determent of consumers, patients, and doctors.

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.

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.

Ironically, the administration 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.”

We are also concerned that the IPI is being proposed through the Obamacare Center for Medicare and Medicaid Innovation (CMMI). There is long standing conservative opposition to CMMI based on the concern that it bypasses Congress’ power over the purse as enshrined in Article I of the Constitution.

CMMI is completely exempt from the Congressional appropriations process and is prone to being misused in ways that result in the executive branch of government usurping Congress’ role in setting policy.

The administration has repeatedly acknowledged that foreign price controls have damaged medical innovation.

Instead of fighting these price controls, we are concerned that the proposed International Pricing Index adopts them. This proposal will suppress competition and innovation and harm American competitiveness and investment.

We respectfully request that your department withdraw this proposal.

Sincerely,

Grover Norquist
President, Americans for Tax Reform

James L. Martin
Founder/Chairman, 60 Plus Association

Saulius “Saul” Anuzis
President, 60 Plus Association

Dick Patten
President, American Business Defense Council

Phil Kerpen
President, American Commitment

Dan Schneider
Executive Director, American Conservative Union

Steve Pociask
President, American Consumer Institute

Lisa B. Nelson
CEO, American Legislative Exchange Council

Dee Stewart
President, Americans for a Balanced Budget

Rick Manning
President, Americans for Limited Government

Andrew F. Quinlan
President, Center for Freedom and Prosperity

Ryan Ellis
President, Center for a Free Economy

Jeffrey Mazzella
President, Center for Individual Freedom

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

Peter J. Pitts
President and Co-founder, Center for Medicine in the Public Interest

Thomas Schatz
President, Citizens Against Government Waste

Chip Faulkner
Chair, Citizens for Limited Taxation

Iain Murray
Vice President for Strategy, Competitive Enterprise Institute

Matthew Kandrach
President, Consumer Action for a Strong Economy (CASE)

Fred Roder
Health Economist/Managing Director, Consumer Choice Center

Yaël Ossowski
Deputy Director, Consumer Choice Center

James Edwards
Executive Director, Conservatives for Property Rights

Joel White
President, Council for Affordable Health Coverage

Katie McAuliffe
Executive Director, Digital Liberty

Robert Roper
President, Ethan Allen Institute

Palmer Schoening
President, Family Business Coalition

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 Bauman
Director of Healthcare Policy, Goldwater Institute

Mario H. Lopez
President, Hispanic Leadership Fund

Linda Gorman
Health Care Policy Center Director, Independence Institute

Carrie Lukas
President, Independent Women’s Forum

Heather R Higgins
CEO, Independent Women’s Voice

Andrew Langer
President, Institute for Liberty

Tom Giovanetti
President, Institute for Policy Innovation

Colin Hanna
President, Let Freedom Ring

Seton Motley
President, Less Government

Mary Adams
Chair, Maine Center-right Coalition

Charles Sauer
Founder/President, Market Institute

Kevin Waterman
Co-Chair, Maryland Center-right Coalition

Ted Tripp
Chair, Massachusetts Center-right Coalition

Tim Jones
Chair, Missouri Center-right Coalition
Former Speaker, Missouri House of Representatives

Pete Sepp
President, National Taxpayers Union

Stephen Stepanek
Co-Chair, New Hampshire Center-right Coalition

Jack Boyle
Executive Director, Ohioans for Tax Reform

Jeff Kropf
President, Oregon Capitol Watch Foundation

Sally Pipes
President, Pacific Research Institute

Ed Martin
President, Phyllis Schlafly Eagles

Lorenzo Montanari
Executive Director, Property Rights Alliance

Paul Gessing
President, Rio Grande Foundation

Karen Kerrigan
President/CEO, Small Business & Entrepreneurship Council

David Williams
President, Taxpayers Protection Alliance

Jenny Beth Martin
Chairman, Tea Party Patriots Citizens Fund

Sara Croom
Executive Director, Trade Alliance to Promote Prosperity

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


ATR Urges Broader High-tax Exception to GILTI

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Posted by Alex Hendrie on Wednesday, November 21st, 2018, 8:00 AM PERMALINK

In a letter to Treasury Secretary Steven Mnuchin, ATR urged the department to broaden the high-tax exception that exists under Section 951A Global Intangible Low-Tax Income (GILTI) in order to prevent an unintended consequence to the tax law that may harm American competitiveness and increase taxes on businesses.

Click here to view the full letter. 

The Tax Cuts and Jobs Act passed last year dramatically overhauled the U.S. international tax system. The law added the new GILTI provision, which was designed to counteract base erosion from moving to a territorial system. At the same time, TCJA left the existing subpart F base erosion rules untouched.

These changes have resulted in some unintended consequences. For instance, the law could be currently interpreted as including high-tax, foreign source income in the new GILTI regime. This income would otherwise be subpart F income but for an exception to Subpart F such as the active finance exception or active insurance exception. 

This is poor policy that is not required by the statute and should be fixed – high-tax foreign income has historically been exempted from U.S. taxation under the Subpart F rules because it was already taxed in the country of origin.

In effect, this creates a situation where high-tax active CFC income from foreign jurisdictions is now being treated worse than easily-shifted passive CFC income. 

This is problematic as the rationale for base erosion provisions is to counteract the possible shifting of intangible income to low tax jurisdictions.  As the letter notes, this will create perverse incentives for businesses to restructure and will harm American competitiveness:

This discrepancy could create significant adverse consequences for businesses and result in a net tax increase relative to pre-TCJA law. Businesses will now have perverse incentives to restructure business operations in a way that is costly, that creates future complexity, or that may not be practical in foreign jurisdictions.

This absence of a broadened exception will also harm American competitiveness given U.S. businesses face additional tax on high-tax CFC income, while foreign competitors face no additional tax on their high-tax income.

Treasury should address this issue by interpreting the current high-tax exception in GILTI so that it applies not only to passive Subpart F income, but also to active high-tax non-Subpart F income.

As the letter states, Congress intended for high-tax foreign income to be exempt from GILTI because this type of income is already exempted from U.S. tax based on the conference report to TCJA released by the Senate Finance Committee:

“The Committee believes that certain items of income earned by CFCs should be excluded from the GILTI, either because they should be exempt from U.S. tax – as they are generally not the type of income that is the source of base erosion concerns – or are already taxed currently by the United States. Items of income excluded from GILTI because they are exempt from U.S. tax under the bill include foreign oil and gas extraction income (which is generally immobile) and income subject to high levels of foreign tax.”

Click here to view the full letter. 

Photo Credit: Cliff - Flickr


Congress Should Use the Lame Duck Session to Repeal the Obamacare Health Insurance Tax, Medical Device Tax, and Expand HSAs

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Posted by Alex Hendrie on Tuesday, November 20th, 2018, 9:12 AM PERMALINK

Lawmakers should use the remaining six weeks of the year to pass much needed relief from the Obamacare health insurance tax and medical device tax and expand health savings accounts.

When it was signed into law, Obamacare imposed a trillion dollars in new or higher taxes on the American people. These taxes included a tax on Americans facing high medical bills, taxes on health savings accounts, a tax on innovative medicines, and a tax for failing to buy health insurance. They have all caused significant harm to middle-class and low-income families across the country.

In the long term, lawmakers must continue working to repeal all one trillion in Obamacare taxes and passing reforms to get the government out of healthcare so that Americans can have better access to lower cost, higher-quality health care.

More immediately, the lame duck period is a prime opportunity to repeal or delay the health insurance tax and continue to delay the medical device tax. Lawmakers can also strengthen healthcare freedom and choice by expanding HSAs for American families across the country.

The Obamacare health insurance tax is scheduled to go into effect in 2020. Insurers plan their premiums months in advance, so if Congress fails to act soon, the tax will harm more than 141 million consumers, including those in the individual market, large and small group plans, Medicare Advantage and Medicare Part D plans. In total, the tax hits 11 million households that purchase through the individual insurance market, and 23 million households covered through their jobs.

If the HIT does go into effect, it is estimated that the tax will increase premiums by 2.2 percent per year and by almost $6,000 over the next decade for a typical family of four with small or large group insurance. This tax is also highly regressive – half of the HIT is paid by those earning less than $50,000 a year.

The tax would also exact an enormous burden on small businesses and our economy. It is estimated to directly impact as many as 1.7 million small businesses. The National Federation of Independent Business estimates the tax could cost up to 286,000 in new jobs and cost small businesses $33 billion in lost sales by 2023.

77 percent of registered voters support delay or full repeal of the Health Insurance Tax, according to polling released by Morning Consult. Congress should act as soon as possible to repeal or delay the health insurance tax. Fortunately, the House has already put forward proposals to repeal and delay this tax. Congress should swiftly move forward on this legislation.

Lawmakers should also expand access to tax-advantaged Health Savings Accounts. Not only will this offer Americans important tax relief, it will also expand healthcare freedom. Today, 25 million American families and individuals save and spend their own money tax free on a variety of healthcare expenses, more than two times the amount of individuals that use Obamacare exchanges. 

The Republican-controlled House has already passed legislation that would double the contribution limit for an HSA, as well as allow individuals with a bronze or catastrophic health care plan to be eligible for an HSA. The proposal also expands access to HSAs by allowing working seniors enrolled in Medicare Part A to contribute to an HSA and allows HSAs to be used to purchase over-the-counter medications and fitness expenses.

These HSA reforms are in stark contrast with Obamacare’s top-down, command and control model and will empower individuals, lower health care costs, strengthen retirement security, and cut taxes for hardworking middle class Americans.

Finally, Congress should further roll back the Obamacare medical device tax, which is scheduled to go back into effect in 2020. The medical device tax is imposed as a 2.3 percent excise tax on all manufacturers including the thousands of small businesses. Ultimately, this tax suppresses investment and costs jobs.

The medical device tax was disastrous when it was in effect under President Obama. Research indicates that the tax reduced medical device investment by $34 billion in 2013 and cost almost 22,000 jobs when it was in effect between 2013 and 2015.

In the past two years, Republicans have made significant progress towards reforming the health care system. Most notably, Republicans repealed the individual mandate tax that was crushing middle and lower-class families that couldn’t afford health care. Obamacare’s most famous tax was a blatant war on the middle class, with 79% of individuals affected by the tax making $50,000 or less, and 37% of people affected by the tax making $25,000 or less.

The Trump Administration also recently issued a slew of new rules through the Department of Labor and the Department of Health and Human Services that strengthened health care choice and access to care for employees and employers. The new rules expanded health reimbursement accounts so that small- and medium-sized employers can easily offer their workers an HRA to pay $1,800 of medical expenses per year. The new rules also allowed small businesses to band together and form association health plans.

While these are significant wins, the GOP should not let the lame duck session pass without building on their success. The Health insurance tax should be delayed or repealed outright, HSAs should be expanded, and the medical device tax should be rolled back.

Photo Credit: Matt Wade - Flickr

More from Americans for Tax Reform


Congress Should Reject Proposals to Expand and Extend the Electric Vehicle Tax Credit


Posted by Alex Hendrie on Thursday, November 8th, 2018, 8:00 AM PERMALINK

With the Congressional lame duck session soon to begin, it is expected lawmakers will act on a number of tax provisions before the end of the year. 

Congress may pass parts of the Tax Reform 2.0 legislation including the provisions that strengthen retirement, education, and family savings. It is also possible that lawmakers may pass technical fixes to the Tax Cuts and Jobs Act including allowing qualified retail improvement property to benefit from immediate, 100 percent expensing.

One proposal lawmakers should reject is legislation to extend and lift the cap on the Electric Vehicle Tax Credit as has been proposed in S. 3582/H. R. 7065, legislation introduced by Congressman Diane Black (R-TN) and Senator Dean Heller (R-NV).

Under current law, the federal EV tax credit grants a taxpayer purchasing a qualifying vehicle a credit of between $2,500 and $7,500 depending on the vehicle sold. The credit is capped at 200,000 vehicles per manufacturer at which point it begins to phase out.

This tax credit should not be extended, nor should the cap be lifted. Instead, the EV credit should be repealed or phased out as part of revenue-neutral tax reform.

The EV tax credit is bad policy. Ideal tax policy promotes the most economically efficient decisions by limiting the number of distortionary provisions. The EV tax credit undermines this goal as it arbitrarily benefits one type of car over others.

The credit is also regressive – almost 80 percent of the benefits go to those making $100,000 or more per year.  This type of tax subsidy is also unpopular with the American people -- 67 percent of voters oppose subsidizing electric vehicles.

The EV credit was originally created with the 200,000 vehicle cap as it was designed to help an emerging industry. Extending the credit and lifting the cap would enshrine a handout for electric vehicle manufacturers in the tax code.

Extending the EV credit also undermines the progress made by Republicans in making the tax code simpler and fairer. Over the past several years, GOP lawmakers have been successful in reducing the number of distortionary credits and deduction in favor of broader lower tax rates:

  • In 2015, Congress passed tax extender legislation that made many conservative tax provisions permanent like small-business expensing, research and development credits, and provisions to prevent double taxation on international income. Importantly, many other, distortionary credits were phased out.
     
  • Lawmakers built on this success by passing the Tax Cuts and Jobs Act in 2017. This legislation reduced tax rates for small businesses and corporations across the board, while again repealing numerous distortionary or preferential credits and deductions.            
     
  • Since passage of TCJA, Ways and Means Chairman Kevin Brady (R-Texas) has spent the year examining the merits of the remaining temporary tax provisions with a goal of either repealing or making permanent any remaining tax extenders.

 

Lawmakers have made admirably progress in recent years toward making the tax code simpler and fairer. Pushing policies like an extension and expansion of the regressive Electric Vehicle Tax Credit directly undermines this progress.


Democrats Threaten Corporate Tax Hike if Elected to Congress

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Posted by Alex Hendrie on Tuesday, October 30th, 2018, 11:24 AM PERMALINK

If they win control of the House in November, Democrats will raise the corporate rate, according to Congressman John Yarmuth (D-KY), the top Democrat on the House Budget Committee.

As reported by Politico Morning Tax, Rep. Yarmuth floated a corporate rate as high as 27 percent, which would raise the U.S. rate above the average rate in the developed world.

Prior to passage of the Tax Cuts and Jobs Act, the U.S. had the highest corporate rate at 35 percent (plus state corporate rates averaging over 4 percent). This was nearly 15 points higher than the average rate of 25 percent across the 35-member Organisation for Economic Co-operation and Development (OECD).

The GOP tax cuts addressed this problem by reducing the rate to 21 percent. Now, the U.S. is competitive with foreign countries.

Raising the corporate rate, will harm the economy, slow job creation, and reduce wage growth. Following tax reform, the U.S. has been named the most competitive economy in the world, according to the World Economic Forum.

The economy grew at a rate of 3.5 percent in the third quarter of 2018 and is on track for the strongest growth in 13 years. Job openings are at a record high and the unemployment rate is at the lowest levels since 1969,

The competitive corporate rate is a big part of this economic success. In fact, recent studies have found that workers bear a significant portion of the corporate tax — 50 percent70 percent, or even higher.

A high corporate tax rate will also make America a less competitive place to do business, which will result in and investment fleeing overseas. This is not a hypothetical.

Before the corporate rate was reduced, almost 50 American businesses left the country through inversions over a decade, according to data compiled by Democrats on the House Ways and Means Committee. American companies also suffered a net loss of almost $510 billion in assets between 2004 and 2017, according to a study released by EY.

Senate Democrats have already proposed raising the corporate rate as part of a $1 trillion tax hike which also includes a $600 billion income tax increase.

Others Democrats want to go further and have proposed extensive tax hikes paired with massive new government programs such as single-payer healthcare.

When Bernie Sanders (I-VT) unveiled his single payer plan in 2016, he proposed a 6.2 percent payroll tax on businesses that would increase taxes by $10 trillion over a decade and a 2.2 percent payroll tax on families and individuals totaling $2 trillion. Sanders also proposed a $1 trillion income tax increase, an increase in the death tax, and a nearly $1 trillion capital gains tax increase.

This is likely just the tip of the iceberg because the program would cost at least $32.6 trillion over a decade according to the Mercatus Center.

Clearly, Democrats want higher taxes if elected to Congress. As Rep. Yarmuth’s comments make clear, it is a matter of when, not if, the left pushes tax hikes on American businesses and individuals.

Photo Credit: AFGE


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