Alex Hendrie

Rubio is Wrong to Propose Higher Taxes on Capital Gains

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Posted by Alex Hendrie on Tuesday, February 12th, 2019, 5:00 PM PERMALINK

Senator Marco Rubio (R-Fla.) has released a document outlining the challenges posed by China’s growth and proposing solutions to promote American prosperity and economic productivity.

Surprisingly, Rubio calls for higher capital gains taxes by increasing taxes on share repurchases (or stock buybacks). While the plan does not detail what kind of increase, it calls for equalizing the treatment of buybacks to dividends, which could subject them to a top rate of 37 percent.

This plan aims to curb share repurchases – which many wrongly claim comes at the expense of investment in the economy. In reality, buybacks occur because a company is reinvesting in itself and returning funds to shareholders, as Senator Toomey (R-Pa.) pointed out in a recent floor speech. Buybacks occur when there is no more productive investment left to make and are returned into the economy.

While Rubio’s plan is to increase investment, higher taxes on capital gains would have the opposite effect. Dividends are subject to two layers of taxation – at the business level and at the individual level either in the form of capital gains taxes (taxes on investment) or as ordinary income.

The better approach would be limiting the double taxation on dividends and capital gains in general. Specifically, dividends received should be taxed as capital gains or ideally not be taxed at all because they have already been taxed at the business level. 

Senator Rubio deserves credit for proposing to make full business expensing permanent. This would promote continued investment in the economy.

However, this should not be done at the expense of higher capital gains taxes and restrictions on stock buybacks.

Photo Credit: Matt Johnson - Flickr

Lawmakers Should Reject the CREATES Act

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Posted by Alex Hendrie on Monday, February 11th, 2019, 2:00 PM PERMALINK

There is broad consensus among Democrats and Republicans that lowering drug prices should be a top priority of the 116th Congress.

One way to lower drug prices is to promote competition among manufacturers. However, any effort to promote competition must be done in a way that safeguards intellectual property rights, minimizes frivolous litigation, protects patients, and encourages innovation.

Unfortunately, the recently released CREATES Act (The Creating and Restoring Equal Access to Equivalent Samples) fails on all counts. The legislation, introduced in the House as H.R. 965 by Congressman David Cicilline (D-RI) and in the Senate as S. 340 by Senator Patrick Leahy (D-Vt.), undermines innovation and a system that ensures the safe development of medicines. Instead, the CREATES Act creates a system that promotes reckless litigation and grants generic manufacturers the right over an innovators’ creation under threat of lawsuit.

The CREATES Act is flawed and should be rejected by members of the House and Senate regardless of whether it is considered as a standalone bill or as part of a broader package of proposals.

CREATES Upends a Carefully Balanced, Working Regulatory System
The CREATES Act modifies the FDA’s Risk Evaluation and Mitigation Strategies (REMS), a regulatory structure that applies to roughly 40 highly advanced yet potentially dangerous drugs. REMS has been carefully enshrined in law to balance safety, innovation, and access to medicines.

The CREATES Act would modify this regulatory system by allowing generics to bypass FDA procedures that exist to ensure REMS medicines are safely developed. Under the proposal, a generic manufacturer is not required to include adequate safeguards for patients and researchers as a condition of authorization. This reform also limits the ability of the FDA to deny or modify an authorization request.

These changes restrict the safeguards within the REMS structure in a way that undermines the safe, efficient development of medicines.

CREATES Encourages Unnecessary Litigation
The main way that the CREATES Act modifies REMS is by creating a new litigation system that grants generic competitors seeking samples from an innovator the ability to launch litigation just 30 days after negotiation has begun. 

This will create incentives to launch litigation rather than go through existing process of approval for generic product.

Under this proposal, bad actors in the industry would be empowered to launch frivolous litigation. In turn, this would be a handout to trial lawyers at the expense of innovators, consumers, and the healthcare system. The legislation’s legal protections are so vague that innovators may even be responsible for actions taken by a reckless generic competitor.

CREATES Undermines Intellectual Property Rights
In addition to opening the door to a wave of unnecessary lawsuits, the new litigation system threatens intellectual property rights of innovators. The system may force innovators to hand over their IP through the threat of litigation, a precedent that could result gives generics a right over an innovators IP and will result in more resources being devoted to fighting legal action and fewer resources to research and development.

Patent exclusivity for medicines has been carefully legislated to ensure that creativity, innovation, and medical growth are protected. However, exclusivity is limited to prevent against a monopoly and ensure that consumers have access to medicine at reasonable prices. The CREATES Act upends this important system.

CREATES Will Not Lower Costs
While the CREATES Act is described by supporters as an attempt to increase efficiency and lower costs, it may have the opposite effect. Rather than reducing the cost of medicines, this bill may create a more burdensome, litigious system that undermines innovation.

Costs associated with medical development are already significant. On average it costs $2.6 billion and more than a decade of research time for each new medicine that hits the market.

Lower health care costs will not be achieved through empowering reckless litigation or through changes to the regulatory process that fail to protect innovation or safety.

Serious proposals to reduce costs should focus on increasing competition in a way that encourages innovation, limits meritless litigation, and protects safety.

Photo Credit: Becci Sheptock

ATR Supports FTC Transition Rule

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Posted by Alex Hendrie on Friday, February 8th, 2019, 2:12 PM PERMALINK

In a letter to Treasury Secretary Steven Mnuchin and IRS Commissioner Charles Rettig, ATR President Grover Norquist expressed support for guidance related to the foreign tax credit and guidance implementing changes made by the Tax Cuts and Jobs Act.

Click here to read the full letter.

As the letter notes:

“The transition rule for FTC carryforwards in Prop. Regs. 1.904-2(j)(1)(ii) creates an efficient transition and follows the precedent set following by the Tax Reform Act of 1986 (TRA) and other laws. As the rulemaking process continues, this provision should be maintained in a final rule.

This rule automatically allocates pre-2018 general income FTC carryforwards into the post 2017 general category basket and allows unused carryforwards to be reallocated into the foreign branch basket. This rule promotes investment and economic growth and allows a streamlined transition to the new tax code.”

The Tax Cuts and Jobs Act was a comprehensive overhaul of the U.S. international tax system. The TCJA also modified foreign tax credits, making it necessary for REG-105600-18 to assist with a seamless transition to the new tax code. As the letter states:

“Prior to TCJA, FTCs were divided into two baskets – a general category income basket and passive category income basket. While the passive income basket was unchanged, the general category income basket was split into three baskets.

Under the new system, credits that would have previously been allocable to the general branch are now allocable to either general income, foreign branch, or GILTI baskets. The TCJA did not address the treatment of pre-2018 general limitation FTC carryforwards; this issue was left to be determined through rulemaking.”

ATR strongly supports this FTC transition rule and the administration should maintain the transition rule provision in the final FTC rule.

Click here to read the full letter.

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Congress Should Pass the Hatch-Waxman Integrity Act

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Posted by Alex Hendrie on Friday, February 8th, 2019, 11:47 AM PERMALINK

Lawmakers across the political spectrum agree that the convoluted healthcare system needs reform.

One way, they should look to achieve reform is through passing S.344/H.R. 990, the Hatch-Waxman Integrity Act introduced by Senator Thom Tillis (R-NC) and Congressman Bill Flores (R-Texas). This proposal contains a modest, commonsense reform to the system of pharmaceutical patent review in order to curb repetitive, frivolous litigation.

ATR supports this legislation and urged Senators & Congressman to support and co-sponsor the proposal in a recent letter.

Click here to read the full letter.

Under this legislation, a generic manufacturer wishing to challenge a patent must choose between the Hatch-Waxman framework and the inter party review system. Neither pathway will be eliminated, however a generic challenger may only use one.

Currently, generic manufacturers have two pathways to challenge branded drug parents, which exposes innovators to a system of “double jeopardy” where an innovator can be exposed to litigation costs twice. Medical innovation is already a time consuming & expensive process – on average it costs $2.6 billion and more than a decade of research time for each new medicine that hits the market.

First, generic manufacturers can challenge the patent under the Hatch-Waxman framework, which is exclusive to pharmaceutical patents. Under this system, a generic manufacturer can challenge a patent in federal district court with the burden of proof resting on the challenger. This system has proven successful in balancing the competing interests of protecting IP rights and the costs expended by innovators with the need to promote competition and access to medicines.

In addition to Hatch-Waxman, generic manufacturers can challenge patents through the inter parties review process (IPR) created in 2012 through the America Invents Act. Unlike Hatch-Waxman, which is available only to pharmaceutical patents, IPR is available to all patents.

As a result, IPR challenges in the pharmaceutical sector have become an unintended consequence of this law as it was intended to curb patent trolls that largely existed in the tech industry.

Importantly, this proposal does not restrict the ability of generic manufacturers to initiate a patent challenge. Instead, this proposal eliminates frivolous repetitive challenges in order to restore certainty to the system.

The Hatch-Waxman Integrity Act is a modest, yet commonsense reform to the healthcare system and should be supported by all members of Congress and Senators.

Photo Credit: Becci Sheptock

Jobs Report Shows Success of GOP Tax Cuts

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Posted by Alex Hendrie on Friday, February 1st, 2019, 10:40 AM PERMALINK

The January 2019 jobs report released by the Department of Labor proves that the economy is strong more than a year after the GOP tax cuts.  

304,000 jobs were created in January, meaning a total of 5.3 million jobs have been created since President Trump won election.

Wages are also up with nominal average hourly earnings increasing by 3.2 percent over the past year. This is a welcome development -- wages have not grown at 3 percent since 2009.

Labor force participation is also increasing. Under the Obama administration, Labor force participation hit 40 year lows. Under President Trump, this troubling trend is being reversed, with the participation rate currently sitting at 63.2 percent, a more than five year high.

This positive economic news follows the release of the Congressional Budget Office’s Budget and Economic Outlook report for 2019 to 2029, which contained similarly positive news.

The report found real disposable income growth of 2.9 percent in 2018 and 2.7 percent growth in consumer spending. Growth of Real Business Fixed Investment (measured as purchases of equipment, structures and IP) increased by 14.9 percent in 2017 and by 9.6 percent in 2018.

Economic growth is projected to rise by 3.1 percent in 2018, a dramatic departure from the 1.9 percent average annual growth experienced during the Obama years. 

Despite this news, Democrats continue to propose tax increases that would stifle economic growth and wages: 

  • House Democrats have already changed the rules to make it easier to raise taxes on the American people and have rejected a proposal by Ways and Means Ranking Member Kevin Brady (R-Texas) to extend middle class tax relief.
  • House Budget Chairman John Yarmuth (D-Ky.) has proposed increasing the corporate income tax rate to 28 percent, or 34 percent after including the average state rate. This is 10 points higher than the 23.7 percent average rate across the 36 developed countries that make up the Organization for Economic Development and Cooperation (OECD) and would make it more difficult for American businesses to compete overseas. 
  • House Speaker Nancy Pelosi (D-Calif.) has proposed repealing the entire GOP tax cuts which would see 90 percent of wage earners face higher taxes, and a family of four earning $73,000 in annual income seeing a tax increase of roughly $2,000 per year.
  • Democrats running for President want to go even further and have proposed dramatic tax increases – Bernie Sanders has called for a death tax of 77 percent while Elizabeth Warren has called for a wealth tax.

While these proposals may play to the far-left base, they would cripple the economy at a time of strong wage growth, job creation, and investment.

More from Americans for Tax Reform

ATR Urges Support & Co-Sponsorship of the Global Trade Accountability Act

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Posted by Alex Hendrie on Wednesday, January 30th, 2019, 12:42 PM PERMALINK

ATR today released a letter urging members of Congress to support and co-sponsor H.R. 723, the Global Trade Accountability Act. This legislation would reaffirm Congress' authority by requiring all tariffs proposed by the Executive Branch to be approved by the legislature.

Read the full letter here or below: 

Dear Members of Congress, 

I write to urge support and co-sponsorship of H.R. 723, the Global Trade Accountability Act, introduced by Representative Warren Davidson (R-Ohio.).  Article I, Section 8 of the Constitution grants Congress the power to regulate foreign commerce.  This legislation would reaffirm Congress’ authority by requiring all tariffs proposed by the Executive Branch to be approved by the legislature. 

Article II of the Constitution gives the President the power to negotiate international trade agreements, not implement tariffs.  Over time, Congress has increasingly allowed the Executive Branch to establish and raise tariffs and restrict imports, under certain conditions. 

Tariffs are another form of tax on American citizens, and therefore should be voted on by Congress.  Domestically, tariffs harm jobs and the economy.  The prices of imported goods increase, and the cost falls on consumers.  Internationally, a trade war could ensue as other countries retaliate with their own trade barriers. 

Free trade is critical to the American economy and is essential to guaranteeing a high standard of living for Americans.  International trade directly affects millions of jobs across all 50 states.  In 46 of the 50 states, trade-related jobs account for more than one-quarter of all jobs.  In total, more than 1 in 5 jobs, or close to 41 million, are reliant on trade.   

Historically, protectionist trade policies have failed in America.  They worsened and prolonged the Great Depression.  The 1931 Smoot-Hawley Act, which increased tariffs by 20 percent, caused American exports to fall 75 percent.  Since World War II, the United States has decreased trade barriers with bipartisan support and great success.  This has paid enormous dividends both domestically and abroad.  The United States needs to continue free trade trends, made possible through Congress reclaiming its Constitutional powers. 

Congress should reassert its authority with all who serve in the Executive Branch, today and in the future.  Members of Congress can demonstrate their support for Congressional authority and their opposition to increased tariffs by co-sponsoring the Global Trade Accountability Act. 


Grover G. Norquist 
President, Americans for Tax Reform 

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The Obamacare Health Insurance Tax Must be Delayed or Repealed

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Posted by Alex Hendrie on Thursday, January 24th, 2019, 9:00 AM PERMALINK

When it was signed into law, Obamacare contained over a trillion dollars in new or higher taxes on the American people over a decade. The health insurance tax (HIT), a tax on insurance premiums, is one of Obamacare’s costliest taxes. If lawmakers fail to repeal or delay the tax, it 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.

The Health Insurance Tax is set to again go into effect in 2020 imposing a $16 billion tax on premiums next year alone.

Congress must prevent this, ideally through outright repeal as proposed in a bipartisan Senate bill (S. 80). Short of full repeal, Congress should continue to delay the HIT so that it doesn’t harm health care consumers, as proposed in another bipartisan bill (S. 172), which would delay the HIT for two years.

The HIT Harms the Middle Class, Small Businesses, and the Elderly

The HIT is designed to pass the costs onto the middle class, seniors, and the poor. The HIT is estimated to negatively impact the 11 million households that purchase through the individual insurance market and 23 million households covered through their jobs. In 2020 alone, the HIT is projected to add an estimated $16 billion to the cost of coverage for families and Medicare Advantage seniors.

If lawmakers fail to act, the HIT 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 HIT Is A Job Killer

The HIT is job killer that targets small businesses at the exclusion of large corporations and unions. Because the tax only applies to fully-insured plans, large corporations and unions (which are universally self-insured) emerge unscathed. According to the American Action Forum, the will directly impact 1.7 million small businesses.

Typically, small businesses purchase insurance through the small group insurance market, while larger employers have the scale to provide healthcare through self-insured plans, which are excluded from this tax.

Because it falls disproportionately on small businesses, the health insurance tax suppresses economic growth and jobs.

Small businesses account for half of all jobs in the US and two-thirds of new jobs in recent decades so this tax will mean businesses across the country can spend less investing in new equipment, hiring new workers, or providing higher wages.

One estimate, conducted by the National Federation for Independent Businesses estimates the tax could cost up between 146,000 and 262,000 jobs over a decade.

Time for Lawmakers to Take Action

There are two bipartisan Senate bills that will stop the HIT from hitting the American people. The first is S. 172, the “Health Insurance Tax Relief Act,” introduced by Senators Cory Gardner (R-Colo.), Jeanne Shaheen (D-N.H.), John Barrasso (R-Wyo.), Doug Jones (D-Ala.), Tim Scott (R-S.C.), and Kyrsten Sinema (D-Ariz.). This legislation suspends the costly HIT for 2020 and 2021, saving taxpayers an average of $1,000 over the next two years.

Click here to read ATR’s letter of support for S. 172.

The second bipartisan bill dealing with the HIT is S. 80, the “Jobs and Premium Protection Act,” introduced by Senators John Barrasso (R-WY), Cory Gardner (R-CO), and Kyrsten Sinema (D-Ariz.). This legislation fully repeals the HIT.  

Click here to read ATR’s letter of support for S. 80.

In a time of divided government, repeal of the health insurance tax is a proposal that has bipartisan support. 77 of registered voters support delay or full repeal of the HIT, according to polling released by Morning Consult.

Congress should follow the will of the American people and immediately delay or repeal the HIT. Doing so will give much needed certainty and relief to small businesses, seniors, and families.

Photo Credit: 401(K) 2012

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.

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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*


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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