Alexander Hendrie

Norquist to Congress: No Gas Tax Increase


Posted by Alexander Hendrie on Wednesday, February 21st, 2018, 1:00 PM PERMALINK

ATR President Grover Norquist today sent a letter to Congress in opposition to an increase in the fedeal gas tax. The letter was addressed to House Speaker Paul Ryan (R-Wis.), Senate Majority Leader Mitch McConnell (R-Ky.), House Ways and Means Chairman Kevin Brady (R-Texas), and Senate Finance Chairman Orrin Hatch (R-Utah).

[The full letter can be found here]

As Norquist noted, a gas tax increase will directly undermine the gains made from tax reform and could contribute to wiping out 60 percent of the individual tax cuts:               

“A gas tax increase of $0.25 per gallon would increase taxes on consumers by $37 billion next year. If combined with an anticipated $0.20 per gallon increase from rising gasoline prices, consumers will pay $71 billion more for gasoline next year, wiping out 60 percent of the $120 billion in tax cuts contained in the Tax Cuts and Jobs Act.”

Rather than increasing taxes on consumers, lawmakers should more wisely use existing revenues to pay for roads and bridges, which are frequently diverted to unrelated projects:

“A recent report by the Government Accountability Office (GAO) found that more than 50 percent of the HTF spending went to non-road-related projects, while 15 percent of federal gas tax revenue is diverted to the Mass Transit Account…”

The full letter is available below and can be found here.

Dear Speaker Ryan, Leader McConnell, Chairman Brady, and Chairman Hatch:

I write in opposition to increasing the federal gas tax. An increase in the gas tax will disproportionately harm low and middle-income families and will only encourage further wasteful spending.

Republicans have just passed tax reform that gave middle class tax relief to American families across the country. The legislation reduced the federal tax burden for a family of four earning $73,000 by nearly 60 percent, resulting in a $2,058 reduction in taxes. Similarly, a single parent with one child earning $41,000 per year will see tax reduction of 73 percent, resulting in a $1,304 tax cut.

Raising the gas tax will directly undermine these gains and would predominantly falls on middle and low-income American families. According to Strategas Research, a gas tax increase of $0.25 per gallon would increase taxes on consumers by $37 billion next year.

If combined with an anticipated $0.20 per gallon increase from rising gasoline prices, consumers will pay $71 billion more for gasoline next year, wiping out 60 percent of the $120 billion in tax cuts contained in the Tax Cuts and Jobs Act.

Instead of increasing taxes on consumers, Congress should prioritize cutting wasteful spending. While supporters of a gas tax increase argue that it is needed to pay for roads and bridges, the Highway Trust Fund, which is financed by the gas tax, is frequently pillaged for projects unrelated to its purpose.

A recent report by the Government Accountability Office (GAO) found that more than 50 percent of the HTF spending went to non-road-related projects, while 15 percent of federal gas tax revenue is diverted to the Mass Transit Account, which supports local bus and light rail services, while an additional $850 million is spent on recreational trails and beautifying streets. HTF funds have even been used on squirrel sanctuaries and to finance driving simulators.

Lawmakers can find further savings through suspending the Davis-Bacon Act, which needlessly increases the cost of infrastructure projects. The Davis Bacon Act requires contractors working on government projects to be paid “prevailing wage.” However, the Department of Labor uses a highly flawed methodology which sets prevailing wages 22 percent above market rates. In 2011 alone, Davis-Bacon added $11 billion to the deficit. 

Rather than asking taxpayers to foot the bill for more wasteful spending, Congress should prioritize meaningful reforms to the HTF to end the cycle of wasteful spending on projects unrelated to rebuilding America’s roads and bridges.

A vote to increase the gas tax will only perpetuate further wasteful spending and will undermine middle class tax relief gained from passing tax reform last year. Rather than increasing taxes on consumers to fund infrastructure, I urge you to prioritize spending reforms that ensure existing revenues are wisely spent.

Onward,

Grover G. Norquist
President, Americans for Tax Reform

Cc: All Members of the U.S. House of Representatives and U.S. Senate

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Norquist Statement In Opposition to Raising the Gas Tax


Posted by Alexander Hendrie on Wednesday, February 14th, 2018, 4:43 PM PERMALINK

ATR President Grover Norquist released the following statement in opposition to raising the federal gas tax:

“There is no need to raise the federal gas tax. The problem is not that the gas tax is too low. The problem is that gas tax revenue is siphoned off to pay for projects unrelated to roads and bridges.

“Supporters of raising the gas tax claim that roads and bridges are a priority and higher taxes are needed to pay for them. But by refusing to consider displacing existing spending, they are admitting that they view every other spending program—foreign aid, farm subsidies--as more important than fixing roads and bridges. Their insistence on raising the gas tax proves their only real goal is higher taxes on American families. Again.

“Democrats always promise they would only tax the top 1%.  Then they get elected and try to raise taxes on energy/gasoline and screw the middle class. (Clinton and Obama). President Trump will not be fooled into following the Democrat play book.”

 

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Treasury Should Index The Calculation of Capital Gains Taxes To Inflation


Posted by Alexander Hendrie on Tuesday, January 16th, 2018, 9:00 AM PERMALINK

The Trump tax reform plan enacted into law late last year is already driving stronger economic growth, higher wages, and more job creation. While this legislation is a landmark achievement, there are other steps the administration can take to promote stronger economic growth, such as through indexing the calculation of capital gains taxes to account for inflation.

When paying capital gains taxes, taxpayers generally pay tax on an asset calculated as the sale price less the purchase price. However, this fails to account for gains that are purely from inflation and are not a true gain.

For example, an investor makes a capital investment of $1,000 in 2000 and sells that investment for $2,000 in 2017 will be taxed for a $1,000 gain at a top capital gains tax rate of 23.8 percent. After adjusting for inflation, the “true gain” is much lower – just $579. (1,000 in 2000 - $1,421 in 2017).

According to a 2013 analysis by the Tax Foundation, the average effective capital gains tax rate excluding gains based on inflation between 1950 and 2012 was 42.5 percent, nearly twice today’s 23.8 percent top capital gains tax rate.

The ability of Treasury to index capital gains taxes to inflation has been analyzed by lawyers Charles J. Cooper, Michael A. Carvin and Vincent Colatriano in a 1993 legal memo published in Virginia Tax Review, and again by Cooper and Colatranio in a 2012 legal memo published in the Harvard Journal of Law and Public Policy.

[Read the 1993 legal memo by Cooper, Carvin & Colatriano here]

[Read the 2012 memo by Cooper and Colatranio here]

According to these analyses, federal law is sufficiently ambiguous to allow Treasury to index capital gains taxes to inflation. In addition, there is significant judicial precedent for indexation and no explicit Congressional opposition to indexation.


Federal Law Grants Treasury the Flexibility to Index the Calculation of Capital Gains Taxes to Inflation

Historically, the tax code has defined taxable income or “gain” when calculating capital gains tax owed as the difference between the historical cost of the asset and the sale price of the asset less certain adjustments. However, the use of historical cost is not explicitly required under law.

The tax code states that tax owed on capital gains is “the gain from the sale or other disposition of property… [in] excess of the amount realized therefrom over the adjusted basis…”

The “adjusted basis” is defined as the cost of such property after depletion, depreciation and other expenses. This means that “cost” is defined as the original purchase price after adjusted basis.

However, this terminology is not explicitly defined in law and Congress has not passed legislation defining cost or requiring the use of the current definition of cost.

In fact, the IRS has used regulatory discretion in defining cost in the past.

In 1918, Treasury decided that an asset’s cost was not strictly purchase price but was purchase price less depreciation and depletion taken by the taxpayer prior to sale. Treasury never explicitly defined cost until 1957, when they defined it as “the amount paid for… property in cash or other property.”
 

Relevant Judicial Precedent Suggests Treasury Has the Authority to Add an Inflation Index

Under the precedent set by the Supreme Court in Cheveron U.S.A. v. National Resources Defense Council (1984), the ability of Treasury to add an inflation adjustment hinges on whether the new definition of “cost” is plausible.

If the statute is not explicit, the question becomes whether the new reading of the law is based on a permissible construction of the statute. As noted above, the statute is not explicit in defining cost.

In addition, recent legal precedent – specifically three recent court cases suggests that there is precedent for “cost” to be reinterpreted by Treasury to include inflation:

  • In Verizon v. FCC (2002) the Supreme Court affirmed that the term “cost” was ambiguous. In this case, the petitioners, local exchange carriers, argued that the term “cost” meant historical cost and by using an expanded definition that the FCC was not properly implementing rate-setting provisions under the Telecommunications Act of 1996 (TCA).
    • Under Sec. 252(d)(1) of the TCA, local exchange carriers were required to charge a competing local carrier for a network element, “the cost… of providing the… network element…”
    • The court unanimously rejected the petitioner’s argument that required the plain meaning definition of “cost.” The court instead found cost was “protean,” “a chameleon,” and “virtually meaningless.”
       
  • In National Cable & Telecommunications Ass’n v. Brand X Internet Services (2005), the Supreme Court affirmed the right of an agency to interpret an ambiguous provision of the law. Specifically, the court ruled that judicial precedent does not prohibit an agency from interpreting an ambiguous statute.  
    • This means that Treasury is only prohibited from adding an inflation index if Section 1012 of the code explicitly defines “cost” as the price paid to purchase the property (which it does not.)
       
  • In Mayo Foundation for Medical Education & Research v. United States (2011), the Supreme Court affirmed that the Chevron doctrine applies to Treasury regulations.
    • In this case, the petitioner argued that Chevron does not apply to the tax code and that the precedent built in National Muffler Dealers Ass’n v. United States (1979) should instead apply.
    • The Court rejected this argument and found that Chevron fully applies to the tax code.

 

Relevant Legislative History Shows Support for Adding an Inflation Index

  • While Congress has not enacted an inflation index into law, inaction should not preclude Treasury from having regulatory authority in any way. Lawmakers have done nothing to eliminate or prevent indexation. In addition, Congress has indexed numerous other tax provisions to inflation, including individual income tax brackets.
  • Modern history indicates significant support in Congress for indexing the calculation of capital gains taxes to inflation:
     

 

 

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Congress Should Reject the CREATES ACT


Posted by Alexander Hendrie on Wednesday, January 10th, 2018, 2:28 PM PERMALINK

This year, lawmakers have numerous legislative proposals they must consider related to the cost of healthcare.

One of these proposals, the “Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act,” should be rejected by Congress.

While the legislation (H.R. 2212 in the House and S. 974 in the Senate) aims to address a narrow issue, it would set a precedent that undermines innovation and the safe development of medicines in favor of a system that promotes reckless litigation and grants generic manufacturers the right over an innovators’ creation under threat of lawsuit.

In turn, this would undermine intellectual property protections, open the door to unjustified litigation, endanger patient and researcher safety, and suppress innovation. 

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 Act 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 Act 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 Act 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 Act Will Not Lower Costs
While the CREATES Act is described by supporters as an attempt to increase efficiency and lower costs, it is a flawed proposal. Rather than reducing the cost of medicines, this bill may have the opposite effect by creating 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.

 

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ATR Supports Legislation to Delay Obamacare Taxes

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Posted by Alexander Hendrie on Friday, December 15th, 2017, 8:00 AM PERMALINK

Earlier this week, Ways and Means Republicans released five pieces of legislation that offer taxpayers relief from numerous Obamacare taxes. Specifically, these pieces of legislation would offer relief from Obamacare’s medical device tax, medicine cabinet tax, health insurance tax, employer mandate tax penalty, and Cadillac tax.

This relief would provide relief to millions of HSA and FSA users, medical device manufacturers, the healthcare premiums paid by seniors, small businesses owners and middle class families, small businesses that are hit by the employer mandate, and employers that provide healthcare plans to their employees.

Members of Congress should support these commonsense proposals.

Five year relief from the medical device tax

H.R. 4617, sponsored by Reps. Erik Paulsen (R-MN) and Jackie Walorski (R-IN) would offer five years of relief from Obamacare’s 2.3 percent medical device tax.

If Congress fails to act, the medical device tax will go into effect next year, which could lead to more than 25,000 lost jobs by 2021. Over the next decade, this excise tax is projected to increase taxes by $30 billion.

Medical device makers contribute roughly $150 billion to the U.S. economy. Nationwide, there are over 6,500 medical device companies in America. 80 percent of these have fewer than 50 employees, so the medical device tax disproportionately falls on small businesses.

Two year relief from the medicine cabinet tax on over-the-counter medications

H.R. 4618, sponsored by Rep. Lynn Jenkins (R-KS) would offer two years of relief from the Obamacare Medicine Cabinet tax. This tax 20 million Americans with a Health Savings Account and 30 – 35 million Americans with a Flexible Spending Account.

Under Obamacare’s Medicine Cabinet Tax, Americans are forbidden from using HSA and FSA funds to buy over the counter medicines, such as -cold, cough, and flu medicines, children’s fever relievers, chest rubs, aspirin and baby aspirin, and allergy medicine.

By forcing Americans with FSAs and HSAs to use post-tax dollars to purchase these necessary items, Obamacare raised taxes on these households by $5.6 billion over a ten year period.

2019 delay of the health insurance tax and 2018 delay provided insurer provides rebate to plan holder

H.R. 4620 sponsored by Rep. Kristi Noem (R-S.D.) delays the Obamacare health insurance tax for 2019 and for 2018 provided the provide rebates any costs of the tax onto the plan holder.

In total, the health insurance tax hits 11 million households that purchase through the individual insurance market, and 23 million households covered through their jobs. Next year alone, the tax will total $14.3 billion, and over a decade the tax totals roughly $150 billion in higher taxes.

Half of the tax is paid by those earning less than $50,000 a year and it will increase premiums by $5,000 per family over the next decade according to research by the American Action Forum.

Not only does it harm American families, the health insurance tax is devastating to small businesses. As many as 1.7 million small businesses would be directly impacted  and the tax could cost up to 286,000 in new jobs and small $33 billion in lost sales by 2023, according to the National Federation of Independent Business.

Two year full relief from the health insurance tax for plans in Puerto Rico

H.R. 4619, sponsored by Rep. Carlos Curbelo (R-Fla.) offers full relief from the health insurance tax to plans offered in Puerto Rico. As noted above, the Obamacare health insurance tax hits millions of individuals, small businesses and seniors resulting in higher premiums.

Three years of retroactive relief and one year of future relief from the employer mandate tax penalty; one year delay of the Cadillac tax

H.R. 4616, sponsored by Reps. Devin Nunes (R-CA) and Mike Kelly (R-Pa.) delays the Cadillac tax on employer provided health insurance for an additional year (new effective date 1/1/2021) and the employer mandate tax penalty for one year. This bill also offers three years of retroactive relief from the employer mandate tax penalty.

The Cadillac Tax applies a 40 percent tax on employer provided health insurance plans exceeding a value of $10,200 for individuals and $27,500 for families. This threshold includes the value of a healthcare plan, but also includes HSA and FSA payments.

According to research by the Kaiser Family Foundation, the Cadillac tax will hit 26 percent of employer provided plans by 2020 and 42 percent of employer provided plans by 2028. Over time, this will decrease care and increase costs for millions of American families across the country. 

The Employer mandate tax penalty forces employers to pay a $2,000 tax per full time employee (defined as 30 hours per week) if they do not offer “qualifying” health coverage as defined by the federal government.

Photo Credit: Thomas Hawk

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ATR Supports Expanding 529 Savings Accounts to Include Apprenticeship Programs

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Posted by Alexander Hendrie on Thursday, December 14th, 2017, 4:41 PM PERMALINK

Americans for Tax Reform released a letter in support of S. 2222 which will expand 529 savings accounts to include apprenticeship programs. This legislation will help bring more job opportunities to young Americans.

The full letter can be found here and below:

Dear Senator Daines,

I write in support of S. 2222, legislation that expands 529 tax-preferred savings accounts to apprenticeship programs.

529 savings accounts currently allow parents to invest after-tax earnings into a plan that collects interest, and can later be spent tax-free on their children’s college education. Because of the popularity of this program, there are already 13 million accounts, saving $300 billion. These plans are a key way for middle class families to invest in their children’s futures.

Expanding this program to apprenticeships would greatly help young adults. Today, youth unemployment is high at 9 percent, and many continue to live with their parents. Often employers can’t find young adults with the skills needed to do certain jobs.

This bill would help alleviate the skilled worker shortage in our country by allowing 529 funds to be spent on costs associated with approved apprenticeship programs. As with a traditional college, there are many ancillary expenses associated with apprenticeship programs. This bill levels the playing field between students and apprentices by allowing apprentices to use 529 funds to cover these costs.

This legislation is also bipartisan and has been co-sponsored by Senators Lisa Murkowski (R-Ala.), Cory Booker (D-N.J.), and Elizabeth Warren (D-Mass.).

Including apprenticeships in 529 accounts would expand a successful and important part of the tax code that encourages education. All Senators should support this important legislation.

Sincerely,

Grover G. Norquist
President
Americans for Tax Reform

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FATCA Repeal Cuts Taxes and Reduces Compliance Costs


Posted by Alexander Hendrie on Monday, December 11th, 2017, 2:09 PM PERMALINK

Repeal of the Foreign Account Tax Compliance Act (FATCA) reduces taxes by approximately $150 million per year AND reduces compliance costs by $200 million per year, according to estimates by William Byrnes of Texas A&M University School of Law.

This means that repeal of FATCA simultaneously offers relief to taxpayers and saves the government money by reducing outlays and reducing revenues.

FATCA was signed into law in 2010 with the goal of stopping tax evaders that were using offshore bank accounts. However, it was designed as a blunt instrument that targets any American with a bank account overseas. Most who are forced to comply are expatriate Americans who have, little if any U.S. presence. 

As a result, compliance costs far outstrip any effectiveness in curbing tax evasion. American citizens overseas have become locked out of financial institutions including banks, stockbrokers, hedge funds, and insurance. Often, it is easier for these businesses to deny US citizens service.

Under FATCA, any overseas account held by U.S. citizens must be reported to the IRS. This means that millions of Americans must give up personal information and comply with burdensome IRS regulations and reporting requirements. The law requires financial institutions to collect and disclose this information. If they fail to do so, the IRS can impose a 30 percent withholding penalty on an institution’s U.S. investments.

FATCA also requires American citizens to comply with tax filing forms if they have assets overseas that meet or exceed $50,000. For overseas Americans, this means they must comply with the tax compliance laws in their country of residence in addition to IRS laws.

Given that this law increases taxes and increases compliance costs for the government, it should be repealed. Doing so will offer relief to millions of Americans living overseas and reduce the size and scope of the IRS.

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A 20 percent Corporate Tax Rate Is Key for More Jobs and Higher Wages


Posted by Alexander Hendrie on Thursday, December 7th, 2017, 4:30 PM PERMALINK

Both the House and Senate versions of the Tax Cuts and Jobs Act reduces the uncompetitive 35 percent federal corporate tax rate to 20 percent – putting the U.S. in line with the corporate rates of the rest of the world.

Given this consensus, tax writers should ensure that the rate in the final tax reform bill is no higher than 20 percent. This competitive rate is key to stronger economic growth, higher wages, and more jobs.

A 20 percent corporate rate will mean more take-home pay for families across the country. As noted in a study released by the Council of Economic Advisors, a 20 percent corporate rate could result in household wages increasing by between $4,000 and $9,000.

A 20 percent corporate rate will create more jobs. In the increasingly global economy, it is clear that workers are more vulnerable to the high U.S. corporate rate. A high corporate tax rate means that capital will be relocated in a more productive way (i.e. to a country with a lower corporate tax rate). In other words, U.S. capital is mobile, while U.S. workers are not. According to research by the Tax Foundation, a 20 percent corporate rate will create almost 600,000 full time jobs.

A 20 percent corporate rate will make America globally competitive. The average rate in the developed world is around 25 percent, while the European rate is just 18 percent. When accounting for state corporate taxes, which average 4 percent across the country, a 20 percent rate would ensure the U.S. rate is in line with foreign competitors. Since 2000, 32 of the 35 developed countries have reduced their corporate rates. The U.S. is only one of two countries with a higher rate than in 1988.

A 20 percent corporate rate will end inversions and foreign acquisitions. The high rate has also resulted in close to 50 American businesses leaving the country through inversions in the past decade, according to data compiled by Democrats on the House Ways and Means Committee.

In addition, the high U.S. rate has made American innovation vulnerable to foreign acquisitions. According to a study commissioned by the Business Roundtable, the U.S. business climate is so uncompetitive that American companies have suffered a net loss of almost $510 billion in assets since 2004. The study estimates that a 20 percent corporate rate would have resulted in U.S. companies acquiring $1.2 trillion worth of assets over that same period, meaning that more than $1.7 trillion in assets were lost because of the uncompetitive U.S. rate.

Increasing the 20 percent corporate rate now will mean future increases in the corporate rate. In 1986, President Reagan reduced the top marginal income tax rate from 50 percent down to 28 percent. President George H.W. Bush increased this tax in 1990 to 31 percent, in the process breaking his promise to the American people that he would not raise taxes. Since then, President Clinton and President Obama have signed into law rate increases. Today, the top rate sits at 39.6 percent.

 

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ATR Releases Letter to Tax Cuts and Jobs Act Conferees


Posted by Alexander Hendrie on Thursday, December 7th, 2017, 10:00 AM PERMALINK

Members of the House and Senate will soon begin a conference committee to resolve differences in the Tax Cuts and Jobs Act.

[ATR's Policy recommendations can be found here]

​While there are minor differences between the Senate and House passed bills, both proposals are strongly pro-growth and pro-family. Where differences remain, the conference committee should be an opportunity to make the bill more pro-growth and ensure strong tax relief for American families, individuals, and businesses. 

While there are ways both pieces of legislation could be improved, both bills are infinitely better than the status quo. It is imperative that conferees swiftly reconcile differences between the two bills and send it to the House and Senate to ensure tax reform is signed into law in 2017. 

As lawmakers progress through the conference committee, ATR urges confeerees to keep the following policy priorities in mind:

  • Ensure tax reduction for Americans of every income level while simplifying the code
  • Repeal of Obamacare’s individual mandate tax penalty
  • Tax Reduction for Businesses including a permanent 20 percent corporate rate
  • Pro-Growth Cost Recovery including 100 percent expensing and reasonable limitations on deductibility of interest
  • Repeal of the death tax
  • An internationally competitive territorial system with appropriate base erosion rules
          

[The full document can be found here]

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ATR Urges NO Vote on Rubio-Lee Amendment Hiking Business Taxes to Finance Tax Code Spending Subsidies


Posted by Alexander Hendrie on Friday, December 1st, 2017, 7:00 PM PERMALINK

[Update: Senator Rubio has introduced a new amendment that would increase the corporate rate to 20.94 percent to finance spending subsidies in the form of refundable child tax credit payments. This opens the door for EVERY Senator to further increase business taxes to finance specific preferential tax provisions and spending subsidies. ATR urges a NO vote on this amendment.]

Senators Marco Rubio (R-Fla.) and Mike Lee (R-Utah) have proposed an amendment (1605, 1606) to the Tax Cuts and Jobs Act that increases taxes on businesses to finance spending through the tax code. ATR urges a NO vote on this amendment.

In net, this amendment would result in lower economic growth, fewer new jobs, and decreased wages. 

The amendment proposes increasing the corporate tax rate from 20 percent to 22 percent to finance an increase in the refundability (spending) of the child-tax credit, to index the credit to inflation, and to slightly increase the income threshold at which the credit phases-out.

These policy changes would come at the cost of lower economic growth, fewer new jobs, and decreased wages. 

In addition, support for this amendment opens the door to all Senators proposing tax increases on businesses to finance distortionary tax provisions and spending subsidies for narrow interests.

Businesses don’t pay taxes – people do, so any higher tax rate on businesses is passed onto employees, consumers, and investors. 

Recent studies that take into account the global economy find that workers bear a significant portion of the corporate tax — 50 percent70 percent, or even higher.

This translates into real money for families across the country. A study released by the Council of Economic Advisors found that a 20 percent corporate rate could result in household wages increasing by between $4,000 and $9,000.

Similarly, a study by the Tax Foundation found that reform would boost capital investment by 8.5 percent, and create more than 592,000 jobs, while increasing after-tax incomes of families by an average of $1,800. 

Lawmakers should not water down the growth potential of the Tax Cuts and Jobs Act by increasing taxes on businesses to finance distortionary spending subsidies in the tax code. ATR urges a NO vote on the Rubio-Lee Amendment. 

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