Bryan Bashur

Socialist Tax Hike Package Intends to Crowd Out Private Financing

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Posted by Bryan Bashur on Tuesday, November 30th, 2021, 2:05 PM PERMALINK

The Democrats’ socialist spending package includes trillions of dollars in tax hikes and new spending on superfluous government projects such as subsidies for electric bicycles and planting trees. 

The bill also would expand the size and scope of the Small Business Administration (SBA). Specifically, section 100502 of the package appropriates about $2 billion to establish and run a new lending program that would provide direct loans to small businesses. New direct financing under this program runs the risk of reducing available capital from private lenders because the federal government will crowd out private competition. Increasing reliance on federal loans will also likely be met with future tax hikes on middle class Americans to fund the program. This will lead to a circular phenomenon where advocates of big government push for additional tax hikes to fund more federal spending.  

Under the new program, the loan amounts can go up to as much as $150,000, or even $1 million if the borrower is small government contractor or small manufacturer. The bill also only gives the SBA three months to publish “interim final rules” that would set the underwriting criteria for the program. 

It is hard to imagine how a federal bureaucracy that had a hard time processing the Paycheck Protection Program (PPP), is going to have a much easier time creating, establishing, and operating a whole new direct lending program. 

Make no mistake, small businesses are the backbone of the American economy. According to the SBA, there are 32.5 million small businesses in the United States employing over 46 percent of the private workforce. Additionally, small businesses “have accounted for 62% of net new job creation since 1995.”

However, loans from the federal government have flaws. According to a report by the SBA’s Inspector General (IG), as of June 2020, the SBA approved “more than $250 million in COVID-19 economic injury loans and advance grants to potentially ineligible businesses.” The SBA also approved nearly 300 duplicate economic injury loans amounting to more than $45 million in duplicate loans. The IG’s serious concerns with fraud control protections at the SBA are warranted. The establishment of a new direct loan program is bound to be filled with fraudulent transactions and waste millions of taxpayer dollars. 

Moreover, certain SBA loans have experienced significant rates of default. According to one study, from 2006-2015 the 10-year default rate was 65.6 percent for mortgage and nonmortgage loan brokers, 46.2 percent for residential property managers, and 42.8 percent for multifamily housing construction. 

Clearly the SBA already has issues with its current loan programs. Taxpayer dollars could be put to better use reforming the existing programs.

While banks, credit unions, and online lenders all finance small businesses, banks continue to be the most prolific source of credit. According to a small business credit survey conducted by all twelve Federal Reserve Banks, in 2020, 42 percent of small businesses that applied for “a loan, line of credit, or cash advance” sought financing from a large bank; 43 percent sought financing from small banks; and 20 percent approached online lenders about financing opportunities. Additionally, according to the National Credit Union Administration (NCUA), since 2019 the number of commercial loans financed by credit unions increased by 12 percent and the dollar amount of commercial financed last year was “up by 22%.”

Private financing from bank and nonbank lenders is providing the necessary credit to small businesses. A new direct lending program from the SBA could increase the government’s foothold in loans and crowd out private lenders. 

Instead of appropriating billions of dollars in new funding for a redundant lending program, Congress should reform the SBA’s current 7(a) program to ensure that it runs efficiently. Unnecessary spending is fiscally irresponsible and will only further contribute to the inflation crisis the United States is already facing.

Photo Credit: "Small Business Administration" by Mr. Blue MauMau is licensed under CC BY 2.0

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ATR Supports Rep. McHenry’s Bipartisan “Keep Innovation in America Act”

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Posted by Bryan Bashur on Thursday, November 18th, 2021, 1:51 PM PERMALINK

This week, Rep. Patrick McHenry (R-N.C.), ranking member of the House Committee on Financial Services, introduced the Keep Innovation in America Act (H.R. 6006) a bill that would both protect the privacy of investors in digital assets, and mitigate burdensome reporting requirements for crypto miners; validators; and software, hardware, and protocol developers.

“I am proud to support Ranking Member McHenry’s bill that will significantly improve the digital asset reporting requirements recently enacted in President Biden’s infrastructure package. The Infrastructure Investment and Jobs Act imposed burdensome reporting requirements on virtually every participant within the cryptocurrency ecosystem, including miners and software developers, and impinged on consumers’ privacy. McHenry’s bill, the Keep Innovation in America Act, strengthens privacy protections, and limits which individuals would be required to submit tax return information to the IRS. This bipartisan legislation will significantly improve the status quo and should be swiftly passed into law to preserve the United States’ position as a global leader in the innovation of digital assets and blockchain technology,” said Grover Norquist, President of Americans for Tax Reform.

President Biden’s infrastructure bill, also known as the Infrastructure Investment and Jobs Act (P.L. 117-58), included a provision that would require enhanced reporting requirements for participants within the cryptocurrency ecosystem. The language enacted into law would require a broad swath of participants in the cryptocurrency ecosystem to file tax returns to the Internal Revenue Service (IRS), including individuals who have no access to the personally identifiable information (PII) of crypto investors.

Biden’s Treasury Secretary, Janet Yellen, was the primary supporter of the heavy-handed language. Ostensibly, the provision was included to crack down on digital asset tax avoidance and to close the “tax gap.” However, the reporting provisions in Biden’s bill were nothing more than a desperate attempt to rake in revenue to the federal government to justify future irresponsible spending.

McHenry’s bill addresses the issues in Biden’s infrastructure package by:

  • Removing the obligation of network participants, such as miners and software developers, who don’t have—and shouldn't have—access to customer information to report tax information to the IRS. It does so without affecting the reporting obligations placed on brokers and traders of digital assets.

 

  • Requiring that any information reported to the IRS must have been submitted to brokers voluntarily by investors.

 

  • Improving the definition of “digital asset”

 

  • Giving brokers an additional 2 years, until 2026, before any returns need to be reported to the IRS.

 

  • Requesting the Secretary of the Treasury to conduct a study and submit a report to Congress and lists Congressional findings on the importance of digital asset innovation.

 

  • Deleting an egregious provision from statute that would require any digital asset transactions above $10,000 in a single day to be reported to the IRS.

 

On balance, Rep. McHenry has delivered a commonsense, bipartisan bill that will protect investors’ privacy, and is in line with convention by ensuring that tax return reporting is limited to the entities that would have access to the proper information.

Lawmakers should support the Keep Innovation in America Act. The text of the bill can be read here.

Photo Credit: "Bitcoin cash" by QuoteInspector.com is licensed under CC BY-ND 2.0

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Democrats Target Retirement Savings in Tax-and-Spend Package

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Posted by Bryan Bashur on Thursday, November 11th, 2021, 3:09 PM PERMALINK

The Democrats’ socialist tax-and-spend package is over 2,000 pages and contains billions of dollars in tax increases that will harm working families in the form of higher prices, lower wages, and fewer jobs.

The Democrats’ package is also taking aim at the financial security of Americans with changes to individual retirement accounts (IRAs). While the Left claims these restrictions are being made in the name of “fairness” they will just punish Americans saving for retirement.

A Roth IRA is a type of individual retirement account where someone contributes money that has been taxed before it enters the account. This allows contributions to the account to grow tax-free. After an individual has reached the age of 59 and a half, and once the account has been open for five years, an individual can withdraw the funds tax-and penalty-free.

The Democrats’ bill prohibits contributions to a traditional or Roth IRA if the total value of an individual’s IRA plus defined contribution accounts exceeds $10 million. 

The bill would also create a new required minimum distribution (RMD) for taxpayers with more than $10 million in their account. Specifically, the account holder would have to withdraw 50 percent of accounts above $10 million at the end of any taxable year and 100 percent of funds exceeding $20 million. Currently, RMDs only exist based on an individual’s age, not the size of the account.

Individuals often decide to convert their retirement savings from a traditional IRA to a Roth IRA so that they can withdraw the funds tax-free. The other benefit of converting to a Roth IRA is that there are no RMDs during an individual’s lifetime, whereas a traditional IRA has RMDs every year after an individual reaches the age of 72 (70 and half if an individual turned that age before 2020).

Under the Democrats’ bill, taxpayers would also be prohibited from converting any portion of a non-Roth account to a Roth IRA if the account has any after-tax contributions

Additionally, Democrats have proposed limits on rollovers. Starting in 2032, taxpayers earning more than $400,000 would be prohibited from converting funds from non-Roth accounts to Roth IRAs. 

The bill would also provide more authority to the Internal Revenue Service (IRS) to snoop on Americans’ IRAs. It would require any defined contribution account with more than $2.5 million to be reported to the IRS and would double the length of time allowed for the IRS to pursue IRA noncompliance, from 3 years to 6 years. 

Effectively, this bill puts additional limits on Americans can do with their retirement savings. This could make the usage of IRAs less attractive overall.

In 2020, over 37 percent of U.S households owned an IRA. According to the Investment Company Institute (ICI), 36.8 million owned a traditional IRA while 26.3 million owned a Roth IRA. Now more than ever, IRAs are a significant portion of households’ assets. ICI’s report states that “in June 2020, IRA assets were 11 percent of all household financial assets, up from 8 percent of assets two decades ago.”

According to the Bureau of Labor Statistics, 67 percent of private industry workers had access to employer-provided retirement plans in March 2020. Additionally, 91 percent of union workers had access to a retirement plan. 

In their effort to raise revenue for future spending, Democrats are opening the door to present and future abuse of retirement accounts. Additional restrictions on rollovers and contributions, and increased IRS reporting is a slippery slope to more government intervention into individual retirement savings, and potentially less savings overall.

Increasing taxes on Americans’ retirement savings via the additional restrictions in this package would be detrimental to households, especially in the wake of the COVID-19 pandemic. Lawmakers should be opposed to the changes to IRAs in this package and the other billions of dollars of tax increases that will decrease the standard of living for all Americans.

Photo Credit: "Retirement" by 401(K) 2021 is licensed under CC BY-SA 2.0

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ATR Supports H.R. 5773--The Stop Settlement Slush Funds Act of 2021

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Posted by Bryan Bashur on Wednesday, November 3rd, 2021, 3:36 PM PERMALINK

Today, the President of Americans for Tax Reform, Grover Norquist, sent a letter to the House Committee on the Judiciary expressing support for H.R. 5773, The Stop Settlement Slush Funds Act of 2021. 

The bill, sponsored by Rep. Lance Gooden (R-Texas), would prohibit federal government officials from crafting settlement agreements that would funnel donations to activist groups that are favored by the political party running the executive branch.

Read the full text of the letter here or below:

November 3, 2021

 

The Honorable Jerrold Nadler

Chairman 

House Committee on the Judiciary

2141 Rayburn House Office Building

Washington, D.C. 20515

 

The Honorable Jim Jordan

Ranking Member

House Committee on the Judiciary

2141 Rayburn House Office Building

Washington, D.C. 20515

 

Dear Chairman Nadler and Ranking Member Jordan,

I write in support of The Stop Settlement Slush Funds Act of 2021 (H.R. 5773), legislation that would prohibit federal government officials from crafting settlement agreements that would funnel donations to activist groups that are favored by the political party running the executive branch.

This bill is necessary because of reports that the Biden administration has revived the Obama administration policy of bankrolling left-leaning special interest groups using settlement money from civil suits. Under this initiative, government officials have required defendants to donate money to select activist groups within the terms of the settlement. Instead of providing remuneration for victims in civil suits, funds are being diverted to third-party organizations that are not directly involved in the lawsuit. This behavior is a gross politicization of the United States’ legal system and should be abhorred by both Republicans and Democrats.

During the Obama administration, the Department of Justice (DOJ) granted activist groups millions of dollars in under–the–table settlements, all while avoiding Congressional oversight. 

For example, in 2014 the Obama DOJ and Bank of America agreed to a $17 billion settlement where millions of dollars of the settlement were siphoned off to Interest on Lawyers’ Trust Accounts and left-leaning groups such as the Affordable Housing Alliance, the Association of Community Organizations for Reform Now (ACORN), and the Mutual Housing Association of New York.

Moreover, this behavior may even be unlawful. These partisan settlement agreements appear to circumvent Congressional authority under the Appropriations Clause and violate both the Miscellaneous Receipts Act and the Antideficiency Act.

H.R. 5773 would expressly forbid such abusive ‘slush fund’ payments to activist groups, and guarantees money recovered in settlements is returned to the pockets of the American people, where it truly belongs. This bill ensures settlement money goes directly to victims, or alternatively to the Treasury, where elected officials, and not bureaucrats, determine how it is spent. 

Previous iterations of this bill passed the House of Representatives three times with bipartisan support. I urge members of the House Committee on the Judiciary ouse House and all members of Congress to support H.R. 5773.

Sincerely,             

Grover Norquist

President, Americans for Tax Reform

CC: Members of the House Committee on the Judiciary

Photo Credit: "Courtroom One Gavel" by Joe Gratz is licensed under CC0 1.0

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Partisan FTC and DOJ Misconstrue Debit Card Landscape

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Posted by Bryan Bashur on Thursday, October 21st, 2021, 2:57 PM PERMALINK

Partisanship and left-wing extremism epitomize the Biden administration. This has made it exceedingly difficult for the administration to finalize a deal with moderate Democrats on the multi trillion-dollar tax-and-spend package. What is important to note though is that this partisanship extends beyond the doors of the White House and is present at every agency throughout the federal government.

In particular, the Department of Justice (DOJ) and Federal Trade Commission (FTC) are led by liberals Merrick Garland and Lina Khan, respectively. Recently DOJ and FTC filed letters in support of the Federal Reserve’s notice of proposed rulemaking, which would amend provisions of Regulation II so that certain debit card routing restrictions would apply to transactions that occur online (i.e. card-not-present transactions).   

The fact that these agencies publicly support the Federal Reserve’s rulemaking to further bolster the routing restrictions from the Durbin amendment, which is widely lauded by Democrats, is par for the course.

If officials at DOJ and FTC were nominated by a conservative Republican administration, it is unlikely they would support policy that is clearly an expansion of a federal government mandate.

Moreover, the language on routing restrictions in the Durbin amendment has been misconstrued by the Federal Reserve. The language in statute requires the Federal Reserve to issue rules that prohibit restricting “the number of payment card networks on which an electronic debit transaction may be processed.” However, statute does not authorize the Federal Reserve to write rules “to impose an affirmative obligation” on banks and credit unions to make sure that each merchant and transaction is provided with at least two unaffiliated payment networks. Clearly, the Federal Reserve is overstepping its statutory authority in its proposed rulemaking.

The DOJ and FTC’s claims that banks, credit unions, and payment card networks are actively conducting anticompetitive behavior to the detriment of merchants is false. In many cases merchants are the ones limiting routing options. Banks and credit unions cannot help it if merchants refuse to use updated and more secure technology to access payment networks.

In 2011, the Federal Reserve admitted that banks and credit unions could not be at fault if a merchant decided to not install new card processing technology, such as card reader terminals. The Federal Reserve stated that, “To the extent a merchant has chosen not to accept PIN debit, the merchant, and not the issuer or the payment card network, has restricted the available choices for routing an electronic debit transaction.”

This issue continues today. Merchants have limited payment options for consumers to cut corners while the technology for alternative payment methods for card-not-present transactions has existed for years.

Merchants “have been making a conscious decision not to adopt technologies” that would broaden payment transaction choices for card-not-present transactions.

Biden’s DOJ and FTC have it all wrong. It is not the banks, credit unions, or payment card networks that reduce competition, it is the large multi-billion-dollar merchants that prefer to cut corners than prioritize secure and efficient debit transactions.

Photo Credit: "Woman holding credit card closeup" by Nenad Stojkovic is licensed under CC BY 2.0

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Democrats’ Taxes on Investment will Harm Start-Up Businesses

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Posted by Bryan Bashur on Tuesday, October 19th, 2021, 11:17 AM PERMALINK

Democrats have proposed numerous tax increases on investment. President Biden’s budget called for doubling the tax rate on capital gains from 23.8 percent to 43.4 percent while the House Democrats $3.5 trillion tax and spend bill proposed raising the capital gains tax to 28.8 percent. However, under the House Democrat proposal investors in small private companies will be hit twice because of the repeal of the tax exclusion on qualified small business stock (QSBS). 

Currently, the tax code allows for individuals and pass-through entities to exempt up to 100 percent of gains made on the sale of qualified small business stock if it was acquired at issuance, and held for at least five years in a C corporation with aggregate gross assets of $50 million or less. Individuals or pass-through entities can sell up $10 million, or “10 times the investor's basis in the stock,” in QSBS and still qualify for the tax exclusion. 

If this exclusion is repealed individuals would pay a 25 percent tax on capital gains from the sale of QSBS. In addition, they would pay the 3.8 percent Obamacare net investment income tax and could pay the 3 percent surtax for individuals making more than $5 million. 

In addition, taxpayers would have to pay state capital gains taxes. In California, for instance, they would have to pay an additional 13.3 percent tax resulting in a staggering tax rate of 45.1 percent.

This would be significantly higher than the tax rate charged by foreign competitors. For instance, the capital gains rate in Communist China is 20 percent, so the United States would be far less competitive.

If an investor knows they are going to lose nearly half of the gain on their stock when they sell, they may likely decide to reel back investment or invest in a different country with lower tax rates.

According to a memorandum prepared by RSM, there are clear benefits that come from the section 1202 tax exemption. RSM states that the 100 percent exclusion has “spurred interest in investments into start-up and other small businesses.”  Additionally, Patrick Smith of CliftonLarsonAllen, makes a similar statement about the impact of section 1202. In a quote he provided to the Angel Capital Association, he states that, “Section 1202 stock is one of the most powerful tools Congress has ever provided to small businesses.”

Notably, this tax increase proposed by House Democrats could reduce competition. By eliminating the section 1202 tax advantage, Democrats are threatening to reduce a vital source of capital for small businesses. According to Fred Tannenbaum at Gould & Ratner, section 1202 has provided low-cost access to capital for small businesses that are aspiring to “to be the next Amazon, Google or 10X Genomics.”

The proposal, as drafted in the House Ways and Means Committee title of the budget reconciliation bill, could drastically diminish competition and bolster market share for large companies.

Congress should reject efforts to raise taxes on investment including through the repeal of section 1202. Maintaining this provision will help ensure private capital can continue to flow to small businesses for years to come.  

Photo Credit: "US Capitol" by kidTruant is licensed under CC BY-SA 2.0


Report: Increase Retail Investor participation in Private Equity

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Posted by Bryan Bashur on Wednesday, September 29th, 2021, 2:40 PM PERMALINK

In a bout of good news for retail investors, the Securities and Exchange Commission’s Asset Management Advisory Committee (AMAC) unanimously approved a final report on how to increase retail investor participation in private investments.

AMAC’s report outlined various principles the SEC could promote to enable greater retail investor participation in the private investment market. The “design principles” encourage the SEC to:

         1. Favor investment structures that offer at least limited redemption opportunities, or that can be traded on secondary markets without needing to liquidate an underlying private investment.

         2. Allow retail investors to make investments managed by independent investment advisers who (and whose affiliates) (1) do not receive fees or other income from the underlying investments and who have an obligation to act in the best interest of investors (if broker-dealers) or (2) have a fiduciary obligation to the investors (if investment advisers).

         3. Require standardized disclosure of important information about the private investment, particularly with respect to fees, risks, key terms and returns.

         4. Enable retail investors to hold a diversified pool of private investments within their overall portfolio which should also comprise more liquid investments.

         5. Use a regulated investment company (RIC) framework to balance investor protection with access to private investments.

Currently, most private investments are not available to retail investors. In the private investment landscape today, retail investors can participate in certain securities offerings that do not require registration with the SEC, but many of these offerings require that investors be “accredited” by earning more than $200,000 or being worth more than $1 million. Retail investors can also invest in open-end funds, such as mutual funds, and closed-end funds (e.g., bond funds, tender offer funds, and interval funds) that can hold no more than 15 percent of their investments in private funds. Thus, the current landscape for retail investors to participate in private investments is limited.

The report found that the overall demand for innovative investment products with higher returns will be more attractive to the increasing number of retirement accounts and retail investors with assets under management. In 2020, there were approximately $35 trillion assets under management that were in the retirement market. Additionally, over the past 15 years, 401(k) and individual retirement accounts have increased to about $19 trillion from $6 trillion.

The higher returns offered by private equity provide a unique opportunity for employees’ retirement plans to have marked improvement. According to the AMAC’s report, “PE funds offer potential benefits to retail investors compared to public equity investments due to their higher average returns and their diversification potential.”

AMAC’s report concluded that:

        1. The SEC should consider permitting retail investors access to a wider range of private investments;

        2. Wider access could initially be considered within a set of “Design Principles” that balance the potential benefits to retail investors from wider access to private investments with sufficient investor protection; and

        3. The current RIC framework could serve as the basis on which to achieve the balance sought by the Design Principles.

The SEC would do good to listen to the advice that the AMAC has provided. Where it can, the agency should strive to expand access to private investment options for all retail investors.  

 

Photo Credit: "DSC_4880 - Securities and Exchange Commission" by Scott S is licensed under CC BY 2.0

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Biden Nominates Left-Wing Extremist to head OCC

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Posted by Bryan Bashur on Monday, September 27th, 2021, 5:00 PM PERMALINK

Last week, President Biden nominated a Cornell University law professor who was educated in the Soviet Union to lead the Office of the Comptroller of the Currency (OCC). 

Saule Omarova, a graduate of Moscow State University and a recipient of the Lenin Personal Academic Scholarship, should raise eyebrows in the Senate.  

If Omarova is confirmed to the position, she will be able to serve a five-year term as comptroller of the currency. As comptroller, Omarova would head the bureau that “charters, regulates, and supervises all national banks, federal savings associations, and federal branches and agencies of foreign banks.”

On her resume, Omarova states that she was a senior fellow at the Berggruen Institute from 2020-2021. The think tank was founded by Nicholas Bergguren, a self-proclaimed Marxist, and has a history of promoting Chinese communist propaganda in the news. 

Omarova will also undoubtedly expand the size, scope, and authority of the OCC to the limit.

She would use her role to push “equity” policies that increase the federal government’s footprint in the market. Most notably, Omarova has advocated for the Federal Reserve to provide deposits and lending for individuals in the country—crowding out any private banking opportunities in the United States. Omarova has explicitly stated her support for replacing private bank deposits with the Federal Reserve in the name of “equity.” Omarova says that, “the ultimate ‘end-state’” in her writing is where “FedAccounts fully replace—rather than compete with—private bank deposits.” This would be a total overhaul of the banking system in the United States. Effectively eliminating all free market competition in the banking system.

Omarova has also expressed the need to continue to assert strong government authority when administering bank charters. In an article from 2015, she and her coauthor opined, “whether it might be time to bridge the gulf between banking and general corporate regulatory regimes – not by making access to bank charters ‘free and easy,’ but by making access to corporate privileges once again expressly conditional on the delivery of public benefits.” No doubt, Omarova has no intention of promoting free market ideologies when regulating federally chartered banks, but instead will likely implement policies to make it harder for banks to conduct business and thus restrict access to capital across the country. 

Omarova is not shy about expanding the size of the federal government to prop up every industry in the United States. For example, in an article she wrote in April of 2020, Omarova stated the need for a new permanent federal agency to bail out companies during crises. Omarova states that “Having a permanent institutional platform for coordinating the national crisis response, including bailouts of private companies, would help to ensure that these emergency measures are executed in an efficient, transparent, and democratically accountable, and socially just manner.” Omarova calls this agency the National Investment Authority. She envisions this new centralized investment juggernaut to “act directly in financial markets as a lender, guarantor, securitizer, and venture capitalist with a broad mandate to mobilize, amplify, and direct public and private capital to where it’s needed most.” So, the federal government gets to decide where capital should be allocated, not private banks who actually have shareholders that hold them accountable. 

Finally, Omarova is critical of cryptocurrencies. In an article Omarova wrote for the Harvard Law School Forum on Corporate Governance, she claims that cryptocurrencies contribute to financial instability, fail to produce “activity in the real economy,” and “fuel financial speculation on an unprecedented scale.” In light of her opinions on cryptocurrencies, it is unlikely that Omarova would be supportive of potential proposals to engender greater collaboration or partnerships between fintechs and national banks.  

When Omarova appears before the Senate Banking Committee for her nomination hearing, senators should ask her hard questions. The Senate needs to avoid confirming someone to the helm of the OCC that will restructure the national banking system to reflect that of a totalitarian regime.

Photo Credit: "United States Capitol" by Phil Roeder is licensed under CC BY 2.0

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Rohit Chopra To Weaponize CFPB

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Posted by Bryan Bashur on Wednesday, September 22nd, 2021, 4:50 PM PERMALINK

In the next few days, the Senate will vote on confirmation of Rohit Chopra to serve as the next director of the Consumer Financial Protection Bureau (CFPB). Americans for Tax Reform opposes Chopra’s nomination and urges all senators to vote against Chopra’s final confirmation.

Chopra is a far-left acolyte of Elizabeth Warren who will expand the size, scope, and authority of the CFPB to the greatest extent possible.

Chopra currently serves as a commissioner at the Federal Trade Commission (FTC), but he has previously held positions at the CFPB as an assistant director, student loan ombudsman, and policy advisor.

Chopra is no friend to private industry. Under Chopra’s leadership, the CFPB will strictly enforce rulemakings that impose burdensome reporting requirements on financial institutions. For example, Chopra will likely severely enforce the mandates in the CFPB’s rule to collect certain data from small businesses pursuant to section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Chopra is also likely to increase enforcement actions against financial technology companies and mortgage lenders, stifling innovation and expanding the federal government’s reach into private loan agreements.

Additionally, Chopra has been rightly scrutinized by Ranking Member Pat Toomey (R-Pa.) of the Banking Committee for failing to respond to inquiries about the Biden administration’s potentially unlawful removal of CFPB career staffers from their positions in favor of replacing them with Democratic loyalists.  

Chopra never responded to Senator Toomey’s inquiry about whether he was involved in the removal of high-level career staffers. Failure to respond during the nomination process is enough by itself to be disqualified. Moreover, Chopra’s unresponsiveness foreshadows he is likely to be unaccountable to Congress just as the agency has been since its inception.    

The CFPB is an independent agency created by the politically divisive Dodd-Frank. The agency is structurally different from other independent agencies because it has a sole director leading the agency unlike most independent agencies, which have multiple commissioners and a chair. The CFPB is also not funded via Congressional appropriations, but by the Federal Reserve.

On Tuesday night, the Senate moved forward with turning the CFPB into a weapon for far-left Democrats. Senators voted in favor of discharging Rohit Chopra’s nomination from the Senate Banking Committee by a vote of 49-48. Only Democrats voted in favor of considering his nomination for full confirmation.

In March, the Senate Banking Committee voted along party lines, ending up in a tie vote of 12-12. This tie vote in committee is why the Senate needed to vote on a motion to discharge to the full Senate.

Senate confirmation of Chopra will put a radical liberal at the helm of a redundant federal agency with no Congressional accountability.

Senators should vote NO on Chopra.

 

Photo Credit: "cfpb 36794" by Ted Eytan is licensed under CC BY-SA 2.0


House Tax Provision is Bad News for Crypto

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Posted by Bryan Bashur on Monday, September 13th, 2021, 6:33 PM PERMALINK

Capitol Hill continues to impose tax increases on cryptocurrencies.

This time, Chairman Richard Neal (D-Mass.) of the House Ways and Means Committee released text for the tax portion of the budget reconciliation bill, which includes a section that restricts crypto investors from being able to deduct losses on certain transactions.

Section 138153 amends the tax code to specify that foreign currencies, commodities, and digital assets qualify under the Internal Revenue Service’s rules for wash sales. Under current IRS rules, a wash sale occurs when an investor sells “stock or securities” at a loss, and either 30 days before or after the sale, purchases a “substantially identical” stock or security. The IRS prohibits any deduction of losses when a transaction like this occurs.

If this language passes, it will limit crypto investors’ flexibility to deduct losses.

The language drafted by Chairman Neal applies to investors who directly purchase digital assets and investors who purchase derivatives of digital assets (e.g., options and futures contracts).

Additionally, the bill amends statute to capture transactions from a variety of entities. In current statute, the wash rules will apply if an investor were to sell a digital asset and the investor’s spouse subsequently purchased a substantially identical digital asset within the specified timeframe. However, Chairman Neal’s bill expands this so that the wash sale rules also apply to a transaction involving the investor’s dependents; “any individual, corporation, partnership, trust, or estate which controls, or is controlled by” the investor; an IRA, health savings account, or Archer MSA; deferred compensation plan; annuity plan or contract; and a 529 plan.

Democrats are on the warpath when it comes to raising revenue for their monstrosity of a reconciliation bill. This is made clear by their eagerness to reel in revenue by applying wash sale rules to every nook and cranny of an individual’s retirement savings. Democrats do not want individuals to be able to use derivatives, digital assets, or commodities to strengthen their long-term savings, they care more about making sure the government gets its fair share.

On top of restricting deductions on losses, Democrats are also raising the top rate for the capital gains tax from 20 percent to 25 percent. Including the 3.8 percent net investment income tax and the Democrats’ proposed 3 percent surtax, the capital gains tax could be as high as 31.8 percent.

Together these policies will slowly erode individuals’ purchasing power and eliminate any incentive to invest at all.

If enacted, the new application of the IRS’s wash sale rules on digital assets will become effective on January 1, 2022. Unfortunately, without guidance from the IRS, section 138153 of Chairman Neal’s bill could create confusion among investors about what constitutes a “substantially identical” purchase of a digital asset. Additional uncertainty could compel investors to slow trading or stop altogether to avoid any potential punishment from the IRS—creating a chilling effect on transactions within the digital asset industry.

Members of Congress should oppose section 138153 of Chairman Neal’s bill and request its expulsion from the text.

 

 

Photo Credit: "Secure Bitcoins locked with padlock and chain" by QuoteInspector.com is licensed under CC BY-ND 4.0

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