Damien Salamacha

Most Americans Are Living Paycheck to Paycheck During Obama Recovery

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Posted by Damien Salamacha on Friday, January 9th, 2015, 1:49 PM PERMALINK

While President Obama tries to convince the American people that the economy is back on track a new report indicates that a majority of Americans are now living paycheck to paycheck.  In Obama’s post-recession recovery, nearly 62% of Americans do not have emergency savings to cover unexpected expenses.  Faced with an emergency, Americans say they would raise the money by reducing spending elsewhere (26%), borrowing from family and/or friends (16%) or using credit cards (12%).

Additionally, homeowners and renters are finding it difficult to meet rising rents and mortgage payments.  Over half of Americans have had to make at least one major sacrifice to cover the cost of their rent or mortgage over the last three years.  Sacrifices that include getting a second job, deferring saving for retirement, cutting back on medical care, going further into debt, or choosing to move to a cheaper, but less safe neighborhood.  

Oblivious to the circumstances of most Americans, President Obama speaking Wednesday in Detroit said, “As a country, we have every right to be proud of what we have got to show for that hard work,” Mr. Obama said. “America’s resurgence is real. Don’t let anybody tell you otherwise.” He later followed up by saying, “One of my new year’s resolutions is to make sure more Americans…feels like they’re coming back. And there is no doubt…that America is coming back.”

An immediate step the President can take to improve the economy and strengthen the middle-class is to sign legislation authorizing the construction of the Keystone Pipeline. Unfortunately, President Obama has already threatened to veto such legislation.   Even President Obama’s State Department has concluded that “during construction, proposed Project spending would support approximately 42,100 jobs (direct, indirect, and induced), and approximately $2 billion in earnings throughout the United States.”

Unfortunately, the President is too ideologically driven and disconnected from the middle-class to adopt policies such as Keystone which would have an immediate positive impact on the economy.  The House and Senate Republicans will send the Keystone legislation to the President, along with other measures to strengthen the middle-class and create jobs.  It is now up to the President whether he can work with Congress to strengthen the American economy.  

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Center-Right Icons: Friedrich Hayek

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Posted by Damien Salamacha on Monday, December 15th, 2014, 10:31 AM PERMALINK

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

 

Friedrich Hayek (1899-1992), the Nobel Prize laureate in 1974 for Economic Science, was an Austrian economist and philosopher best known for his defense of classical liberalism.  Born in Austria-Hungary, Hayek was greatly influential and succeeded in spreading Austrian ideas throughout the English-speaking world. 

Hayek’s The Road to Serfdom, written in 1944, serves as a persuasive and popular exposition of free-market economics.  New York Times editorial writer and champion of free-market economics Henry Hazlitt regarded his work as “one of the most important books of our generation” in a front-page review of the New York Times.   With over two-million copies sold, The Road to Serfdom has had a significant impact on conservative and libertarian politics. 

The Road to Serfdom makes a strong argument against central planned economies. In doing so, Hayek warns of the dangers of tyranny that inevitably ensue from economic planning brought out by a central government authority.  Furthermore, he argues that the abandonment of individualism and classical liberalism predictably lead to a loss of freedom, and the creation of an oppressive society. 

Moreover, in Hayek’s The Use of Knowledge in Society (1945), Hayek argues that prices serve to coordinate individual knowledge, enabling society’s members to achieve diverse, complicated ends through a principle of spontaneous self-organization.  His theory of how changing prices communicate information enabling individuals to co-ordinate their plans is widely regarded as an significant achievement in economics.

In 1974, Hayek shared the 1974 Nobel Prize in Economics with ideological rival Gunnar Myrdal “for their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena.”

Most notably, the views of Friedrich von Hayek and his counterpart John Maynard Keynes have served as a driving force in the United States economy since the end of World War II.  During the 1950s, 1960’s and into the 1970s, Keynes’ view of having government intervention in economic affairs has prevailed.  Since the 1970s however, Hayek’s view of government intervention in a minimal sense has gained popularity.

A series of rap parody videos recently created demonstrate this ongoing battle of economic viewpoints:

 

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Alabama Gov. Bentley Pushing for Tax Increases

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Posted by Damien Salamacha on Monday, December 8th, 2014, 12:54 PM PERMALINK

Alabama Governor Robert Bentley, a Taxpayer Protection Pledge signer, publicly endorsed eliminating tax deductions for Alabama families as a means for solving the state’s overspending problem last Monday.

According to the Cotton State’s governor, eliminating tax deductions is not the same as raising taxes.

"I am not for raising taxes and this actually would not be raising taxes," Bentley said. "It would be taking away some deductions. That is certainly one of the things we'll be looking at."

Bentley is wrong. By signing the Taxpayer Protection Pledge, the governor has committed to “oppos[ing] changes in tax deductions or credits that increase the net tax burden on Americans.” 

Enacting legislation that burdens taxpayers with higher taxes and fees to fuel exorbitant state spending, goes against his written promise to the people of Alabama to "oppose and veto any and all efforts to increase taxes." Americans for Tax Reform encourages Gov. Bentley to pursue revenue neutral, pro-growth tax reform and enact spending restraint instead of raising taxes on Alabama families. He should look to the tax reform efforts in Kansas and Wisconsin as a model for the 2015 legislative session. 

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Important Challenges for the Lone Star State to Tackle in 2015

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Posted by Damien Salamacha on Friday, November 14th, 2014, 10:56 AM PERMALINK

Many say that as Texas goes, so goes the nation, and there is some data to back that up, at least from an economic standpoint. Were it not for Texas, national job growth in recent years would not look so hot. As Vance Ginn, Economist at the Texas Public Policy Foundation’s Center for Fiscal Policy pointed out in Investors Business Daily, “excluding the 1.1 million jobs added in Texas since the last recession started in December 2007, the rest of the U.S. employs about 350,000 fewer people than its pre-recession level.”

With an important 2015 biennial session of the Texas legislature fast approaching, Americans for Tax reform sent a letter to members of the Texas legislature this week urging them to take important steps to protect Texas taxpayers and further spur economic growth. The letter ATR sent to Texas legislators is as follows:

Dear Returning and New Members of the Texas Legislature,

As you prepare to return to the state capitol for the 2015 legislative session, on behalf of Americans for Tax Reform and our membership across the Lone Star State, I urge you to keep taxpayers in mind as you consider all the pieces of legislation that will come across your desk. There are two main things that you can do to protect Texas taxpayers and stoke economic growth: 1) rein in the unsustainable trajectory of state spending, which can be accomplished by instituting a true and unbustable state spending cap; and 2) eliminate the state’s business tax, otherwise known as the margin tax, one of the biggest blemishes on what is an otherwise relatively competitive tax code.

As was noted in Forbes earlier this year, even relatively-well governed states like Texas face significant fiscal challenges. In a Texas Public Policy Foundation report titled “The Real Texas Budget,” TPPF researchers found an incomplete comparison in state spending data published by the Legislative Budget Board, the state’s official keeper of budget information. According to the report’s findings, the Texas budget – when adjusting for moving patient income to higher education-related facilities off-budget and the projected underfunded Medicaid amount – actually increased by nine percent in the current 2014-2015 biennium from the previous, as opposed to the more modest five percent increase advertised by the state’s official scorekeeper.

Another TPPF report titled “The Conservative Texas Budget,” outlines a series of policy recommendations and reforms to rectify Texas’s overspending problem that, while not as bad as that of some states, is still a major problem. One of those reforms, the institution of clear and achievable spending limits, is the best step that lawmakers could take to protect Texas taxpayers.

I also write today to urge you to rid Texas of the margin tax during the 2015 legislative session. Legislation was recently filed by Sen. Craig Estes that would do just that. The Lone Star State has been a model for other states on numerous matters of governance, and for good reason, but the margin tax is the one major blight on the state’s otherwise stellar business tax climate and now is the perfect time to unlock the state’s full economic potential by repealing this misguided tax.

The margin tax reduces the job-creating capacity of Texas businesses and does so in an incredibly onerous way at that. As the Texas chapter of the National Federation of Independent Businesses put it, the margin tax is "crippling the small and mid-sized businesses” throughout the state. In addition to the harm it does to employers, economists of all political stripes agree that it is one of the worst ways to raise revenue. Professor John Mikesell, an expert in public finance at Indiana University, has described the margin tax as a "badly designed business profits tax...combin[ing] all the problems of minimum income taxation in general—excess compliance and administrative cost, penalization of the unsuccessful business, undesirable incentive impacts, doubtful equity basis—with those of taxation according to gross receipts."

The tax is so complex – it applies variably to different industries and types of businesses – that the costs to comply with this levy for some employers are actually greater than their tax liability. One of the more egregious aspects of the margin tax is that it applies to companies without regard as to whether a profit was generated, meaning that businesses that lost money can still end up having a margin tax liability.

Other states are eager to compete with Texas for jobs and the state stands to fall behind if the margin tax is not repealed. In fact, a number of states have passed tax reform in recent years that seeks to make them more competitive with Texas, and over a dozen are set to pursue such tax reform in 2015. It’s important for Texas lawmakers to not rest on their laurels. In order to stay ahead of states that wish to entice employers away from Texas, it would behoove legislators to repeal, or begin phasing out, the margin tax in 2015. It’s time to eliminate this unnecessary impediment to private sector growth and job creation. It’s also time to right the unsustainable trajectory of state spending, which can be accomplished with a robust spending cap, like the one proposed by TPPF.

Americans for Tax Reform will continue to follow these issues closely throughout session and will be educating your constituents as to how you vote on these important matters. If you have any questions, please contact Patrick Gleason, ATR’s director of state affairs, at (202) 785-0266 or pgleason@atr.org.

 

Onward,

Grover Norquist

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Republicans Win the Maryland Governor's Race by Focusing on Taxes, Fees, and Regulations

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Posted by Damien Salamacha on Thursday, November 6th, 2014, 11:42 AM PERMALINK

Republican Larry Hogan's victory over Lt. Gov. Anthony G. Brown, in the Maryland Governor race, was one of the most stunning political upsets this election cycle.  Maryland is a state in which Democrats hold a 2-to-1 advantage in voter registration, super-majorities in the state legislature, and all but one congressional seat. 

A large part of Hogan’s success came from drawing in the many Maryland voters who have grown tired of Gov. Martin O’Malley’s tax increases and out-of-control spending polices.  Gov. O’Malley currently has a 41 percent approval rating in Maryland, which is an eight-year low according to a recent poll.  While Gov. O’Malley was not on the ballot, his policies over the past eight years were through his Lt. Gov. Anthony Brown. 

Hogan ran a disciplined race, focusing his campaign on taxes and the economy while also hammering home the negative impact that Gov. O’Malley’s policies have had over the past eight years.  It was no surprise that when Americans for Tax Reform previously compiled all of the state tax increases enacted under Democrat governors since 2011, Gov. O’Malley was the second biggest tax hiker, having raised taxes on Maryland residents by over 3 billion since 2011, and more than 11 billion since 2008.  The only governor to have raised more taxes was Gov. Pat Quinn of Illinois, another deep-blue state, who lost his re-election race to Republican Bruce Rauner.   

Delivering a strong message focused on lower taxes and increased economic freedom seems to have resonated with voters – even in traditionally blue states – during the 2014 election cycle.  Low-tax, limited-government Republicans defeated entrenched liberal Democrats in traditionally blue states like Massachusetts, Maine, and Illinois. Meanwhile Republican governors Sam Brownback of Kansas and Scott Walker of Wisconsin won re-election in their respective states after engaging in tax reform during their first terms.  November 4 was a good night for Maryland taxpayers as well as taxpayers across the country. 

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Grover Norquist and Will Upton Discuss The Most Important Election This November

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Posted by Damien Salamacha on Thursday, October 23rd, 2014, 12:20 PM PERMALINK

ATR President Grover Norquist sat down with Will Upton as part of ATR’s podcast series to discuss the gubernatorial race in Kansas. Grover has taken to calling Kansas’ gubernatorial election “the most important race in the 2014 cycle”. According to Grover, “Should Gov. Brownback get re-elected, this will send a signal to the 24 Republican governors that anyone of them could pass a similar law that gradually phases out the income tax.” 

Listen to the podcast to get a full in-depth analysis.

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New Cato Institute Report Grades Governors on Fiscal Policy

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Posted by Damien Salamacha on Tuesday, October 14th, 2014, 11:03 AM PERMALINK

The Cato Institute released their biannual Fiscal Policy Report Card on America’s Governors 2014, which examines state budget actions since 2012. From a limited-government perspective the report grades America’s governors based on their fiscal policies and actions.  Governors that were able to reduce spending and taxes the most received the highest grades, while governors that increased spending and taxation received the lowest grades. 

One of the four governors to receive an “A” was Governor Sam Brownback of Kansas.  The report highlighted major tax reform initiated by Gov. Brownback in 2012 as a key factor in earning him a high rating.  Through tax reform in Kansas the number of tax brackets were reduced from three to two, while the top rate was cut from 6.45 to 4.9 percent.  The reform also increased standard deductions, reduced taxes on small businesses, and repealed numerous narrow tax breaks.  Additionally, Gov. Brownback approved changes in 2013 that included further income tax cuts and broadened the income tax base.  Aside from the tax reform, the report also noted the governor’s ability to be frugal with budgeting which has resulted in only minimal increases in general spending.

Also among the governors earning an “A” was Governor Pat McCrory of North Carolina. One factor that lead to Gov. McCrory receiving a top grade was:  a major tax reform package in 2013 which replaced three individual income tax rates (6.0, 7.0 and 7.75) with a single rate of 5.8 percent falling to 5.75 percent in 2015.  In addition to this, McCrory also helped cut the corporate tax rate, repeal the estate tax, and broadened the sales tax base.  The report noted that Gov. McCrory has been able to keep spending under control, while recently enacting further tax cuts for 2014. 

Also earning an “A” was Governor Paul LePage of Maine.  The factors that lead to Gov. LePage receiving the top grade were: his continued support for further tax and spending reforms, the relative consistency of general funding during the past three years, a reduction in state government employment, and the cost-cutting reforms to welfare and healthcare programs.  Also noted was Gov. LePage’s use of the veto to stop tax hikes, which were ultimately overridden by the state legislature.  This year LePage has proposed matching $100 million in new tax cuts with $100 million in spending cuts.

A governor who did not fare well in the report was Colorado Governor John Hickenlooper.  Some of the factors that earned him a failing grade were:  general funding increases from $7.2 billion in 2012 to a proposed $9.2 billion in 2015 and proposed spending increases averaging 6 percent for the past three years.   His recent budget which included a 15 percent spending increase for higher education as well as new spending on corporate welfare, and an increase in state government employment by 16 percent over the past three years.  In addition, Gov. Hickenlooper advocated for a large personal income tax increase that was on the ballot in 2013 which would have replaced Colorado’s flat 4.63 percent income tax with a two-rate structure of 5.0 and 5.9 percent.  Luckily the amendment did not pass.

Three of the governors previously mentioned are up for re-election and are currently in close races.  Kansas Governor Brownback is currently tied with his challenger Paul Davis according to the Real Clear Politics average.  President of Americans for Tax Reform Grover Norquist has called Kansas’ gubernatorial election “the most important race in the 2014 cycle”.  While Real Clear Politics has Maine Gov. LePage leading by a half a point over his challenger Mick Michaud, and Governor Hickenlooper leading by 2.5 points over his challenger Bob Beauprez in Colorado.  North Carolina Governor Pat McCrory is not up for re-election this year.

With the release of the Cato Institute’s biannual report, taxpayers will be able to see which governors are fiscally responsible and which are addicted to taxing and spending.  Governors Brownback, LePage, and McCrory earned high marks for their ability to engage in real reform by lowering taxation and spending.  Alternatively, Governor Hickenlooper has received the lowest grade possible due to his taxing and spending policies. 

 


DC Tax Reform to Take Effect

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Posted by Damien Salamacha on Thursday, October 2nd, 2014, 2:19 PM PERMALINK

In July, the DC Council approved tax reform based on recommendations made by the District of Columbia Tax Revision Commission.  The shortcomings listed by the commission on DC’s tax code were the relatively large share of income that DC’s middle class had to pay, the high business taxes, and a narrow tax base.  Acting on the advice of the commission, the DC Council enacted tax reform that cuts income and business taxes, expands the low-income tax credit, and broadens the tax base through the sales tax. 

The base broadening aspects of the tax reform became effective yesterday.  Now, previously exempt items such as bottled water delivery, storage rentals and leases, carpet and upholstery cleaning, car washes, bowling alleys and billiard parlors, and among the most controversial, health club and tanning services, will be affected by the 5.75 percent sales tax.  It is important to note that no special fitness tax was included in the tax reform.  Rather, the local sales tax is now simply applied to yoga and gym classes, along with other previously exempt services.  The income tax cut amount will far exceed the higher sales tax collection that this base broadening measure will generate. 

The rest of DC’s tax reform will take effect in 2015. According to the Tax Foundation, here is what to expect from the rest of the reform:

  • Middle-income taxpayers (those between $40,000 and $350,000) will see their tax rate drop from 8.5 percent to 7 percent next year, then 6.5 percent the year after that. Those earning up to $1 million will see their tax rate drop from 8.95 percent to 8.75 percent.
  • All taxpayers will see more generous standard deductions and personal exemptions, as they will be increased to match federal levels.
  • Childless low-income workers will see a larger Earned Income Tax Credit (EITC), from 40 percent of the federal credit to 100 percent of the federal credit.
  • The District’s hefty business tax will drop from the current 9.975 percent to 9.4 percent (2015), 9 percent (2016-17), 8.5 percent (2018), and then to 8.25 percent (2019), and the District will adopt single sales factor apportionment.
  • The estate tax threshold will be recoupled to federal laws

Americans for Tax Reform has previously applauded the DC City Council for restoring this much needed tax relief for District residents.  By lowering the rate of taxation for both businesses and middle-income earners DC residents can finally get some much needed relief.  This will surely boost economic activity by leaving more money in the pockets of those that have earned it.  DC is moving in the right direction by lowering tax rates on individuals and business, as well as by broadening the tax base.  It is nice to see actual tax reform occurring in our nation’s capital.

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