Grover Norquist

Norquist: Tax Cuts are As American as July 4, 1776

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Posted by Grover Norquist on Tuesday, July 3rd, 2018, 3:58 PM PERMALINK

Taxes are too high in America. They will always be too high for a people jealous of their freedoms and who understand how the nation built its prosperity. But we can clearly see on this July 4, 2018, that the nation is moving towards the America envisioned by the Boston Tea Party revolutionaries and away from the sclerotic excessive government that has built up like barnacles on the side of a ship.

The United States of America was born of a tax revolt. 

Some place the start of that revolution with the Boston Tea Party of December 16, 1773 when Massachusetts colonists dumped British tea into Boston Harbor in the world’s most famous tax revolt.

But America’s opposition to taxes in all sizes, shapes and forms played a key role in the colonies long before Samuel Adams and his Sons of Liberty.

The 1629 Charter of Massachusetts Bay granted settlers a seven-year exemption from customs taxes on all trade to and from Britain and a 21-year exemption from all other taxes. In 1621, the Dutch government granted the Dutch West India Company an eight-year exemption from all trade duties between New Amsterdam/New York and the mother country. Swedish settlers in Delaware were offered a 10-year tax exemption. America, in other words, was in part created as a tax haven populated with immigrants moving from high-tax nations to low-tax colonies.

Low-taxed Pennsylvania was founded by William Penn, the father of American religious liberty, who also notably refused the Pennsylvania General Assembly’s kind offer to establish an import and export tax for his personal benefit.

Yes, people everywhere have complained about the tax burden, but Americans have shown themselves more jealous of their liberty and freedom from oppressive taxation than others.

In 1714, British citizens in Great Britain were paying on a per capita basis 10 times as much in taxes as the average "American" in the 13 colonies, though some colonies had higher taxes than others. Britons, for example, paid 5.4 times as much in taxes as taxpayers in Massachusetts, 18 times as much as Connecticut Yankees, 6.3 times as much as New Yorkers, 15.5 times as much as Virginians; and 35.8 times as much as Pennsylvanians. But it was the “undertaxed” colonists who revolted, not Londoners.

Taxation in the colonies consisted of property taxes, poll taxes on men over 18, excise taxes, and forced labor contributions of a few days a month to build roads and assume other "public functions" such as constable, assessor, or "hog reeve" ("an officer charged with the prevention or appraising of damages by stray swine," according to the Oxford English Dictionary).

The tendency of the state to grow at the expense of liberty started early, even in the New World.

Massachusetts imposed an embryonic income tax in 1634 in the form of a "faculty" tax. In 1643, Alvin Rabushka writes in Taxation in Colonial America, "assessors were appointed to rate inhabitants on their estates and their faculties, which included personal abilities." One notes with some envy that the tax came to about 1 percent of what we might call income.

Connecticut, anticipating New York Mayor Michael Bloomberg’s nanny-state tendencies, imposed sumptuary laws in 1676 that taxed any person who wore silk ribbons, gold or silver lace, or gold or silver buttons.

By 1775, the British government was consuming one-fifth of its citizens’ GDP, while New Englanders were only paying between 1 and 2 percent of their income in taxes. British citizens were also weighed down with a national debt piled up by years of worldwide warfare that amounted to £15 for each of the crown’s eight million subjects, while American local and colonial governments were almost debt-free. Against this backdrop, Americans watched as the British monarchy attempted to raise taxes on the colonists to pay down its war debt and pay for the 10,000 British soldiers barracked in the colonies.

Surely, the Americans would not begrudge the King a demand that they pay increased taxes for all the benefits of being part of the British empire.

The first effort was The Sugar Act of 1764, a rewrite of the Plantation Duty of 1673, was designed to raise revenue rather than force the colonies to trade with England alone, and fell mostly on molasses, sugar, and Madeira wine. The colonies reacted particularly poorly to the imposition of the Stamp Act of 1765, which was an effort to impose a direct tax on the colonies rather than tax imports and exports. Benjamin Franklin and others argued to the British government that while the colonies did not object to tariffs, they did oppose direct domestic "taxation without representation."

The British parliament got the message, repealing the Stamp Act and responding with the Townshend Acts of 1767, which imposed duties on 72 items, including tea (the changes actually reduced taxes on tea originally imported from British colonies to combat the smuggling of Dutch tea to America). Although the British repealed most of these duties in 1770, they maintained the specific tax on tea to make the point that the crown could tax when it chose to do so. By then, however, the American colonists had stopped distinguishing between domestic and trade taxes and started opposing all taxation and control by Britain, setting the stage for the revolution.

The bottom line: American colonists were both paid more and taxed less than the British. American taxes, in fact, were low and going lower, but the very idea that they had been raised and could be raised again by a distant power was enough to send Americans into the streets to engage in civil disobedience. Regime change followed the tax revolt.

And 245 years later, what has changed?

Americans are still wealthier and taxed less than the citizens of other nations. By some measures, federal taxes are lower today than they were in the past: Today’s top marginal tax rate for individuals is 37 percent, which is higher than Ronald Reagan’s 28 percent but lower than Dwight Eisenhower’s 90 percent. State and local taxes, meanwhile, have undoubtedly been trending upward.

The modern “Tea Party” movement that elected a Republican House and Senate during Barack Obama’s presidency responded to three threats.

First, Obama unleased a $878 spending “stimulus” package and increased total spending  another $1 trillion over ten years.

Second, Obama demanded the passage of Obamacare with 20 new and higher taxes. Most of these taxes directly hit the middle class.

Third, Obama spent the rest of his presidency demanding more than $1 trillion in higher taxes over the next decade.

Higher taxes brought a Republican House, (2010) Senate (2014) and Presidency (2016) just as they had flipped the House and Senate in 1994 following the Bill Clinton Spending stimulus bill and his 1993  tax hike on energy and incomes.

Americans in 1994 and 2010 sounded a great deal like John Adams denouncing the Sugar Act for imposing "enormous taxes, burdensome taxes, oppressive, ruinous, intolerable taxes."

This last December Congress passed and the President signed a roll back of many of the taxes imposed by Clinton and Obama. The corporate income tax, then at 35% the highest in the world, was dropped to 21%. Every American saw their marginal tax rate fall. The 28 million small businesses were targeted for further rate reduction. The Death Tax imposed to pay for the Civil War (and repealed), the Spanish American War (and repealed) and World War One (never repealed) was dramatically cut back. The Alternative Minimum Tax (AMT) put in to punish 155 individual taxpayers had grown to hit more than 4.5 million Americans was reduced to harassing 200,000.

Taxes are too high in America. They will always be too high for a people jealous of their freedoms and who understand how the nation built its prosperity.

But we can clearly see on this July 4, 2018, that the nation is moving towards the America envisioned by the Boston Tea Party revolutionaries and away from the sclerotic excessive government that has built up like barnacles on the side of a ship.

Photo Credit: Josh Meek

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Congress Needs To Act Soon To Stop the Imminent Obamacare Health Insurance Tax

Posted by Grover Norquist on Monday, October 30th, 2017, 8:00 AM PERMALINK

If Republicans don’t act quickly, they will allow a tax increase to go into effect under their watch. Starting January 1st, 2018, the Obamacare health insurance tax will go into effect harming small businesses that provide healthcare to their employees, middle class families through higher premiums, and seniors that purchase Medicare advantage plans.

If the Health Insurance tax is allowed to go into effect next year, it will total $14.3 billion in higher taxes in 2018, and roughly $150 billion over the next decade.

Across the country, the health insurance tax hits 11 million households that purchase health care through the individual insurance market. This tax also hits 23 million households covered through their employers, and 1.7 million small businesses. Half of this tax is paid by those earning less than $50,000 a year. According to research by the American Action Forum, this tax is responsible for increasing premiums by an average of $5,000 per family over a decade.

According to the National Federation of Independent Businesses, the health insurance tax has cost an estimated 286,000 small business jobs and $33 billion in lost sales.

Clearly, this tax would be devastating on small businesses, middle class families, and seniors.

The last thing taxpayers need is another Obamacare tax to go into effect, and 36 conservative groups and activists recently told lawmakers that they must act so to prevent the health insurance tax from harming Americans. 

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Don't Screw Up Tax Reform, or the Economy Won't Grow in Time for the Midterms

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Posted by Grover Norquist on Tuesday, October 17th, 2017, 3:49 PM PERMALINK

Editor’s Note: This article originally appeared in the Washington Examiner.

It is hard to screw up a tax cut.

But we've done it before. The Reagan tax cut of 1981 was supposed to be a 33 percent across-the-board tax cut. The Democratic Party held a majority in the House, so that rate reduction was reduced to 25 percent. Not good, but understandable. A compromise. But the real damage was that the 25 percent cut was delayed. There was a 5 percent rate reduction in 1981, a 10 percent rate reduction in 1982, and then a final 10 percent rate reduction in 1983.

Why did this matter? The economic growth driven by a 25 percent rate reduction began in Jan. 1983. Four million jobs were created that year, 1 million in Oct. 1983 alone. In 1984, Reagan won a smashing victory in 49 states – missing only Walter Mondale's home state of Minnesota.


But there was an election in 1982, and the GOP got clobbered. Why?

Because by delaying the full tax cut, the economy was not growing in 1982 – oddly enough the 1982 election was held in November 1982.

Now, we have an election scheduled for Nov. 2018. There is careless talk among some staffers drafting the tax reform bill in the House that they might "phase in" (read: delay) the full reduction of the burdensome corporate tax rate from 35 percent to 20 percent.

Tax cuts taking effect immediately would supercharge the economy. If businesses know that by delaying recognizing earnings for a year or two (or three) they will face lower tax rates, they will react accordingly and delay new investment, jobs, and earnings.

Sure, strong growth three years from now would be nice. But strong growth in early 2018 so that even MSNBC "reporters" will have to mention new and additional jobs before the Nov. 2018 election would be more than nice.

If you cannot fit all the tax cuts you want into 10 years, then frontload them. That is what Republicans announced they will do with full and immediate expensing. It is to last five years, but start immediately so that we get the strong growth before the 2018, 2020, and 2022 elections. By then, it will be obvious to everyone – except experts at the Joint Tax Committee – that expensing should be made permanent. That is what happened with the research and development tax credit.

Frontload tax cuts. Speed up recovery and growth. Win the next election. Cut taxes.


Photo Credit: Gage Skidmore

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Grover Norquist: Tax Reform is a Must Win for Republicans (and it really could happen)

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Posted by Grover Norquist on Monday, October 9th, 2017, 2:10 PM PERMALINK

This article originally appeared on Fox News

Tax reform is the one legislative victory Republicans must have if they are to hold the House and pick up five to seven Senate seats in November 2018. And tax reform is also the one legislative victory that looks increasingly likely.

Tax reform is a must-win for two reasons. First, to kick-start strong economic growth and job creation. Second, to demonstrate that President Trump and the Republicans in Congress can "get things done."  

If there had not been a zillion shiny things and tweets distracting us, it should have been obvious last year that America would not elect a Democrat to the presidency for the third time, as a result of the failed economic policies of President Obama and congressional Democrats.

The Democratic failures include higher taxes on everyone, (including eight ObamaCare taxes directly on the middle class), an explosion of regulatory costs, a new unending entitlement and lousy job numbers.

Even coming out of a deep recession, the Obama administration averaged growth of only 2 percent a year. President Reagan battled recession and inflation and managed 4 percent growth, creating 4 million jobs in the first year of his recovery.

In the 2016 election, Hillary Clinton promised $1 trillion in even higher taxes. She said she would not reduce tax rates for anyone and for any business, and hinted at other new and different taxes yet to come.

Donald Trump was elected president because he promised jobs, jobs, jobs. He and the GOP Congress know they have to deliver in such a way that even MSNBC will have to note from time to time that in the first six months of 2018 the economy is in fact demonstrably stronger.

The good news is that the emerging tax reform and reduction legislation will deliver a strong boost to the creation of jobs, income and wealth. The federal tax on businesses will be reduced from 35 percent (fourth-highest in the world), to roughly 20 percent, just below the developed world average. China is at 25 percent. 

Long depreciation schedules will be replaced by full and immediate business expensing – at least for a few years. And history suggests that any such pro-growth measure will be extended again and again (just as the research and development tax credit was) and eventually be made permanent.

Today there are $2.6 trillion earned by American companies overseas and stuck there because of stupid federal tax policy. Tax reform will bring those dollars back in a cascade of real investment in America. President Obama's "stimulus" was run through congressional earmarks and city politicians. It left no noticeable permanent job gains.

The biggest winners of tax reform will be the millions of Americans who enter or return to the job market when we unleash America's business investment through lower taxes, expensing and repatriation.  

Middle-income Americans will also see their personal tax rates fall and the standard deduction for an individual will jump from $6,000 to $12,000, and for a married couple from $12,000 to $24,000. Good luck to the Democrats explaining to millions of middle-class Americans who will see pay raises from these changes that they just benefit "the rich."

Finally, passing tax reform without a single Democratic vote will remind Americans that there are two teams in Washington. One works for government and the other works for them. Democrats refer to tax hikes as income. Republicans know taxes are a cost imposed on American families. Pick your team.

The Republican plan had been to pass ObamaCare repeal and reform, and then move on to tax reform and reduction – and run on those two victories. That may or may not happen. 

ObamaCare repeal may fail if three Republican senators put their personal pique and desire for approbation by the media ahead of their constituents, who are damaged by ObamaCare's ever-higher premiums and the 20 ObamaCare taxes.

Republicans must plan on asking Americans to judge them in 2018 on one big victory, not the expected two. Every Republican member of Congress knows that for policy and political reasons, the tax reform and reduction bill this fall will have to be as large, deep and pro-growth as possible.

 Grover Norquist is president of Americans for Tax Reform. Follow him on Twitter @GroverNorquist.

Photo Credit: Kevin Simmons

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Why the Trump Tax Cut is Necessary

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Posted by Grover Norquist on Monday, October 9th, 2017, 1:47 PM PERMALINK

This article originally appeared in The National Interest

The battle underway in Washington to enact pro-growth tax reform is itself a perfect storm. Four questions will be answered. Competing visions of the world will clash and America may change its economic future and define its national policy for years to come. Or not. The stakes are high. And this political battle has a deadline.

It should be easy to cut taxes with a Republican House, a Republican Senate and Donald Trump elected both as a Republican and as the candidate of pro-growth tax cuts. George W. Bush had a Senate majority (fifty-one) slimmer than Mitch McConnell’s fifty-two, and a House majority of 229 compared to Paul Ryan’s 240. The 2001 tax cut was signed into law on June 7, 2001. Reagan had fifty-three Republican Senators and a fiercely partisan 244-Democrat majority in the House. Reagan’s across the board 25 percent tax rate reduction was signed at the Western White House on August 13, 1981.

It is now late September and the optimists predict a tax bill will be signed by Trump in late November, early December.

Why the delay in unveiling and passing a tax cut? Trump’s tax cut plan was as clearly stated and as often repeated in 2016 as George Bush was in 2000 and Reagan was in 1980. It was a central part of the campaign. Trump called for reducing the corporate income tax from 35 percent—the fourth highest business tax rate in the world (United Arab Emirates, Comoros and Puerto Rico have higher rates.) Trump’s recommended business income tax rate of 15 percent was below the 25 percent House Republicans had earlier supported and Paul Ryan rewrote his plan to move to a 20 percent rate to be closer to Trump’s number.

American firms today pay, on average, 19 percent higher business tax rates than our competitors overseas. China’s business tax is 25 percent, Irelands is 12.5 percent. This is the U.S. government handicapping American businesses and kneecapping American workers. Worse, the United States has a worldwide tax system—unlike almost all the rest of the world. The federal government taxes American businesses and citizens not just on the income they earn here in the United States, but also on any earnings overseas. The French government taxes French people and French companies earnings in France. But if a French firm or citizen earned money in Baltimore, then the firm or individual would pay U.S. taxes and then be free to repatriate all earnings without further interference by France. This means that an American firm that does business internationally is worth more when purchased by a Canadian firm. When Burger King was bought by Canadian firm Restaurant Brands International, it had the same number of employees, the same product, the same intellectual property—but lower taxes because earnings around the world are taxed one time in the country in which they are earned. Not once overseas and again by America.

The Republican and Trump plans all move to a territorial system. There would be a one-time hit on money now overseas—some suggest 3 percent on fixed assets and 8 percent on cash—that all future repatriations experience.

Trump joined House and Senate Republicans in demanding the abolition of the Death Tax—originally enacted to pay for the Civil War. Trump also railed against the Alternative Minimum Tax (AMT), which was put in the tax code in 1969 to ensnare some 115 high-net-worth American who escaped federal income taxes by investing in tax free municipal bonds. Abolition of both the Death Tax and AMT have been advocated by Republicans for years.

Trump and the House Republicans endorsed the idea of moving to full and immediate expensing of business investment in plant and equipment, which will replace long depreciation schedules. This dramatically reduces the cost of new investments, leading to a substantial increase in GDP, wages and employment.

Trump’s personal income tax rate reductions were largely borrowed from Paul Ryan’s plan to reduce the number of tax rates from seven to three. The top rate would fall from 39.5 percent to 35 percent. The bottom rate from 10 percent to effectively 0 percent due to a larger Standard Deduction. And the Standard Deduction for an individual would be increased from $6,000 to $12,000, and for a married couple from $12,000 to $24,000. That means that 95 percent of Americans would no longer have to itemize deductions. A significant simplification.

So what is the delay?

There are two ways to pass a tax cut. One can garner a simple majority of the House and sixty or more votes in the Senate and cut any taxes by any amount one wishes permanently. But Republicans have only 52 senators. They would need at least eight Democrat votes in the U.S. Senate to pass a large permanent tax cut. And on August 1, 2017, forty-five of the forty-eight senators wrote a letter to the present offering to help pass tax reform as long as the reform, one, was not a net tax cut, two, did not cut taxes for all Americans—they wanted to discriminate against high-income earners, and three, the legislation was not enacted through budget reconciliation.

The idea that there are eight Senate Democrats willing to vote to reduce taxes is a fantasy. The issue that most divides the modern Republican and Democrat parties is the tax issue. Yes, John F. Kennedy pushed a 22 percent across-the-board tax cut in the 1960s. But by 1980, most Democrats in the House voted against a 25 percent across-the-board tax cut.

Hillary Clinton ran for president in 2016 as the more moderate Democrat candidate for president, and she promised one trillion in higher taxes over the next decade and did not propose a single tax rate reduction for any American business or citizen. No Democrat has endorsed the GOP tax reforms this year

Thus, the only path to tax reduction is to use the reconciliation process, which allows a single majority in the Senate to pass a budget that includes tax cuts. The rules for reconciliation process is that the tax cuts can be of any size inside the “budget window”—arbitrarily set at ten years. It could be any number larger than five. Outside the budget window, in years eleven to fifty following passage, the only tax reduction that would be “permanent” would have to be offset dollar for dollar by reduction in entitlements (hence permanent cuts), tax increases, or increased revenue projections due to pro-growth policies in the bill scored by the Joint Committee on Taxation.

Since there are limits to how much growth the Joint Committee on Taxation will attribute to tax reform there are limits to how much tax cuts can be made permanent. In the past the Congressional Budget Office has pointed out that if the U.S. economy grew at four percent a year, instead of two percent a year for one full decade the federal tax revenue would be increased by $6 trillion over those ten years. Growth is a powerful generator of more tax revenue. In the past, the Joint Committee on Taxation did not consider the dynamic effects of tax changes. But that has proved embarrassing. The 1993 Bush tax cut in the tax rate on dividends and capital gains generated more revenue between 1993 and 1997 to Washington than was predicted without the tax cuts—i.e. that tax cut actually paid for itself.

So the size of the permanent tax cuts is limited to how much revenue can be raised by eliminating tax credits and deductions—for instance, eliminating the tax deductibility of state and local taxes would raise $1.7 trillion over a decade—and what growth in revenue might be projected by the Joint Committee on Taxation from lower rates and expensing. There is a third way to increase the amount of permanent tax cuts beyond the ten-year window and that is for congress to use “present policy” rather than “present law” in projecting future revenue. Assuming all tax credits that are planned to expire will continue frees us more space for permanent tax cuts that if one employed “present law” and assumed they would indeed lapse.

There is no limit on how many tax cuts can be enacted for the next ten years and how deep those tax cuts can be. The only limit is on how many and much of those tax cuts can be made permanent. That is enough to keep the House, Senate, White House and affected interests busy through November.

So, can the House leadership convince the “Freedom Caucus” to avoid the train wreck of Obamacare repeal and this time avoid making the perfect the enemy of the good. Can they vote for a “less than perfect” tax bill? Can anyone convince John McCain to set aside personal pique and vote for a Trump-endorsed tax bill? One remembers that McCain voted against both the successful Bush tax cuts. Can Trump avoid the siren call of the media to engage in endless and fruitless negotiations with Democrats to water down a bill they will not vote for under any circumstances? Will the Joint Committee on Taxation provide a reasonable dynamic score that allows more of the tax reductions to be permanent?

We shall see.

Photo Credit: Gage Skidmore

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The Promised Land of Trump's Tax Plan?

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Posted by Grover Norquist on Friday, October 6th, 2017, 9:26 AM PERMALINK

This article originally appeared on OZY

The White House and congressional Republicans unveiled their unified framework for tax reform they expect to pass before the end of 2017. So will tax reform meet the same fate as Obamacare repeal — failing because three Republican senators break rank? Is this just a replay of Reagan’s supply-side 25 percent across-the-board reduction in marginal tax rates? Or is it closer to the bipartisan 1986 Tax Reform Act that was revenue neutral — not a net tax cut — and simplified the code by culling deductions and credits and reducing individual tax rates?


The outline presented last week by the White House does call for lower marginal tax rates for all Americans who pay taxes. The seven rates — from 10 to 39.6 percent — will be reduced to four: zero, 12, 25 and 35 percent. The standard deduction will double from $6,000 to $12,000 for an individual and from $12,000 to $24,000 for married couples. Your first $24,000 is taxed at the zero rate, and the larger standard deduction means that a whopping 95 percent of Americans will not have to itemize, compared to the third who itemize today.


Forty-five of the 48 Democrat senators wrote a letter to the GOP — before the framework was unveiled — saying they would oppose any tax reform that actually cut taxes, that cut tax rates for all Americans or that did not receive at least eight Democrat Senate votes. That was a not-too-subtle way of saying they would oppose any Republican tax reform.

And they will. But that was expected. No one has ever assumed a single Democrat vote. The Democrat opposition today is the same as its opposition to all tax cuts — they say they benefit the rich. So look out for “studies” saying the Trump/GOP tax cut will benefit high-income earners. Since the plan is only in outline form, much of these early assertions are based on assumptions by critics. But the fact is that this battle will be won or lost by winning (or failing to win) 50 Senate Republicans on the benefits of growth — not by asking for Democrat votes.


So how will this stack up against the 2.2 percent average of the Obama recovery, the 3 percent average growth after World War II or the 4.8 percent rate following the Reagan tax cut? The plan claims to boost growth with three new approaches. First, the corporate rate will drop from 35 to 20 percent. At 35 percent, we have the highest business tax rate of all our significant competitors — China’s 25 percent, Russia’s 20 percent and Canada’s 15 percent. Because the corporate capital gains tax rate is the same as the regular corporate rate, reducing the corporate rate from 35 to 20 percent also slashes the capital gains tax rate and is expected to encourage companies to sell trillions of dollars of long-held land and other appreciated assets.

The corporate tax will also shift from a worldwide tax system — we now tax all earnings by American firms both here in the United States and abroad — to one used by most other countries: a territorial system, where each country only taxes economic activity inside its borders. Moving to a territorial system will start with allowing much of the $2.5 trillion to $3.5 trillion in American earnings to return to the United States, paying a one-time hit of perhaps 8 percent on cash, but with all future repatriation being tax-free. Today’s high 35 percent rate and worldwide taxation makes any American multinational firm more valuable if purchased by a foreign company. Hundreds of billions of dollars worth of U.S. firms have moved to or been bought by foreign businesses because of this self-inflicted wound. This change is expected to attract capital from around the globe and end inversions (relocating a firm’s headquarters to a country with lower taxes) and tax-driven purchases of U.S. firms.

The second growth factor? The move from long depreciation schedules for business investment to immediate and full business expensing. Today if you buy a plant and equipment and you expense the cost that year — not depreciating it over 10 or 20 years — it reduces the cost of new investment. Expensing is scheduled as a temporary five-year measure, but everyone understands that expensing would, like the research and development tax credit, be extended and eventually made permanent.

This tax reform is focused on growth through reducing business taxes, rather than the Reagan 1981 focus on reducing high — 70 percent — tax rates on individual income and the 2003 Bush tax cuts that slashed capital gains and dividend taxes paid at the individual level. Trump and the Republicans have added a new twist, focusing on the 30 million Americans who own “pass through” businesses, where they pay individual tax rates on their business earnings. (These are sole proprietorships, partnerships and subchapter S corporations.) The top rate for pass throughs is higher today than the top rate for corporations. These, usually smaller firms, employ half of the U.S. private sector workforce and earn half of American business income; corporations employ and earn the other half. But past tax cuts have ignored this rather large number of businesses. This time the top rate for pass throughs will drop to 25 from 39.6 percent, the same percentage reduction corporations got when their top rate fell from 35 to 20 percent.


Republicans do know how to do one thing: cut taxes. There is a consensus in the GOP on all the major parts of the tax cut — ending the death tax and the Alternative Minimum Tax, reducing rates on all business income, and simplifying and reducing personal taxes. And the business community from Silicon Valley to the Rust Belt manufacturers are strongly in support of lower rates and expensing. One suspects that 30 million small business men and women and their spouses are a heretofore untapped reservoir of support for tax reduction/reform.

The GOP failed to deliver on the repeal of Obamacare. So they will face voters in 2018, not with the double-barreled “we ended Obamacare and cut taxes” slogan but with one visible, measurable accomplishment: tax reform. The incentives are strong to make it big, pro-growth and to have it fully in effect by Jan. 1, 2018, nine months before Election Day on Nov. 6, 2018.

Photo Credit: U.S. Department of Energy

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Republicans Have Come Up With a Tax Plan That Will Work

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Posted by Grover Norquist on Thursday, October 5th, 2017, 5:13 PM PERMALINK

This article originally appeared in the Orange County Register

We have arrived at the tipping point.

The Republican Congress and the White House have announced the framework for reducing and simplifying the federal tax code.

The battle to enact tax reform over the next three months will decide two questions.

One, can America return to her historic annual growth rate of 3 percent plus and leave behind the anemic 2 percent growth rate of the Obama “recovery”? Or not?

The Washington-based pundits have begun proclaiming that 2 percent growth is the “new normal.” China can grow at 7 or 8 percent, but Americans, we are told, must get used to 2 percent growth, the European growth rate befitting a sclerotic welfare state past its prime.

These predictions/assertions would be more depressing if one failed to remember that this is exactly what the very same “experts” announced in the late 1970s when Jimmy Carter’s policies also led to “malaise” and negative growth rates. There were “limits to growth” said all the beautiful people on network television. We should stop trying to grow faster. Limit our hopes for the future and for our children.

And then Reagan cut taxes and growth rates shot up to 4 percent a year and we created 4 million new jobs in 1983 — the first year of the Reagan tax cuts.

The second question we are about to answer is: “Can the thin Republican majorities in the House and Senate combine with the White House to govern against a Democrat Party determined to filibuster and delay any and all Republican successes so they can denounce the Republicans as incapable of governing?”

The good news for the country is that the answer to both questions is a resounding “yes.”

The tax plan will pass by mid-December and it is powerful enough to kick-start the present economy that has been damaged and weakened by eight years of tax hikes, “stimulus” spending, the doubling of the national debt, swelling unfunded liabilities and new and expensive regulations.

The tax reform plan outlined by the Big Six — House and Senate leaders and Treasury Secretary Steven Mnuchin and White House economic advisor Gary Cohn — has three major drivers of economic growth.

First, it reduces the business tax, the corporate income tax rate of 35 percent down to 20 percent. Our present corporate income tax rate of 35 percent is higher than any other major nation. China has a 25 percent tax rate. How did we expect to create jobs and opportunities here at home weighed down by taxes higher than a communist country? Russia’s top corporate rate is 20 percent. Canada’s is 15 percent (federal rate). The European average is just above 20 percent. This rate cut makes America competitive in the world once again.

President Trump does remind us that he wanted — and still wants — a top rate of 15 percent. While I hope he is successful in driving the rate down to 15 percent during his presidency, 20 percent is a very, very good start.

Tax rates on business income paid by the 30 million smaller “pass through” businesses that pay taxes through the personal income tax code — sole proprietorships, partnerships, Subchapter S corporations — will see their top rate fall from 40 percent to 25 percent.

Half of business income is earned by larger corporations, and half is earned by “pass through” businesses. Half of Americans work for a major corporation and half for smaller “pass-throughs.”

Finally these smaller firms will see their taxes reduced.

The second big bang for job creation will be moving from long depreciation schedules for new business investment in plant and equipment to full and immediate business expensing. Buy a million dollars of new equipment to make your employees more productive and you expense that million — it does not count as taxable income because you just spent it. This greatly reduces the cost of new investment.

The Republican plan introduces full expensing for five years. Then it goes away like Cinderella’s stagecoach. But I will bet you dollars to donuts that the powerful pro-investment, pro-growth effects of full and immediate expensing will convince Congress to extend the expensing provision just as Congress repeatedly extended the Research and Development Tax Credit. Eventually expensing, like the R&D tax credit, will be made permanent.

Third, tax reform will allow businesses that have earned and parked more than $2.5 trillion overseas to bring those dollars back without the stiff tax penalty demanded by present law. In the future all American earnings abroad would be taxed once by the overseas nation and then they could repatriate their earnings without penalty. One or two trillion dollars would return to the United States next year bringing reductions in debt, new investments, jobs and growth. A real stimulus program, not one run by politicians, but by men and women who earned that money in the first place.

Increasing the cash flow of every major company in America, repatriating trillions in overseas earnings back to the U.S. and lifting the tax burden on 30 million smaller businesses is a recipe for growth, new jobs and wealth creation.

But wait. There is more.

On the individual side the personal income tax standard deduction will increase from $6,000 to $12,000 and for married couples increase from $12,000 to $24,000. The first $24,000 of income for a married couple is free of federal income tax. The tax rate is zero.

The plan collapses the present seven rates that go as high as 39.6 percent down to four rates: Zero, 12 percent, 25 percent and 35 percent. The present 10 percent rate moves to zero.

The death tax is finally put to rest. Those foolish enough to die will no longer be taxed.

The Alternative Minimum Tax — invented by Ted Kennedy and Richard Nixon in 1969 — was supposed to hit 115 millionaires who paid little in taxes and now catches millions in its web. This tax is eliminated.

So who benefits most from the tax cut?

Answer: Those Americans who could not find a job during the Obama years. The unemployed and underemployed. The biggest winners will be the millions of Americans who enter the work force for the first time in their lives or re-enter after giving up during the lean years.

But can the Republicans pass tax reform? It will be a large bill with many moving parts. They came one vote short in the Senate of repealing much of Obamacare. Might that happen again?

The good news is that cutting taxes is a consensus issue in the modern Republican Party. Ronald Reagan did that. It took time. The Taxpayer Protection Pledge shared with all candidates by Americans for Tax Reform has been signed by more than 90 percent of congressional Republicans. Republicans will not raise your taxes (though they may invade small countries they cannot pronounce) and they will cut taxes when possible.

The House will hold hearings and put the outline into legislative language by the end of October. The Senate will go to work and put together its version by Thanksgiving. And then the two versions go to conference and a final bill will be signed by President Trump before Christmas.

The politics of this three-month battle to cut taxes will define the 2018 elections. Democrats will now spend three months attacking the very idea of reducing taxes on 30 million small businessmen and women. They vote. They have spouses and families. Every week will bring an announcement by the Fortune 500 companies about how much money they are bringing back to the United States and how they will invest it. All Americans who pay taxes will see their take-home pay increase, their rates reduced and their standard deduction doubled. And then the increasing employment numbers will be released every first Friday of the month from January 2018 through the November election. We can see the future from here and it looks good.

Grover Norquist is president of Americans for Tax Reform. Twitter: @GroverNorquist

Photo Credit: AP Photo/J. Scott Applewhite

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ATR Joins 67 Organizations, Scholars and Stakeholders in Support of Intellectual Property Rights

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Posted by Grover Norquist on Monday, February 2nd, 2015, 9:57 AM PERMALINK

The 114th Congress will consider many important issues such as tax and immigration reform. Less well publicized is the important work Congress will conduct regarding intellectual property.

To help Members as they consider these important issues, ATR is proud to join sixty-six think tanks, advocacy organizations, scholars, issue experts, business groups and stakeholders in an open letter to Congress expressing our strong support for all types of IP.

While Congress will continue its important patent litigation reform efforts and we hope for success in the new Congress, there are also debates around intellectual property protection in the copyright review process and the free trade negotiations.

We must ensure that American creators, innovators, and entrepreneurs are protected from theft to maintain international competitiveness in the digital economy.

The letter outlines a framework and set of guidelines through which the signers collectively view intellectual property, and should serve as a valuable tool for Congress in these important discussions.

We believe that Congress’ focus should be on preserving and enhancing IP rights by fostering market based solutions to well documented and widespread IP theft.

As the letter observes “the best way to encourage creation and dissemination of new inventions and creative works to the benefit of both the public good and individual liberty is to recognize one’s right to his or her intellectual property.” As such, Congress should reflect on the integral role IP rights play in American economic, technological and cultural leadership.

To ensure America’s continued dominance in these critical areas, Congress should resist calls to weaken the rights of innovators, inventors, creators and entrepreneurs.  Free trade agreements need to include language encouraging our trading partners to protect valuable American intellectual property.

As the letter concludes, “The Founding Fathers understood that by protecting the proprietary rights of artists, authors, entrepreneurs, innovators, and inventors, they were promoting the greater public welfare. The continued protection of these fundamental rights is essential to American innovation and competitiveness.”

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Norquist: Three Thoughts on the Budget Fights

Posted by Grover Norquist on Monday, April 11th, 2011, 3:47 PM PERMALINK

Three thoughts on the budget fight(s) this year for those interested in economic growth and job creation.

First, one must focus correctly on reducing total government spending as a percentage of the economy as the key metric.  There are only two ways to make the government smaller as a percentage of the overall economy: Spend less and increase economic growth.  This is a great advantage for Republicans.  They are willing to reduce government spending.  Democrats are not.  They benefit from the fact that average taxpayers earn $60,000 a year in pay, pension and health benefits while state and local government workers average $80,000 a year and federal "workers" are paid $120,000 a year.  When the government spends less, there are fewer democrat precinct workers.

 As for increasing economic growth, Republicans have boatloads of policies: cut marginal tax rates -- for starters take the American corporate income tax rate from today's 35% to the European average of 25%. Reduce the individual income tax rate to 25%. Abolish the death tax which double and triple taxes income earned and taxed already.  Reform tort law to stop billionaire trial lawyers from recycling their "earnings" into the DNC coffers.  Reduce the more than trillion dollar a year drag on the economy that is government overregulation. 

 Democrats have no ideas that will increase your 401(k) or the general economy.  They tried Keynesianism.  Again. They took $800 billion dollars through taxes and/or debt from those who earned it and gave it to the politically connected.  They killed two million jobs and swelled the national debt.

 Avoid being distracted by "the deficit."  That is the ploy of Democrats that wish to take your eye off government spending so that they can offer tax hikes as the moral equivalent of spending cuts.  Nice try.  That way leads to Greece.

 Second, one must have bi-focal vision for moving forward.  Key your eyes on the goal: dramatically lowering government spending and higher growth over time.  The Ryan legislation will drop six trillion dollars from what Obama wishes to spend.  It drops government spending as a percentage of the economy from Obama's 25% to 20% in five years and to 15% by 2050.  The near vision part of bi-focals allow one to cut four billion over two weeks and six billion over three weeks and then 40 billion for half a year and realize that making small cuts today is moving forward in the right direction.  It is not important to change everything today or tomorrow.  Much can be done overtime -- if we keep moving however slowly in the right direction.

 Third, Remember 1982 and 1990, the two "deals" that Democrats offered Reagan and then Bush promising to cut three and later two dollars of spending for every dollar of tax hikes enacted.  The tax hikes were real. The spending restraint never happened. When your negotiating partner wants to move in the opposite direction from your goal then you will either be in stalemate...or you will be cheated.

Norquist is president of Americans for Tax Reform.  His Twitter handle is

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Fourteen Ways to Reduce Government Spending

Posted by Grover Norquist on Friday, August 20th, 2010, 2:05 PM PERMALINK

1. Resurrect the “Byrd Committee.”  One good idea for spending restraint is to restore a committee that once existed, the Joint Committee on Reduction of Nonessential Federal Expenditures (known in the post-War years as the “Byrd Committee”).  First proposed in 1941, the committee was a bipartisan, joint committee with subpoena powers that focused only on making rescissions in federal spending. Its proposals enacted over $38 billion (in 2010 dollars) in savings. The fatal flaw in many other “fiscal commissions” is this lack of narrow focus – only when tax hikes are taken off the table are meaningful spending cuts made. Any recommendations from a committee modeled on the Byrd Committee should be privileged and require an up-or-down vote on the floor. To give an idea of the sort of spending that this committee might curb, the federal government made at least $98 billion in improper payments in 2009, Medicare spends $47 billion (12.4 percent of its budget) annually improperly or fraudulently, and Congress recently spent $2.4 billion on 10 new jets that the Pentagon claims it does not need and will not use. With regards to duplicate programs, the Government Accountability Office reports hundreds of wastefully duplicated programs in areas as wide ranging as economic development, serving the disabled, helping at-risk youth, early childhood development, funding international education, and providing safe water. Indeed, according to the Bush administration OMB's PART program reviews, 22 percent of all federal programs, costing a total of $123 billion per year, fail to show any positive impact on their target populations.

2. Give the public five days to read bills before a floor vote.  Congress should enact a five-day waiting period before passing any new or amended legislation.  This “cooling-off” time might have prevented $350 billion in President Bush’s TARP, $350 billion in President Obama’s TARP, over $500 billion in the so-called “stimulus” bill, $183 billion more in discretionary spending in FY 2010, and $794 billion in healthcare “reform.”

3. Put every federal transaction and contract online in real time.  Every federal transaction, contract, and grant should be available online in real time.   A spending transparency portal is an important tool that can be used to cut waste, locate inefficiencies and empower the people whose money is being spent, the taxpayers,  as fiscal watchdogs.  This was pioneered successfully by Governor Rick Perry of Texas.  Missouri, Kansas, and Oklahoma also have good transparency initiatives.

4. Term limit appropriators.  Those serving on the Appropriations Committee should be limited to no more than six (6) years on that committee, as is already the case with members of the Budget Committee.

5. Sitting Congressmen and Senators should not be able to name buildings or other monuments to themselves, and none should be named for them while they are still living.  This encourages Congressmen and Senators to direct pork/earmark projects with more energy, and other Members feel peer pressure to support the projects (with an eye toward their eventual “legacy” vote later on).

6. Block grant education funding and welfare to the states.  All remaining welfare programs—Medicaid, food stamps, etc.—should be block-granted to the states, the same way that AFDC was in 1996.  The cost growth of the block grant should be something less than current law’s cost trajectory. Likewise, the block granting of education funding allows for each state to pursue its own solution and experiment, much as Canadian provinces did when education was federalized. As the Cato Institute has reported, this experimentation led to innovation, including school vouchers and charter schools, and Canadian students generally outperform their U.S. peers in reading, math, and science.

7. Freeze the salary and benefit levels of federal employees.  Scholars at the American Enterprise Institute and the Heritage Foundation have estimated that federal employees earn $14,000 more than their private sector counterparts in salary and benefits (even when controlling for factors such as education level, age, etc.).  The pay and benefits disparity is 30 to 40 percent.  In the aggregate, bringing federal employee compensation in line with the private sector would save $47 billion per year.  Government salary and benefits should be frozen until the private sector has a chance to catch up.  The new government in the United Kingdom recently announced a two year pay freeze for the highest-earning 72 percent of government employees.  Moreover, taxpayers presently match federal employees’ pension contributions 14 to 1 as reported by Third Way, exemplifying the massive chasm between public sector and private sector benefit packages. To make matters worse, government employees owe over $3 billion in unpaid taxes from 2008.

8. Require all eligible federal employees to compete for their job with a private sector bidder.  According to the Office of Management and Budget, some 850,000 federal employees (one-third of all federal employees) have jobs that are commercial in nature, and could be performed by a private contractor.  The Heritage Foundation estimates that the mere act of competing all these jobs would save taxpayers $27 billion annually.  The act of competing forces government employees to become more lean and efficient, so even a low success rate by contractors has big savings for taxpayers. To make maters worse, the present lack of competition actively hurts small businesses as well; every White House Conference on Small Business has identified unfair government competition as one of the leading concerns for small business owners. Moreover, as reported by the Business Coalition for Fair Competition, Congress and the White House continue to enact policies that exacerbate this crowding-out of commercial activities by government.

9. Only hire one new federal employee for every two that retire from government employment.  Over time, the federal workforce can be reduced simply by not filling half the job slots which come up because of retirement.  The positions not filled can be consolidated or privatized.  According to our research, the career savings for each federal slot not filled would range from just under $5 million (low-cost employees) to just under $14 million (high-cost employees), with an average savings of $7 million per employee.  If attrition was used to shed just 10 percent of the current federal workforce, it would save taxpayers nearly $2 trillion over the next forty years.

10. Repeal the Davis-Bacon Act.  Other policies that inflate spending include the Davis-Bacon Act, a Depression-era wage subsidy law that artificially inflates the cost of federal construction contracts by mandating workers are paid no less than local prevailing wages. However, there is a high frequency of errors in data the Wage and Hour Division (WHD) of the Department of Labor (DOL) uses to calculate rates; the survey WHD conducts is self-reported and therefore the results could be biased; a wide gap in time between surveys, long times needed to complete and publish surveys – consequently wage determinations are outdated. The Beacon Hill Institute found that, on average, the WHD inflates wages by 22 percent, increases construction costs by 9.91 percent and raised construction costs by $9 billion in 2009. Repealing the Act could save $9.5 billion over 2002-2011 and decrease mandatory spending by $255 million in the same period. By enacting this cost savings, government could do more with less in terms of infrastructure construction and maintenance.

11. Reform farm subsidies along the lines of the 1996 “Freedom to Farm” Act.Farm subsidies distort the market by inducing farmers to overproduce, which further perpetuates the cycle of taxpayers subsidizing the small, well-off group of farm owners. According to the Cato Institute, the largest 10 percent of recipients receive almost 72 percent of all farm subsidy outlays. Moreover, this wasteful injection of government into the economy distorts international trade and reduces competition. When New Zealand, an economy significantly based on agriculture, boldly repealed its farm subsidies in 1984, it met initial resistance, but farm output, productivity, and profitability have soared since.

12. Leave defense cuts on the table.As with all other federal departments, the Department of Defense contains waste. Likewise, US military spending in constant dollars presently exceeds Cold War levels, and there remains room to pare the budget, especially since a Government Accountability Office audit of 95 Pentagon weapons systems showed combined cost overruns of $295 billion.

13. Stop using “emergency” spending loopholes to get around budget rules.  A recent paper by Veronique de Rugy of the Mercatus Center demonstrates the various ways in which lawmakers hide spending, the most pernicious and expensive being labeling spending as “emergency,” and therefore spending off-budget or avoiding budgetary rules.

Both parties have used this technique to spend abusively. President Bush used it for most of the war supplemental in Iraq and Afghanistan, and Congressional Research Service data obtained by the office of Senator Tom Coburn (R-Okla.) finds that emergency spending has increased deficits by almost $1 trillion since the 111th Congress was seated in January 2009 as reported by the Cato Institute.

In determining what constitutes emergency spending, Keith Hennessey, a former economic advisor to George W. Bush, offers a pragmatic political definition: “it’s whatever you can get away with labeling as an emergency.”

However, the Office of Management and Budget created a test with a fairly high bar by in 1991. According to Hennessey, all five of these conditions had to be met:

  1. Necessary; (essential or vital, not merely useful or beneficial)
  2. Sudden; (coming into being quickly, not building up over time)
  3. Urgent; (requiring immediate action)
  4. Unforeseen; and
  5. Not permanent.

To restore fiscal responsibility and accountability, Congress needs to adhere to this standard, both to reduce spending and to account for spending that exists better.

14. Freeze discretionary spending at FY 2008 levels. Freezing federal spending at the FY 2008 amounts would return the federal government to pre-bailout and “stimulus” spending levels. Such a spending reduction would bring the budget into balance by 2013 and cut the national debt nearly in half by 2020, even assuming that Congress extends the 2001 and 2003 tax cuts and indexes the Alternative Minimum Tax for inflation. In contrast to the President’s current promise to “freeze” spending at FY 2011 levels, this would ensure the recent spending bonanza is not enshrined in the nation’s fiscal outlook in perpetuity.

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