Isabelle Morales

New Study Finds Biden Tax Hikes Would Eliminate 1 Million Jobs in First 2 Years

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Posted by Isabelle Morales on Friday, April 9th, 2021, 4:50 PM PERMALINK

Joe Biden’s tax hikes would eliminate one million jobs in the first two years, according to a new study by economists John W. Diamond and George R. Zodrow. The study, which was commissioned by the National Association of Manufacturers also found that the tax hikes would eliminate 600,000 jobs per year over the first decade and reduce GDP by $117 billion in the first two years. 

The study assumed several Biden tax hikes would go into effect include raising the corporate tax rate to 28 percent, reinstating the corporate alternative minimum tax, eliminating most expensing of depreciable assets, repealing the 20% deduction for pass-through businesses, doubling the tax rate on capital gains and dividends, taxing unrealized capital gains at death, and increasing the top individual tax rate to 39.6 percent.  

Biden’s tax hikes will reduce new investment and decrease capital in both the short and long term. As the study notes:

Investment in ordinary capital declines initially (two years after enactment) by 1.9 percent, by 1.3 percent ten years after enactment, and by 1.6 percent in the long run; this effect is only modestly affected by imports of ordinary capital into the United States, which increase in the long run by 0.2 percent. 

The increase in the statutory corporate income tax rate results in a reallocation abroad of FSK, which declines initially by 2.7 percent, by 3.5 percent 10 years after enactment, and by 2.9 percent in the long run. 

This reduction in investment and capital will not only have detrimental effects on the U.S. economy, it will also harm workers due to a decrease in household wages. As the study notes: 

The decline in the stocks of ordinary capital and FSK gradually reduce the productivity of labor over time and thus real wages, which fall by 0.6 percent in the long run, while labor compensation falls by 0.6 percent initially, by 0.3 percent ten years after enactment, and by 0.6 percent in the long run… 

These effects translate into a reduction of $638 in wage income per household… 

The study also notes that Biden’s tax hikes will cost jobs each and every year after enactment: 

The declines in hours worked would be equivalent to declines in employment of approximately just over 1.0 million FTE jobs two years and five years after enactment, and a decline of 0.1 million FTE jobs ten years after enactment. 

In terms of the duration of the reduction in employment over the first ten years after enactment, the average annual reduction in employment would be equivalent to a loss of roughly 600,000 jobs, or 5.7 million total “job years” lost over the ten-year interval. 

Other studies, on average, show that labor (or workers) bear an estimated 70 percent of the corporate income tax in the form of wages and employment, as ATR notes here.

At a time when American workers are still trying to regain employment and lost wages, it is hard to imagine a more harmful set of policies to enact. To have a strong economic recovery, it is imperative that we incentivize job creation, investment, and wage growth. Biden’s tax hikes do precisely the opposite. 

Photo Credit: BIS UK


Joe Biden’s “Infrastructure” Plan is Packed Full of Wasteful Spending

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Posted by Isabelle Morales on Friday, April 9th, 2021, 12:10 PM PERMALINK

The Biden administration has outlined the “American Jobs Plan,” a $2 trillion spending plan. While the proposal is purportedly for infrastructure, much of the plan is a liberal wishlist of policies that have little, or nothing to do with roads and bridges.

As noted by Republicans on the House Budget Committee, less than 13 percent of this spending plan is spent on repairing or creating roads, bridges, waterways, locks, dams, ports, airports, and broadband.  

Some of the non-infrastructure provisions in Biden’s plan includes: 

  • 20 percent of the entire cost of the bill is for an expansion of Medicaid—approximately $400 billion.
  • $213 billion for housing and to increase federal control of local housing markets
  • $100 billion of additional funding for schools without requiring them to reopen
  • $50 billion for a new office at the U.S. Department of Commerce
  • $35 billion for climate science, innovation, and R&D 

 

This plan would spend $10 billion in taxpayer dollars on a uniformed “Civilian Climate Corps” tasked with the vague mission of “advancing environmental justice.” This funding would be enough to hire 200,000 professional, progressive environmental activists. These Green New Deal hall monitors would be entitled to taxpayer-funded housing, clothing, feeding, allowance, and medical expenses. 

Biden also wants to include the PRO Act in his “infrastructure” proposal. This would ban right-to-work laws, which 27 states have in place, allowing employers to force their employees to join a union as a condition of employment. The PRO Act would also force a mass reclassification of independent contractors, threatening the livelihoods of millions of contractors across the nation. When California implemented AB5, which established the same independent contractor reclassification as the PRO Act, countless people lost their jobs, had to flee the state, or saw a significant decline in income. 

ATR has compiled 655 personal testimonials from independent contractors who detail the ways that AB5 has hurt them, which you can view here.  

As it stands, the United States is on track to spend $5.8 trillion in 2021. Now, Biden wants to spend trillions of dollars more, including the second part of his infrastructure plan which is likely to cost an addition $2 trillion. With both parts of this spending package combined at about $4 trillion, this plan would be, in dollars, the largest spending increase in U.S. history.  

The so-called “American Jobs Plan” seems eerily similar to the “American Rescue Plan,” which used coronavirus pandemic relief as a Trojan horse for leftist policy goals like a $350 billion state bailout, burdensome tax paperwork mandates, a state tax cut ban, and more.  

Now, Joe Biden is attempting to implement a liberal wishlist under the guise of infrastructure, a historically popular government initiative.  

Photo Credit: Gage Skidmore


Workers Will Pay for Biden’s Corporate Tax Hike

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Posted by Isabelle Morales on Wednesday, April 7th, 2021, 12:35 PM PERMALINK

President Joe Biden has proposed at least $2 trillion in tax increases as part of his new spending plan. Biden has vowed to raise the corporate income tax from 21 percent to 28 percent, impose a 21 percent global minimum tax, and a 15 percent minimum tax on book income.

American workers, including those making less than $400,000 a year will bear a significant portion of Biden’s tax increases.

There is a strong consensus among the left and the right that the corporate income tax is borne by American workers through lower wages and fewer job opportunities:

  • According to the Stephen Entin of the Tax Foundation, labor (or workers) bear an estimated 70 percent of the corporate income tax in the form of wages and employment. As Entin notes, 50 percent70 percent, or even 100 percent of the corporate tax is borne by workers.
  • A 2012 paper at the University of Warwick and University of Oxford found that a $1 increase in the corporate tax reduces wages by 92 cents in the long term. This study was conducted by Wiji Arulampalam, Michael P. Devereux, and Giorgia Maffini and studied over 55,000 businesses located in nine European countries over the period 1996-2003.
  • A 2015 study by Kevin Hassett and Aparna Mathur found that a 1 percent increase in corporate tax rates leads to a 0.5 percent decrease in wage rates. The study analyses 66 countries over 25 years and concludes that workers could see a greater reduction in wages than the federal government raises in new revenue from a corporate income tax increase.
  • A 2006 study by William Randolph of the Congressional Budget Office found that 74% of the corporate tax is borne by domestic labor.
  • A 2007 study by Alison Felix estimated that a 1 percentage point increase in the marginal corporate tax rate decreases annual wages by 0.7 percent. She concluded that the wage reductions are over four times the amount of collected corporate tax revenue. 
  • Even the left-of-center Tax Policy Center estimates that 20 percent of the burden of the corporate income tax is borne by labor.
  • The Congressional Budget Office has said that about 25 percent of the cost of a corporate tax would be borne by workers. Though, they assert that it may be complicated to calculate this, as "the larger the decline in saving or outflow of capital, the larger the share of the burden of the corporate income tax that is borne by workers."

 

Photo Credit: Gage Skidmore


Bernie Sanders Pushing Biden Admin for Even Higher Taxes

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Posted by Isabelle Morales on Tuesday, April 6th, 2021, 2:30 PM PERMALINK

President Joe Biden has proposed at least $2 trillion in tax hikes to finance his new spending proposals. However, he has said that he is open to additional and alternative tax increase.

Budget Committee Chairman Bernie Sanders (I-VT) is now pushing for the administration to go further and raise taxes by trillions more and has introduced a pair of bills which would raise the corporate tax rate to 35 percent and raise the death tax to a top rate of 65 percent. 

Echoing other progressives, Sanders has said that he doesn't think President Biden’s infrastructure plan "goes far enough in terms of climate.” Because Biden's spending plan will be done through the legislative process known as budget reconciliation, Sanders will have a significant role in shaping the legislation. 

Sanders is proposing to raise the corporate income tax rate to 35 percent, which would create a combined corporate tax rate of 38.9 percent after state taxes. While Sanders claims to be a champion of workers, this tax hike would disproportionately harm American workers and families.   

Numerous studies have found that between 50 percent and 70 percent of the corporate tax is borne by workers with the remaining being borne by shareholders. This is because capital is highly mobile, while labor is the least mobile factor in structuring ways to pay for higher corporate taxes. Thus, there is nowhere else for the cost of the corporate tax to land on than the American worker.

A corporate income tax hike would also make the United States’ corporate tax rate the highest rate in the developed world, as European countries have continually lowered their corporate tax rates in recognition of the competitive edge they receive from this tax cut.  

The average OECD corporate tax rate is 23.51 percent. Because of the 2017 tax cut, the United States’ combined tax is now 25.8 percent. Though it is still higher than the OECD average, it was a significant improvement. Under Bernie Sanders' plan, the United States' combined corporate tax rate would be over 60 percent higher than the OECD's average. This would make the U.S. significantly less competitive.

study by Ernst and Young found that, under the 35 percent corporate tax rate, American companies suffered a net loss of almost $510 billion in assets between 2004 and 2017. A net of $1.7 trillion in assets were lost because of the high U.S. rate, compared to if the U.S. rate was competitive.

Senator Sanders also wants to increase the death tax to 65 percent.

The Death Tax is fundamentally unfair and is bad tax policy. It is levied on assets that have been taxed previously through income taxes, capital gains taxes, and the corporate income tax.  

In addition, this tax disproportionately impacts family-owned businesses like farmers and ranchers especially, that tend to be asset rich but cash poor. Not only will people have difficulty paying the tax, but compliance with the tax is difficult as well: compliance may require liquidation, families may encounter difficulty figuring out the value of assets, etc.  

The wealthy often evade the death tax through loopholes and armies of lawyers and accountants, which inheritors of small businesses, farms, and ranches do not have the same access to. Further, the wealthy's use of tax avoidance mechanisms is inefficient and bad for the economy at large. 

Numerous studies have found that repealing the death tax would grow the economy. For instance, a 2017 study by the Tax Foundation found that the US could create over 150,000 jobs by rolling back the estate tax. Similarly, a 2012 study by the Joint Economic Committee found that the death tax has destroyed over $1.1 trillion of capital in the US economy. The economic growth created by repealing the Death Tax would produce $221 billion in federal revenue because of increased wages and more jobs. 

This tax should be repealed, not strengthened and expanded.  

To be clear, these tax hike proposals are just two of the countless tax hikes Bernie Sanders has come out in support of. Other proposals include a wealth tax, a financial transaction tax, a carbon tax, and trillions of dollars in other tax hikes for Medicare for All. 

President Joe Biden has already said that he wants trillions of dollars in higher taxes. Bernie Sanders is using his influence to push for even higher taxes. Biden's tax hikes would prolong the economic downturn--Bernie's would exacerbate this economic damage. If these tax hikes are included in budget reconciliation, and passed, the result would be a painfully slow economic recovery.

Photo Credit: Matt Johnson


TPC: Biden's Corporate Tax Hike Would Harm “Millions of Middle-Class People”

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Posted by Isabelle Morales on Tuesday, March 30th, 2021, 3:00 PM PERMALINK

President Joe Biden ran on a pledge not to increase taxes on any American earning less than $400,000 per year. However, his corporate tax hike would harm middle-class Americans earning below this threshold as the left-of-center Tax Policy Center’s Len Burman notes in a recent post.

In his post, Burman asks and answers the question of whether middle class families would be harmed by the Biden corporate tax hike:

“Does a corporate tax increase or a financial transaction tax raise taxes on shareholders, including the millions of middle-class people who own 401(k) plans? (Answer: yes.)” 

President Joe Biden is planning to increase the corporate tax rate from 21 percent to 28 percent in order to pay for trillions of dollars in new spending. This would impose a higher corporate tax rate than Communist China’s 25%. 

Biden is trying to convince the American people that his trillions of dollars in tax hikes will not harm them.

However, this is not true. A corporate tax hike would harm middle class workers and savers. For instance:

  • Raising the corporate tax rate would reduce the value of stocks, and therefore 401(k)s. According to recent data, 80 to 100 million Americans have a 401(k),  while 46.4 million households have an individual retirement account.  A majority of the assets in retirement accounts are invested in stocks. 401(k)s hold $6.2 trillion in assets and almost 70 percent of these assets (or $4.3T) are in stocks. Similarly, 53 percent of the more than $11 trillion in IRA savings are held directly in stocks while another 18 percent of savings are invested in funds that comprise stocks. 
  • A corporate tax rate hike would hurt anyone who has invested in the stock market, including a significant amount of young people. Half of Gen-Zers and Millennials have begun trading in stocks as a way to increase their life savings, according to recent reports. 
  • Raising the corporate tax rate would harm workers. The American worker is disproportionately harmed by a corporate tax hike. While capitol is mobile, labor is not. As a result, American workers see significant losses in jobs and wages because capital is flowing out of the U.S. Numerous studies have found that between 50 percent and 70 percent of the corporate tax is borne by workers with the remaining being borne by shareholders. 

 

Biden’s corporate tax hikes harm American families and workers making less than $400,000 or less, a fact that even the left-of-center Tax Policy Center admits. As the TPC notes, this will harm millions of middle class Americans that own a 401(k) or are invested in the stock market, but will also harm American workers in the form of fewer jobs and lower wages.

Photo Credit: Matt Johnson


Biden Should Explain Why He Dodged $500k in Taxes

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Posted by Isabelle Morales on Monday, March 29th, 2021, 12:50 PM PERMALINK

President Biden avoided paying $500,000 in payroll taxes including $121,000 in Obamacare taxes by utilizing a tax loophole, as noted in a letter by Republican Study Committee Chairman Jim Banks (R-Ind.).

As the letter notes, Biden used two S-corporations to avoid paying $500,000 in payroll taxes:

“Your 2017, 2018, and 2019 tax returns show that you and the First Lady sheltered over $13 million of income in two S-corporations: the CelticCapri Corporation and the Giacoppa Corporation. Press reports indicate that you both directed revenue from book royalties and speaking appearance fees into these two corporations.”

Sheltering this income was done for the sole purpose of avoiding tax. As the letter notes:

“Tax experts have questioned the propriety of diverting funds raised from one’s own intellectual property through an S-corporation. One accountant interviewed by the Wall Street Journal said ‘there’s no reason for these [earnings] to be in an S-corp – none, other than to save on self employment tax.”

Biden avoided the 3.8 percent Medicare Payroll Tax, and the 0.9 percent Obamacare "Additional Medicare Tax." This is clear hypocrisy as Biden supports expanding Obamacare and routinely says “the rich” need to pay their fair share.

The Obama administration considered it a top priority to close this loophole.  As such, not only did Joe Biden use a loophole that his administration actively fought to close, but he was able to avoid a tax that his own administration created. 

This is particularly ironic given that Joe Biden has repeatedly railed against the “rich” using tax loopholes. For instance, during his speech at the 2020 Democrat National Committee he said loopholes should be repealed and the wealthy need to pay their fair share:

"We can pay for these investments by ending loopholes, unnecessary loopholes... Because we don’t need a tax code that rewards wealth more than it rewards work. I’m not looking to punish anyone. Far from it. But it’s long past time the wealthiest people and the biggest corporations in this country paid their fair share.”

Joe Biden has also said that paying taxes is a "patriotic" act. By this standard, Biden’s tax avoidance is clearly unpatriotic. This hypocrisy is made worse by the fact that Medicare faces significant funding shortfalls as the letter explains:

“Just this year, the Congressional Budget Office estimated its Hospital Insurance Trust Fund will face insolvency in the middle of Fiscal Year 2026—roughly five years from now.” 

The Biden tax dodge was first reported in the Wall Street Journal:

Democratic presidential candidate Joe Biden used a tax loophole that the Obama administration tried and failed to close, substantially lowering his tax bill.

Mr. Biden and his wife, Dr. Jill Biden, routed their book and speech income through S corporations, according to tax returns the couple released this week. They paid income taxes on those profits, but the strategy let the couple avoid the 3.8% self-employment tax they would have paid had they been compensated directly instead of through the S corporations.

As noted by WSJ, even left-leaning tax experts called out Biden for his "pretty aggressive" tax maneuvers:

To the extent that the Bidens’ profits came directly from the couple’s consulting and public speaking, “to treat those as other than compensation is pretty aggressive,” said Steve Rosenthal, a senior fellow at the Tax Policy Center, a research group run by a former Obama administration official.

Biden should explain why he avoided paying taxes and, as the letter notes should be made to answer whether he intends to undo this hypocrisy and pay the funds back to the American people.

 

Photo Credit: Gage Skidmore


Manchin to Stick West Virginians with Business Tax Hike and European-Style Value Added Tax

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Posted by Isabelle Morales on Thursday, March 25th, 2021, 9:00 AM PERMALINK

Sen. Joe Manchin said he is ready to impose a corporate income tax hike and a European-style Value Added Tax (VAT) on West Virginians. The corporate tax increase will hit small and large West Virginia employers, and the VAT would hit all West Virginians and violate President Joe Biden’s pledge against any tax hike on any American making less than $400,000.

This is the same Joe Manchin who slipped a midnight amendment into the most recent spending bill in order to prevent West Virginians from reducing their own tax burden.

Manchin's corporate tax hike will hurt West Virginians’ wages and drive jobs overseas. The corporate tax rate increase will also cause a direct increase in the cost of household utility bills – electric, gas, water – just as Americans are trying to dig out from the pandemic. Utility customers bear the cost of taxes imposed on utility companies, and utility companies pay the corporate income tax.

Thanks to the Trump tax cuts, at least 140 utility companies announced a lowering of utility bills  including several utilities in West Virginia.

Manchin also floated the imposition of a VAT, an onerous tax from Europe that levies a tax on value added to a service or product at each point in the chain of production. West Virginians would also have to pay the VAT at the point of purchase – on top of existing sales taxes. This would violate Biden’s tax pledge and make everyday life more expensive.

The Manchin tax hikes will discourage businesses from investing in the United States. Capital is mobile, so a tax increase can result in jobs and investment going overseas. Manchin’s corporate tax hikes will encourage companies to do business elsewhere. Less money will be invested in the U.S. economy. Fewer jobs, lower wages, and a slower recovery.  

Not only is a $3 trillion “infrastructure” spending bill questionable, its inclusion of damaging tax hikes is particularly concerning in the wake of a once-in-a-century pandemic.

Raising taxes during an economic downturn will be incredibly damaging to American workers and the economy.

In fact, Manchin said so himself when he asked West Virginia voters to send him to Washington:

“I don’t think during a time of recession you mess with any of the taxes or increase any taxes.”

Manchin at the time also said:

“I can’t look the people of West Virginia in the eye and ask them to pay a penny more until I know we are running this government efficiently.”

So what happened, Senator?

Photo Credit: Third Way Think Tank


“Exit Tax Prevention Act” Would Block California From Taxing Residents Who Leave the State

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Posted by Isabelle Morales on Wednesday, March 24th, 2021, 10:00 AM PERMALINK

California residents are fleeing the state because of big government, high taxes and high cost of living. Instead of becoming more taxpayer-friendly, the state is now attempting to tax those who are leaving. 

In light of this attempt to tax residents who leave California for greener pastures, Congressman David Schweikert (R-Ariz.) has introduced the Exit Tax Prevention Act of 2021 legislation that will ensure tax competition and protect the rights of Americans to live where they please. 

Rep. Schweikert’s bill would prohibit California and other blue states from taxing residents that have left their state:

SEC. 2. PROHIBITION ON CERTAIN STATE AND LOCAL TAXATION. 

A State, or taxing jurisdiction in a State, may not impose an obligation for the collection of an income tax, wealth tax, or any similar tax on a resident who has relocated permanent residence to another State or a taxing jurisdiction of another State. 

California state lawmakers are pushing a 0.40 percent annual tax on a taxpayer’s worldwide wealth above $30 million. This tax would be imposed on a taxpayer at the end of each calendar year based on the fair market value of assets. Part-time residents would pay a prorated tax based on the number of days spent in California each year.”  

If this tax were imposed, former California residents would be required to pay the state’s new wealth tax for 10 years after having left. The first year they would owe 0.4 percent and this would gradually decrease to 0.04 percent by the tenth year.

This tax is likely unconstitutional. It violates the right to travel and the “dormant” commerce clause. Article I, Section 8 of the U.S. Constitution authorizes Congress “to regulate Commerce with foreign Nations, and among the several States, and with Indian Tribes.” This clause has been interpreted both as a positive authority to Congress and as an implied prohibition on state laws and regulations that interfere with interstate commerce.  

Even though it would almost certainly be ruled unconstitutional by the courts, Rep. Schweikert should be applauded for his legislation and for highlighting California’s attempt to tax Americans that leave the state.

If allowed to stand, this tax would create dangerous precedent.. If states can simply impose taxes on permanent residents in another state, states can no longer be true “laboratories of democracy.” It is vital that states have autonomy, as it is consistent with the founders’ vision for the U.S. and is also the best informant we have for determining policy effectiveness.  

Between 2010 and 2018, California’s tax base shrank by $24.6 billion. Instead of trying to make up for lost revenues by taxing fleeing residents, California should investigate and address the root of the problem: the undesirability of living there. If they wish to retain residents and tax revenue, they should consider lowering taxes, not perpetually making the state more expensive and undesirable.  

California already has incredibly high taxes. The state has the highest income tax rate, the highest state sales tax rate, and the highest gas tax in the country. 

The state also doesn’t need more revenue. Even during the pandemic, the state's tax revenue is more than $10 billion above projections and it already has a $22 billion budget surplus.

California’s attempt to tax residents leaving the state is unconstitutional and shameful. Congressman David Schweikert should be applauded for highlighting this issue and introducing the Exit Tax Prevention Act in order to preserve state tax competition. Lawmakers should support this important legislation.

Photo Credit: Gage Skidmore


Democrats Double Down on State Tax Cut Ban

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Posted by Isabelle Morales on Friday, March 19th, 2021, 10:55 AM PERMALINK

In a last-minute addition to the partisan $1.9 trillion Biden spending plan, Democrats snuck a provision into the bill prohibiting states from cutting taxes. They are doubling down on this restriction and blocking Republican efforts to preserve tax competition by repealing the provision.

Senator Mike Braun (R-Ind.) went to the Senate floor in an attempt to pass the “Let States Cut Taxes Act,” legislation he introduced to repeal this Democrat ban on state tax cuts. Unfortunately, Senator Joe Manchin (D-W.Va.) blocked this attempt. 

The Democrat state tax cut ban is an attempt to prevent tax competition as Democrat-run states are failing to compete well with low-tax states. Competition between low-tax states and high- states tax allows voters to see a clear contrast between success and failure. Democrats know that taxpayers have already been voting with their feet. Over the last decade, millions of people and jobs have moved from high-tax states into states with low or no income taxes, and the ability to work remotely will only amplify this trend. 

States such as New York, California and Illinois —which have been spending recklessly for decades —will still be allowed to use the bill's funds to directly grow the size of government or bail out government union pension funds. 

There are currently eight states —Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming —that do not impose income taxes of any kind, and this number is expected to increase in the coming years. New Hampshire, which does not tax wage income, is looking to join this list of true no income tax states by phasing out its 5% tax on interest and dividends income. Several more states — including Arizona and Mississippi— are currently exploring ways to put their income taxes on the path to zero. 

There is strong conservative opposition to the state tax cut ban on and off the hill:

  • Senator Braun and Congressman Dan Bishop (R-N.C.) have introduced the “Let States Cut Taxes Act,” legislation to repeal the Democrat ban on state tax cuts. This bill's cosponsors include the following: Sen. James M. Inhofe (R-Okla.), Sen. Todd Young (R-Ind.), Sen. Thom Tillis (R-N.C.), Sen. Marsha Blackburn (R-Tenn.), Sen. Rick Scott (R-Fla.), Sen. Mike Crapo (R-Idaho), Sen. Marco Rubio (R-Fla.), Sen. Roger Marshall (R-Kan.), Sen. Shelley Moore Capito (R-W.Va.), Sen. Mike Lee (R-Utah), Sen. Deb Fischer (R-Neb.), and Sen. Bill Hagerty (R-Tenn.)
     
  • Senate Finance Committee Ranking Member Mike Crapo (R-Idaho) has introduced similar legislation, S. 743, the “State Fiscal Flexibility Act.” This bill has the support of Senators Jim Risch (R-Idaho), Tim Scott (R-S.C.), Chuck Grassley (R-Iowa), John Cornyn (R-Texas), Rob Portman (R-Ohio), James Lankford (R-Okla.), Steve Daines (R-Mont.) and Todd Young (R-Ind.). 
     
  • House Republican leaders including Ways and Means Ranking Member Kevin Brady (R-Texas), Oversight Committee Ranking Member James Comer (R-Ky.) and House Republican Whip Steve Scalise (R-La.) sent a letter to Treasury Secretary Janet Yellen voicing concerns over the state tax cut ban and requesting guidance on this provision. 
     
  • The American Legislative Exchange Council (ALEC) led a coalition letter which was signed by dozens of national and state-based organizations, including Americans for Tax Reform, in opposition to the ban on state tax cuts. 

 

Congressional Democrats have no business dictating to states whether they can or cannot cut taxes. Lawmakers should immediately repeal this prohibition in order to protect tax competition and ensure well run, low tax states can continue to provide tax relief to their residents.

Photo Credit: Third Way Think Tank


Rep. Byron Donalds' Bill Cuts Wasteful Spending and Protects Medicare

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Posted by Isabelle Morales on Thursday, March 18th, 2021, 2:44 PM PERMALINK

Congressman Byron Donalds (R-Fla.) has introduced the "Responsible and Effective Spending Cuts of Undesirable Expenditures (RESCUE) Act," legislation which would prevent cuts to Medicare by ensuring mandatory PAYGO cuts triggered by Joe Biden’s $1.9 trillion spending plan apply to wasteful spending.

The Pay-As-You-Go (PAYGO) Act of 2010 requires mandatory spending cuts if the cost of legislation isn’t offset by revenue increases or cuts to other spending. PAYGO was initially established in order to constrain excessive spending increases, much like this $1.9 trillion stimulus bill.

As noted by the Congressional Budget Office, Biden’s spending plan would require the Office of Management and Budget (OMB) to issue a sequestration order to reduce fiscal year 2022 spending by $381 billion including $36 billion from Medicare.

Because PAYGO exempts many large accounts, like low-income programs and Social Security, in CBO’s estimation, the annual resources available to the OMB would total between $80 billion and $90 billion—significantly less than what the PAYGO law requires be sequestered. Quite literally, this stimulus bill is so large that the OMB wouldn't even be able to comply with the law. 

Under Rep. Donalds' bill, instead of Medicare, sequestration would instead impact wasteful spending programs in the American Rescue Plan itself, such as the billions of dollars for union pension bailouts, $350 billion in funding for state and local governments, and foreign aid. COVID testing and treatment in the American Rescue Plan would be exempt from any cuts. 

A recent report in the Wall Street Journal found that state tax revenues generally stayed flat during 2020, suggesting that the $350 billion state and local funding may exceed the damage Covid-19 has actually done. Not to mention, Congress has already provided $360 billion to state and local governments. 

Further, union pension bailouts and expanded foreign aid have virtually nothing to do with Covid-19 relief. The idea that these expenses be included in a pandemic relief bill is, in and of itself, very wasteful.

This bill keeps Democrats accountable for their wasteful spending while also preventing cuts to Medicare. 

ATR applauds Rep. Byron Donalds for introducing the RESCUE Act and urges members of Congress to support this legislation.


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