Isabelle Morales

Dems Rushing Through Small Biz Tax Paperwork Mandate in Biden Spending Bill

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Posted by Isabelle Morales on Friday, February 26th, 2021, 4:27 PM PERMALINK

Congressional Democrats are sneaking through new reporting requirements that will increase tax complexity for independent contractors, small businesses, and freelancers. They have included this proposal in the 200 page manager’s amendment to President Biden’s $1.9 trillion stimulus bill. This is another attempt by the Left to exploit the COVID-19 crisis by passing unrelated policy measures long desired by progressives.

The provision in question would lower the reporting threshold to $600 or more for 1099-K reporting and eliminates the transactions threshold. Currently, one is only required to report when there is more than $20,000 in sales and more than 200 transactions in a year. The proposal also extends the 1099-K reporting to "specified electronic payment processors." 

This would impact freelancers and independent contractors including freelancers compensated via PayPal, Etsy sellers, Airbnb hosts, Uber and Lyft drivers, food delivery couriers, and others participating in the sharing economy.

This provision would end up harming low- and middle-income contractors, small businesses, and freelancers, many of which have been devastated by the coronavirus pandemic. Implementing new, burdensome reporting rules will only do more damage. It is quite ironic that a provision like this may be included in the so-called “American Rescue Plan.” 

The House plans to vote on the stimulus package today, so Democrats are trying to rush these provisions through with no debate or public scrutiny.  

Democrats last enacted burdensome new 1099 reporting requirements in Obamacare, when they required businesses to send 1099 forms for all purchases of goods and services over $600 annually.

Soon after this provision was signed into law, the National Taxpayer Advocate raised concerns that these reporting requirements would cause “disproportionate” harm to small businesses and do little to improve tax compliance.

This provision was so unpopular that it was quickly repealed in 2011 with a bipartisan vote of 87 to 12 in the Senate and 314 to 112 in the House. The Obama administration even hailed repeal of the provision a “big win” for small businesses in a press release:  

“Today, President Obama signed a law that removes the expanded ‘1099’ reporting requirement from the Affordable Care Act. This is a big win for small businesses.

The SBA and President Obama supported repealing this provision, which would have required businesses to send 1099 forms for all purchases of goods and services over $600 annually. With this bipartisan effort, we have removed a requirement that would have been an undue barrier to small business growth.”

This provision being rushed through today is eerily similar to the Obamacare reporting requirement.

We should not make the same mistakes again. Expanding reporting requirements for 1099-K receivers will harm independent contractors, small businesses, and freelancers. Increasing compliance costs and the regulatory burden on already-struggling workers and small business owners is especially alarming given they have been disproportionately harmed by the pandemic.

Photo Credit: Kentucky Democratic Party


WaPo Editorial: Dems Taking Advantage of COVID-19 Crisis to Push $1.9T Bill

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Posted by Isabelle Morales on Monday, February 22nd, 2021, 11:45 AM PERMALINK

The COVID-19 relief bill being pushed by Congressional Democrats and President Joe Biden fails to properly target aid to those in need, according to an editorial by the Washington Post. 

Rather than “tak[ing] advantage of a crisis to advance other priorities,” the newspaper's editorial board urges Democrats to provide relief "on the widest bipartisan basis possible." This would also help Joe Biden fulfill his repeated, but seemingly empty, calls for unity.

The Post is right to point out that many of the provisions being proposed are not properly targeted to the COVID-19 economic and health crisis. Congress has already enacted over $4 trillion in aid, according to the Committee for a Responsible Federal Budget. Of this, $1 trillion is unspent and $900 billion was passed by lawmakers and signed into law less than two months ago.

Even former Clinton Treasury Secretary and Obama Chief Economic Adviser Larry Summers has expressed skepticism with Biden’s plan. Writing in The Washington Post, Summers argued that Mr. Biden’s stimulus plan is three to six times larger than the economic shortfall and that it will result in wasteful spending that threatens to cause future financial instability and unnecessary inflation.

Additionally, the American Enterprise Institute found that households are sitting on well over $1 trillion of savings. When the $600 stimulus checks were handed out, households with incomes above $78,000 saved $555 of their $600 check, spending just $45.

Similarly, according to the Bureau of Economic Analysis, personal saving as a percentage of income in 2020 was 16.4 percent, more than double the pre-pandemic rate in 2019, which was just 7.5 percent.   

The Post is also correct to point out how Democrats are exploiting the crisis to push longheld progressive policies. 

For instance, Congressional Democrats are attempting to push through a $15 minimum wage within the stimulus package. This policy not only does nothing to help the country during this crisis, but would further damage already-struggling businesses and cost jobs during a time of high unemployment. This addition to the stimulus package is clearly not presented as a solution to the economic downturn, but as a way for Democrats to answer to those who supported them: labor unions and the liberal base.

Biden’s plan also calls for a $350 billion bailout for state and local governments, funding which is entirely unnecessary and caters to the needs of blue states with bloated budgets and high taxes. 

States do not need this aid as most have seen little or no negative budgetary impact because of the pandemic, with California reporting a $15 billion budget surplus.

In addition, as recently reported by the New York Times, Wisconsin expects to have money to contribute to its rainy-day fund, Maryland has increased its revenue projections, and Minnesota expects a surplus. In all, state collections declined just 4.4 percent through September compared to the first nine months of 2019, according to the Tax Foundation.

Congress has also already provided aid to states, including approximately $360 billion that directly went to state and local governments to help them respond to COVID-19.

In fact, even before the last $900 billion package, lawmakers had provided states and localities with 17 times their 2020 revenue loss and double their expected 2020 and 2021 loss, according to the Heritage Foundation

With a House vote later this week on the bill, Democrats are attempting to rush this flawed bill through Congress on a party line basis. Several weeks ago, Democrats rejected virtually every thoughtful, Republican amendment to the bill. For example, Democrats rejected workplace safety assistance for small businesses, assistance for workers who lost their jobs due to President Biden ending the Keystone Pipeline project, doubling the child tax credit, HSA expansion to lower healthcare costs, and countless more. 

While Biden came into office calling for unity, the first legislative act of Congressional Democrats is pushing through a partisan $1.9 trillion proposal. It is significant that even the Washington Post editorial board sees that this relief bill is about furthering the far left agenda, not providing targeted, effective relief to American families and businesses in need.

Photo Credit: Senate Democrats


Democrats Open Door to Frivolous Spending and Corruption as They Attempt to Bring Back Earmarks

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Posted by Isabelle Morales on Wednesday, February 17th, 2021, 4:40 PM PERMALINK

Rep. Rosa DeLauro (D-Conn.) and Sen. Patrick Leahy (D-Vt.), the new chairs of the House and Senate Appropriations panels, are planning to announce that Democrats will reinstate earmarks in next fiscal year's spending bills. They announced that earmarks will be "limited to state and local governments and nonprofits that carry out quasi-government functions," which will likely be a way for the left to reward their political constituencies.

Earmarks are congressional provisions, often within large spending bills, directing funds to be spent on specific projects or programs. Before their ban, funds would often be directed towards specific congressional districts, pressuring members into voting for legislation they wouldn't normally vote for.

Democrats are trying to repackage earmarks with the term "member-directed spending" because they recognize just how unpopular this practice is. According to the Washington Post, 79 percent of Americans said that earmarks are "not acceptable."

Americans for Tax Reform has long opposed earmarks and supported the 2011 earmarks ban. Reinstating earmarks would promote frivolous spending and corruption.  

“Earmarks are the ‘broken windows’ of government overspending, the currency of Congressional corruption, and the price of bad votes for more spending,” said ATR President Grover Norquist. “Earmarks are used to buy the votes of congressmen who would never vote for the overall package standing alone, without a bribe.” 

The most infamous example of an earmark leading to frivolous spending is the “bridge to nowhere,” a project which began in 2005 when some members of Congress from Alaska requested funding to build the Gravina Island Bridge in exchange for their votes.

The bridge was going to connect the town of Ketchikan with a population under 9,000 to the Island of Gravina, an island with an airport and a population of 50. Despite the few number of residents and the availability of a ferry, taxpayers were going to fund the bridge for $320 million. While Congress put an end to this bridge project in 2015, other pork projects have been approved. 

Citizens Against Government Waste lists the worst pork projects from 1991 to 2018 in its “Pork Hall of Shame.” Some examples include grasshopper research in 1999 for $7.3 million, combating Goth culture in 2002 for $273,000, and wool research in 2010 for $4.1 million. 

In fact, in 1999, 40% of the spending in the military construction appropriations bill that year was earmarks.  

These spending issues grow over time, as legislators become more and more comfortable with abusing the earmark process as time goes on.

For example, President Reagan vetoed a highway bill in 1987 because it was loaded with roughly 150 earmarks. By 2005, the transportation bill signed into law contained more 6,300 earmarks. 

Earmarks have also encouraged corruption, causing the downfall of members of Congress such as Pennsylvania Representative Chaka Fattah. CBS Philly reported that grant money from NASA had repaid part of an “illegal $1 million loan from a wealthy friend to prop up his [Fattah’s] failed 2007 campaign for Philadelphia mayor.” 

As the Heritage Foundation details, “Rep. Bennie Thompson, D-Miss., came under scrutiny when some of the funding that he secured through a $900,000 earmark for road construction in his district was used to repave the road where he and his daughter both owned homes.” 

Additionally, former Speaker of the House Dennis Hastert, R-Ill., was involved in a national scandal when he inserted an earmark of $207 million to create a highway near his own property. 

Some members of Congress argue that earmarks are will help lawmakers accomplish legislation because they have “skin in the game.” They also argue that restoring earmarks will lead to transparency that will eliminate the corruption. However, these arguments have been made before, and the corruption has continued. Even with transparency, the wasteful spending continues. 

ATR has long opposed earmarks and wasteful spending. Earmarks provide a pathway for members of Congress to spend money on special interests. This kind of frivolous spending is disrespectful to the taxpayers and a flagrant violation of Congressional duty to be responsible stewards of taxpayer funds.

Photo Credit: Paolo Rosa


Lawmakers Should Not Use GameStop Controversy as Excuse for Financial Transactions Tax

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Posted by Isabelle Morales on Wednesday, February 17th, 2021, 10:00 AM PERMALINK

On February 18th, the House Financial Services Committee will a hearing exploring the GameStop-Robinhood controversy entitled “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide.” 

Lawmakers will hold this hearing to look at ways to better protect investors and prevent market volatility. However, some lawmakers have already made up their mind what the “solution” should be: a $1 trillion financial transactions tax (FTT). 

Rep. Ilhan Omar (D-Minn.), Rep. Ro Khanna (D-Calif.), Sen. Bernie Sanders (I-Vt.), Rep. Peter DeFazio (D-Ore.), and others on the progressive left have already called for this new tax, which would be imposed at a rate of 0.1 percent on any buying and selling of stocks, bonds, and other financial instruments. 

If imposed, an FTT would harm investors, restrict economic growth, would fail to raise as much revenue as supporters claim. While the 0.1 percent rate may seem like a small amount, it would be imposed on every single trade. 

While the Left claims this tax will make wealthy hedge funds pay “their fair share,” the FTT is really a tax on American savers and investors, including the 53 percent of American households that own stock and the 80 to 100 million Americans that have a 401(k). 

The recent GameStop trading controversy and negative perceptions of the hedge fund industry are simply excuses used by Democrats to push an agenda they already had – trillions in new taxes on the American people. Republicans on the Committee including Ranking Member Patrick McHenry (R-NC), Rep. Tom Emmer (R-Minn.), Rep. Andy Barr (R-Ky.), Rep. Bill Huizenga (R-Mich.) and other conservatives must hold the line against any new tax on American investors. 

An FTT will harm American retirees and savers including those that have their investments in 401(k)s, pensions, and index funds. 

This tax will fall especially hard on public sector pensions including those used by teachers, firefighters, and police officers rely that rely on hedge funds for retirement security. In fact, an FTT would cost pension funds billions of dollars every year, leading to fewer savings, less retirement income for retirees, and underfunded pensions. 

According to a study by BlackRock, a financial transaction tax of 0.1 percent would result in an investor losing $2,300 in returns on a $10,000 investment in a global equity fund over ten years. Similarly, a 2021 study conducted by the Modern Markets Initiative found a proposed financial transaction tax  would cost $45,000 to $65,000 over the lifetime of a 401(k) account.   

FTTs have a history of failure. In 1984, Sweden imposed a financial transaction tax, a proposal that lasted just six years. Even though investors were restricted in moving capital to foreign markets, most trading migrated to London to avoid the tax. Not only did this mean the FTT raised little revenue, capital gains tax revenue dropped because of a reduction in sales. When it was abolished in 1990, investment began to return to Sweden. In fact, several countries have experienced the same FTT process: a FTT is made law, the tax is reduced, the tax is finally eliminated. According to the Center for Capital Markets, this has also happened in Spain (1988), Netherlands (1990), Germany (1991), Norway (1993), Portugal (1996), Italy (1998), Denmark (1999), Japan (1999), Austria (2000), and France (2008). It was even repealed here in the United States in 1965 through a bipartisan vote, due to its failure. In the years following the repeal, trading volume in the United States increased substantially.  

An FTT does not raise the revenue supporters claim it does. The Congressional Budget Office found that imposing a FTT in the U.S. would “decrease the volume of transactions” and “probably reduce output and employment.” Some have predicted that a financial transactions tax would raise little, if any, net revenue because of these negative impacts.  

FTTs also cause capital to flee to jurisdictions that do not tax transactions, further reducing revenues. When Italy and France imposed FTTs in 2012, both countries raised less than a quarter of expected revenues.   

Lawmakers should not overreact to short selling, which is a common, well-regulated practice. It is a function of the free market -- investors will short a stock when they believe it to be overvalued. 

In-depth empirical research has found that short selling is not responsible for market crashes and economic downturns. Instead, it provides efficiency and information to markets, ultimately softening the blow of a downturn. The 2008 market crash could have been far more widespread if short sellers hadn’t recognized the housing market was overvalued. Punishing these practices will likely lead to severe pain if we experience another crash. Rather than solving market volatility, an FTT could make this problem worse as there would be fewer buyers and sellers and therefore more price jumps.

Once again, Democrats are not letting a crisis go to waste. They are exploiting the GameStop-Robinhood controversy as an excuse to push their ultimate goal – new taxes on the American people. 

A $1 trillion financial transactions tax would punish investment, leading to market volatility and a reduction in output and employment. 

Photo Credit: ChrisInPhilly5448


H.R. 1 Forces Taxpayers to Fund Campaigns they Do Not Support

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Posted by Isabelle Morales on Friday, February 12th, 2021, 6:00 PM PERMALINK

The top priority of Congressional Democrats is H.R. 1, an 800-page bill filled with partisan policies to rig the system in favor of the Left. Along with politicizing the FEC, chilling free speech, and unconstitutionally invalidating state election laws, H.R. 1, the “For the People Act,” also provides taxpayer-funding for political candidates.

This provision of the bill would create numerous opportunities for corruption and would force taxpayers to fund campaigns that they disagree with.  

Additionally, at a time when millions are out of work and the federal government has spent trillions of dollars more than it has, it is irresponsible at best to put taxpayer money towards political campaigns.

The legislation implements a 600% match for certain political contributions to congressional and presidential candidates, forcing taxpayers to subsidize political campaigns. In addition to being a poor use of taxpayer money, this attempt to end political corruption actually creates greater opportunity for corruption.   

The idea behind taxpayer-funded campaigns is that they would reduce corruption. If candidates don’t depend on special interests for funds, they would not be vulnerable to pressure from those special interests once in office.

In reality, taxpayer-funded campaign measures open the door to new kinds of corruption while existing means of corruption still stand. Institute for Free Speech analyses of longstanding tax-financing programs in Arizona, Maine, and Connecticut found that these schemes “fail to reduce special interest influence, fail to reduce the dominance of businessmen and lawyers in politics, fail to increase the number of women elected to legislatures, fail to change legislative voting behavior, fail to make elections more competitive, and fail to increase voter turnout.” 

Provisions like this have been abused in the past. For instance:

  • An Arizona Congressional candidate took over $100,000 in public match funds and spent it on nightclubs, vehicle rentals, and restaurants. Instead of returning the entirety of the funds he stole, he only had to return $15,000.
  • In New York City, former city council member Sheldon Leffler was convicted of attempting to break up a $10,000 donation to take advantage of NYC’s public matching program. Similarly, a city council candidate was convicted of spending $17,223 in public matching funds for personal expenses like groceries, restaurants, and gas.
  • Again, in New York City, “one candidate was convicted of accepting bribes, extorting money, and other questionable behavior that netted him approximately $200,000 in “illegal rent, expenses and payoffs” – including extorting a Bronx boiler company executive who collected a $283,000 Yankee Stadium contract with his assistance,” as the Institute for Free Speech details.   

 

This policy will not prevent corruption from happening. This is particularly true because the bill allows politicians fairly broad discretion in how they spend the funds they receive. Simply, the funds must be spent “in connection with the candidate’s campaign for such office.” Instead of preventing corruption, it will just force taxpayers to pay for it this time.

This leads into a point that Thomas Jefferson once made: “To compel a man to furnish funds for the propagation of ideas he disbelieves and abhors is sinful and tyrannical.” In this way, it could be described as compelled speech. Especially because it will almost certainly propagate one political party (the Democratic party) over the other upon implementation.  

Taxpayers should not be forced to fund campaigns they find disagreeable. In fact, they shouldn’t be forced to fund campaigns they agree with. Americans’ ability to choose to or refuse to participate in politics has always been a foundational principle in the United States.  

Finally, the CBO has estimated that, in the next 10 years, tax-financed campaigns will cost taxpayers $2 billion.

Bloomberg noted that each eligible congressional candidate would qualify for nearly $5 million each in federal matching funds under this law. For reference, Rep. Alexandria Ocasio-Cortez, whose race was the second most expensive House race in the country, raised $17.3 million for her 2020 race. Under H.R. 1, she’d be eligible to receive 29 percent of what she had raised in additional funds.

Overall this measure is an incredibly irresponsible use of money during a time when millions of Americans are unemployed and we are almost $28 trillion in debt.

Tax-financed campaigns are an ineffective “solution” to a much deeper problem in the United States. The only real way to root out corruption is to remove the incentive for corruption: in other words, to limit the immense power the government has over the economy and the American people.

Photo Credit: Pom', Arma', La Galerie


Democrats’ H.R. 1 Will Have a Chilling Effect on Free Speech

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Posted by Isabelle Morales on Wednesday, February 10th, 2021, 12:55 PM PERMALINK

One of Congressional Democrats’ top priorities for the 117th Congress is H.R. 1 / S. 1, the For the People Act of 2021, which seeks to reform campaign finance laws and reduce the influence of money in politics. There are numerous problems with this bill: it would politicize the FEC, would create taxpayer-funded candidates, and would unconstitutionally invalidate hundreds of state election laws. However, one of the most egregious problems with this bill is that it is a massive threat to Americans’ right to free speech. If passed, this law will have a chilling effect on political speech and donations.

To start, this law would mandate a “public file” requirement for any person or organization spending over $500 in a calendar year, forcing them to identify the name, address, and contact information of ad sponsors that are not candidates or with the campaign. Ultimately, this creates heightened barriers and restricts the ability of these entities to advertise.

In fact, the bill transforms the “stand by your ad” disclaimer in video advertisements, forcing organizations to identify their top five donors at the end of advertisements. This represents a radical change in policy: currently, the “stand by your ad” provision simply requires a statement by the candidate or organization/corporation that they approve the communication. In addition, the bill mandates the disclosure of all the names and addresses of donors giving more than $10,000 to groups that engage in “campaign-related disbursements.”

With the incredible rise in partisanship, cancel culture, and doxing, it is more important than ever to protect donor privacy. This isn’t a matter of transparency; rather, it is a new tool to chill speech. If donors can expect to receive threats, experience business losses, and/or receive hate for exercising their right to free speech through political contributions, it’s likely that many people will stop donating altogether.

It is also worth noting that donors can contribute to an organization, but may not support all of the content the organization produces. In this way, many donors’ views will be misrepresented because of these “stand by your ad” requirements. This may lead to donors wanting to have a stronger hold over an organization’s content in fear of being misrepresented. In this way, this measure may have the opposite of its intended effect.

In addition, H.R. 1 undoes the FEC’s “internet exemption” which excludes the internet from regulation of political speech, exposing online communication to the same scrutiny as traditional advertisements. This even includes any communication an organization makes on social media platforms like Twitter and Facebook, including paid staffers managing the platforms.

H.R. 1 also invents a new regulation called “PASO,” an overbroad standard that asks whether political speech “promotes,” “attacks,” “supports,” or “opposes” a federal candidate or official. Besides the blatant unconstitutionality of this regulation, it is also so unclear and broad that it can be used as a weapon by whichever political party is in power. As Rich Lowry explains, the current law “limits expenditures that expressly advocate for the election or defeat of a candidate, or refer to a candidate in public advertising shortly before an election.”

Any and all political, nonelectoral messages can be framed as something which promotes, attacks, supports, or opposes a candidate. Under this law, the party in power can frame their opponents’ political speech this way and subsequently limit their opponents’ speech. These standards will fly in face of the Supreme Court’s assertion that campaign finance rules be clear and reasonable, so as not to create a culture of fear around political speech and one’s ability to abide by those rules.

H.R. 1 is not tailored to simply reining in super PACs or, as many contend, conservative ideas. This law hurts a multitude of organizations with all kinds of philosophical backgrounds. In a 2019 letter to the U.S. House of Representatives, which later went on to pass this bill, the left-of-center American Civil Liberties Union (ACLU) said the following:

“While some of our concerns have been addressed or mitigated since introduction, the bill, in its current form, would still unconstitutionally burden the speech and associational rights of many public interest organizations and American citizens. These provisions will chill speech essential to our public discourse and would do little to serve the public’s legitimate interest in knowing who is providing substantial support for candidates’ elections.

Clearly, these provisions would hurt causes on both the left and right, both of which are essential for healthy public discourse.

Every one of the aforementioned policy changes in this Democrat-led power grab has a chilling effect on free speech. Even if these provisions are not explicitly restricting certain speech, they do erect barriers which powerfully discourage people from donating and organizations from spreading their ideas. In this toxic political climate, we must continue to protect donors’ privacy and everyone’s ability to exercise free speech. Otherwise, public discourse will continue to be dismantled and cheapened.

 

Photo Credit: Gage Skidmore


Warren to Introduce a $2.75 Trillion Wealth Tax in the Senate

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Posted by Isabelle Morales on Monday, February 8th, 2021, 12:40 PM PERMALINK

As her first act after joining the Senate Finance Committee, Senator Elizabeth Warren (D-Mass.) plans to introduce legislation calling for a $2.75 trillion wealth tax.

A wealth tax is an annual tax on a taxpayer’s assets. This tax leads to double taxation as it is imposed in addition to income taxes and is imposed on the same assets year after year. As reported by Fox Business, Warren’s proposal would impose a tax on taxpayers who have assets above $50 million with a top rate of 6 percent per year. 

This tax would be unconstitutional, would harm the economy, would give the IRS immense power, would be difficult or impossible to calculate and enforce, and will almost certainly grow in size to hit millions of taxpayers. 

A "wealth tax" is unconstitutional. Article 1, Section 9, Clause 4 states: "No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken."  

It is abundantly clear that a wealth tax is a direct tax. Federalist No. 36 explained that taxes on “houses and lands” were direct taxes. Supreme Court majorities have said on at least seven occasions that federal taxes on real property are “direct taxes.” With this condition in mind, it is also clear that Warren’s plan would not be apportioned based on state population, making it inconsistent with Article 1, Section 9.   

As explained by Daniel Hemel and Rebecca Kysar in the New York Times, “We are tax law professors who identify as liberal Democrats, donate to Democratic candidates, publicly opposed the Trump tax cuts and strongly support higher taxes on the affluent… We are worried, though, that leading figures in our party are coalescing around an idea whose constitutionality is doubtful at best.”  

A wealth tax would harm the economy. According to an American Action Forum (AAF) study, a wealth tax would decrease innovation and investment, driving down wages and causing unemployment. The same study explained that it would shrink GDP by $1.1 trillion over the first ten years, and then continue to shrink it each year by $283 billion, or 1 percent of GDP. Currently, the United States’ GDP is $21.43 trillion. The CBO predicts that by 2030, the GDP will be $32 trillion. If a wealth tax was implemented, this single tax would, quite literally, cut into over 10 percent of those gains in GDP.  

This tax would result in a loss of $785 billion in labor income. Over the long run, wage losses would amount to $241 billion annually. As described in AAF’s study, “In short, over the long run Warren’s wealth tax is more damaging to workers than anyone else.”  

A wealth tax would give the IRS immense, invasive power. Warren's "wealth tax" would empower IRS agents to keep a list of all household assets, an extremely invasive power. With the IRS’s history of discrimination and malpractice, this knowledge is especially concerning. The IRS would also have the power to pick a date to value assets, as they may change or be gifted to others throughout the year.  

The Warren "wealth tax" also includes a 40% "exit tax." Even the Washington Post editorial board said this arrangement "conveys a certain authoritarian odor," as it binds people to the United States with severe financial consequences for deciding to leave.  

A wealth tax would be difficult to implement and enforce. One report from the left-of-center Institute on Taxation and Economic Policy suggests that the IRS would need to spend $5 billion to properly enforce and administer a wealth tax. If this money was spent exclusively on IRS employees, it would be the equivalent of 80,800 new full-time agents, twice the current IRS’s workforce.  

Even if new workers are hired and more money is spent to enforce a wealth tax, it is still unlikely that the IRS would be able to pull it off. This is because there are extremely expensive compliance costs, distorted savings and investment, and difficulty valuing non-liquid assets as reasons for repeal.   

Several countries have repealed their wealth taxes for these exact reasons. In 1995, 15 countries had a wealth tax, 11 of which failed and were repealed. The countries that have repealed their wealth taxes are Sweden, Denmark, the Netherlands, Austria, Finland, France, Germany, Iceland, Luxembourg, Ireland, and Italy. In addition to cost of enforcement, which Austria cited specifically, and the difficulty of valuing assets, these countries also found that the tax was ineffective at combating wealth insecurity and did not redistribute wealth in favor of low-to-middle income earners.     

The wealth tax would be a tool to expand the size and scope of the federal government. To draw a parallel, Congress enacted the Alternative Minimum Tax (AMT) in 1969 following the discovery that 155 people with adjusted gross income above $200,000 had paid zero federal income tax. The AMT grew so large that it was projected to tax nearly 30 million Americans (20 percent of filers) in 2010, forcing Congress to pass reforms reducing the size of the tax. Even with these fixes, the AMT still taxed 5 million American households in 2017.

Warren’s wealth tax is not indexed for inflation, so it is clear that not only it will pose serious problems upon enactment, but that it would become a growing problem for American taxpayers.  

To be certain, it is not just radical, leftist Democrats who have embraced this type of tax. Senate Finance Committee Chairman Ron Wyden (D-Ore.) has proposed a “mark-to-market” capital gains tax system which would impose a similar annual tax on illiquid assets. As explained in Vox, “For wealthy Americans who report income above $1 million or assets above $10 million for three consecutive years, taxation would no longer be tied to when people sell their stocks, artwork, or houses. It would instead happen every year that the asset gains in value.” 

This proposal is eerily similar to a wealth tax. It is important not to write off these proposals as radical propositions that will never happen. In fact, these propositions are gaining popularity among mainstream Democrats.   

Despite the repeated failures of wealth taxes around the world, the fight for one in the United States has now begun. If a wealth tax is implemented, it would defy the Constitution, harm the economy, give the IRS immense, invasive power, pose several compliance and enforcement costs, and would create a growing problem for American taxpayers.

Photo Credit: Gage Skidmore


WaPo Gives Three Pinocchios to Sanders Claim that 2017 Tax Cuts Went to the "Wealthiest People"

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Posted by Isabelle Morales on Friday, February 5th, 2021, 1:41 PM PERMALINK

In a major blow to the Democrat push to repeal the Tax Cuts and Jobs Act, the Washington Post awarded three (3) Pinocchios to the assertion that the tax cuts were for the “wealthiest people.” The Post Fact Checker stated: “Most Americans, across all income spectrums, received some sort of tax cut.”

Sen. Bernie Sanders recently repeated the lie that the 2017 tax cuts gave "$2 trillion in tax breaks for the wealthiest people in this country and the largest corporations.” The Washington Post concluded the assertion was "mostly false," and bestowed Three Pinocchios.

The Post stated:

Sanders is wrong to claim that $2 trillion in tax breaks went to the “wealthiest people in this country and the largest corporations.” Most Americans, across all income spectrums, received some sort of tax cut. But the share of the tax cuts for the top 1 percent was not as much as the share they pay in taxes — and some of the superwealthy experienced tax increases. There were limits placed on a new tax deduction for pass-through businesses owned by wealthy individuals.

The law cut the U.S. corporate tax rate from 35% -- at the time the highest rate in the developed world – to 21%, which led to growth in wages, employment, and the economy. The Post notes this was hardly a windfall for large corporations as "companies with a lot of foreign income may have ended up with higher taxes and there were limits on tax breaks given to the wealthy who own pass-through businesses."

In fact, the Post explains that the top 1 percent, who Sanders claims saw the greatest benefits, saw their taxes increase by almost $9 billion, as their share of taxes increased from 20.8 percent to 22.6 percent.

The Republican-passed Tax Cuts and Jobs Act has substantially helped low and middle income Americans:

  • American families with incomes between $50,000 and $100,000 saw their tax liability drop by twice as much as Americans with income above $1 million.
  • Americans with adjusted gross income (AGI) of $50,000 to $74,999 saw a 13.2 percent reduction in average tax liabilities between 2017 and 2018. Americans with AGI of between $75,000 and $99,999 saw a 13.6 percent reduction in average federal tax liability between 2017 and 2018. 
  • Americans with AGI of $1 million or above saw a 5.8 percent reduction in average federal tax liability between 2017 and 2018, less than half the tax cut seen by Americans with AGI between $50,000 and $100,000.
  • 90 percent of households with income between $40,000 and $64,000 saw a tax cut. Average size of that tax cut: $810. 91 percent of households with income between $64,000 and $108,000 saw a tax cut. Average size of that tax cut: $1,400
  • The Tax Cuts and Jobs Act doubled the standard deduction for an individual from $6,000 to $12,000 and for a family from $12,000 to $24,000.
  • The Tax Cuts and Jobs Act doubled the child tax credit from $1,000 to $2,000 per child.
  • Over 2.6 million jobs were created in 2018 and over 5.4 million jobs have been created since the beginning of 2017 according to the Bureau of Labor Statistics. Nominal wages have grown by 3.4 percent over the last year, a ten-year high.
  • The Tax Cuts and Jobs Act repealed the individual mandate tax, which imposed a $695-$2,085 penalty on those who did not buy “qualifying” health insurance.  79 percent of taxpayers (5,264,380 households) that paid the individual mandate made less than $50,000 in annual income.

 

Several left-leaning national media outlets have acknowledged the fact that the Tax Cuts and Jobs Act helped middle income households:

New York Times: "Most people got a tax cut."

Washington Post: “Most Americans received a tax cut.”

Washington Post: “Most Americans, across all income spectrums, received some sort of tax cut.”

CNN: The facts are, most Americans got a tax cut.”

CNN: "The majority of people in the United States of America did receive a tax cut."

H&R Block: “The vast majority of people did get a tax cut.”

FactCheck.org: "Most people got some kind of tax cut in 2018 as a result of the law."

FactCheck.org: "The vast majority (82 percent) of middle-income earners — those with income between about $49,000 and $86,000 — received a tax cut that averaged about $1,050.

New York Times also noted the “sustained — and misleading — effort by liberal opponents of the law to brand it as a broad middle-class tax increase.”

The left continues to push the lie that the TCJA only benefited upper income households and large corporations. In reality, there is abundant data which shows that low and middle income Americans saw the most substantial gains. 

The Washington Post called out Sanders for perpetuating this false narrative. This will not stop President Joe Biden, Vice President Kamala Harris and congressional Democrats from repeating the lie as they try to repeal the TCJA.

Photo Credit: Matt Johnson


ATR Supports Sen. Tim Scott's Amendment to Prohibit Minimum Wage Increase During Pandemic

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Posted by Isabelle Morales on Thursday, February 4th, 2021, 11:45 AM PERMALINK

The U.S. Senate will soon vote on the Fiscal Year 2021 Budget resolution, S.Con.Res. 5. Senator Tim Scott introduced an amendment to this resolution which would prohibit an increase in the minimum wage from taking effect during the pandemic.

Americans for Tax Reform supports this amendment and applauds Senator Scott for working to protect American workers during a time of already-high unemployment. If a minimum wage were to be implemented, it would reduce jobs, increase automation, and crush small businesses. During a pandemic, which has resulted in an economic downturn, these effects would be even more detrimental.

A recent report from the Employment Policies Institute (EPI) found that a nationwide mandate for a $15 minimum wage would cost the U.S. economy two million jobs over the long term.

Out of the two million jobs that would be lost to a $15 minimum wage, 900,000 of the job losses will be concentrated in restaurants, bars and other food services. Notably, these sectors are ones hit hardest during the pandemic. Even so, Democrats are certainly not letting a crisis go to waste, as they are actively pushing for a $15 minimum wage. 

The EPI analysis found that the weight of these job losses will be felt by young workers and women. Other sources have found disproportionate negative effects on ex-convicts, Black/Hispanic workers, and less-skilled/less-experienced workers. This policy would hurt the very people Democrats claim to champion.

A minimum wage increase will also speed up automation. As Economists Grace Lordan of the London School of Economics and David Neumark of UC Irvine explain in their study: “Based on data from 1980-2015, we find that increasing the minimum wage decreases significantly the share of automatable employment held by low-skilled workers.”  

Recently, Americans for Tax Reform led a coalition with 62 groups, activists, and legislators, releasing a letter to members of Congress in opposition to a $15 federal minimum wage. 

Among other points, the letter explains how this law would hurt small businesses:

"Small businesses with thin margins would be forced to pass the costs onto consumers, which could lead to a decline in businesses, a loss of revenue, and layoffs. Businesses that have closed temporarily due to the pandemic may decide not to reopen at all in the face of a higher minimum wage, and many employers will forgo hiring new workers because they cannot afford them."   

ATR urges members of Congress to support Senator Scott's amendment to prohibit an increase in the minimum wage from taking effect during the pandemic.

Photo Credit: Gage Skidmore


Biden OMB Pick Neera Tanden Supports Several Tax Hikes

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Posted by Isabelle Morales on Tuesday, February 2nd, 2021, 3:25 PM PERMALINK

Neera Tanden, President Joe Biden’s pick to lead the Office of Management and Budget (OMB), supports numerous harmful tax increases including a soda tax, a carbon tax, full repeal of the Tax Cuts and Jobs Act, and increased Obamacare taxes.

Each of these taxes would violate Biden pledge not to raise a single penny of taxes on anyone making less than $400,000 a year.

The OMB Director works to enact the President’s budget proposals and has significant influence on tax, spending, and regulation. This pick by President Joe Biden flies in the face of his call for unity and framing as a "moderate." 

Neera Tanden wants to impose a steep national soda tax.

Tanden endorsed the “Medicare for America Act,” legislation introduced by House Democrats that imposed a one cent tax per 4.2 grams of caloric sweetener in sugary drinks.

If one of these sugary drink taxes were imposed, it could result in a 55 to 67 cent tax on a 2-liter bottle of Coca-Cola. A single 2 liter bottle of Coca-Cola costs anywhere from $1.25 to $1.70, so this tax could total 50 percent of the cost of the product. With the Tanden soda tax burden, the cost of a 12-pack of soda could increase by $1.11 to $1.44.

A tax on sugary drinks would also be extremely regressive and disproportionately harm low-income Americans. In fact, according to a 2018 report from the Tax Foundation, 47 percent of the tax collections from a sugary drink excise tax would come from households with income under $50,000.

Soda taxes are so harmful, even Bernie Sanders opposes them.

During his 2016 presidential bid Bernie Sanders slammed Hillary Clinton’s endorsement of a soda tax. Sanders said:

“The mechanism here is fairly regressive. And that is, it will be increasing taxes on low income and working people.”

Sanders went on to note that Clinton’s embrace of a soda tax violated her pledge to the American people not to support any tax increase on Americans making less than $250,000 per year.

"Frankly, I am very surprised that Secretary Clinton would support this regressive tax after pledging not to raise taxes on anyone making less than $250,000. This proposal clearly violates her pledge," Sanders said.

Neera Tanden wants to impose a carbon tax. 

Tanden supports a carbon tax, stating, "We... believe that we have to have some form of tax on carbon." A carbon tax would harm low-income households and increase the cost of electricity and household goods.

In 2016, Hillary Clinton decided to oppose a carbon tax after she learned the following from an internal Clinton report prepared by policy staff: a carbon tax would devastate low-income households, would cause gas prices to increase 40 cents a gallon and residential electricity prices to increase 12% - 21%, would cause household energy bills to go up significantly, and would increase the cost of household goods and services.

Neera Tanden wants to raise taxes by repealing the Tax Cuts and Jobs Act.

Tanden's endorsement of the “Medicare for America Act,” includes a repeal of the Tax Cuts and Jobs Act. 

In one statement, Tanden says, "President Donald Trump and congressional Republican leaders can dress up this bill all they want, but the reality is this: The House tax legislation is a grade-A scam." In another, she claims that "the tax scam slated to be enacted today is one of the most immoral, venal pieces of legislation I have seen in my two decades working in policy and politics."

If the TCJA was repealed:

  • A family of four earning the median income of $73,000 would see a $2,000 tax increase each year.
  • The child tax credit taken by 39 million American families will be cut in half.
  • Millions of low and middle-income households would be stuck paying the Obamacare individual mandate tax of $695 - $2,085. This tax was zeroed out as part of the Tax Cuts and Jobs Act. Biden has vowed to re-impose this tax.
  • The USA would have the highest corporate income tax rate in the developed world, higher than China (25 percent), the United Kingdom (19 percent), Canada (26.8 percent), and Ireland (12.5 percent). 
  • The 20 percent small business deduction taken by 18.6 million Americans would be repealed.
  • Utility bills would go up in all 50 states as a direct result of the corporate income tax increase.  
  • Millions of households would see their standard deduction cut in half, adding to their tax complexity as they are forced to itemize their deductions and deal with the shoebox full of receipts on top of the refrigerator.

 

Neera Tanden supports increasing Obamacare taxes, like the Medicare payroll tax and the Obama-Biden net investment income tax. 

The Medicare for America Act supported by Tanden calls for sharply increasing several Obamacare taxes. The legislation would increase the 0.9 percent Medicare Payroll tax to 4 percent and increase the 3.8 percent net investment income tax (NIIT) to 6.9 percent. Obama and then-Vice President Biden purposefully chose not to index the NIIT to inflation, so each year more and more Americans are ensnared by the tax and eventually everyone will pay it. The NIIT hits individuals making $200,000 and families making $250,000. Every year, a greater share of households are stuck paying the tax. It should be repealed, not expanded.

The 3.8 percent NIIT falls on many small businesses that file through the individual code and would be on top of the 39.6 percent federal rate (assuming repeal of the TCJA). This could see small businesses paying a federal rate of 46.5 percent, and rates approaching 60 percent after state taxes.

Similarly, the 4 percent Medicare Payroll tax would be levied on individuals in addition to the 39.6 percent rate. Biden’s other proposed tax increases could already see taxpayers in New York pay a top rate of 62 percent. Adding the 4 percent tax increase would see this increase to 65 percent.

Given the influential role Neera Tanden is taking in the Biden administration, her support for these steep tax hikes is especially concerning. Each and every one of these tax hikes would be a blatant violation of Joe Biden's pledge not to raise a single penny of taxes on anyone earning less than $400,000 a year. These policies would hurt low and middle-income Americans at a time when they are most vulnerable and in need of relief. 

Photo Credit: Center for American Progress


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