Jack Fencl

White House: Dems' Carbon Border Tax Breaks Biden’s $400,000 Tax Pledge

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Posted by Jack Fencl on Wednesday, August 25th, 2021, 5:11 PM PERMALINK

The White House is withholding support for a proposal to impose a carbon border tax as part of Democrats’ $3.5 trillion package filled with wasteful spending and tax increases over concerns that it would violate President Biden’s pledge not to raise taxes on anyone making less than $400,000 per year.

According to recent reporting from Reuters, “the White House is concerned the Democrats' proposal will raise prices on a host of consumer goods, from cars to appliances, and conflict with Biden's pledge not to tax any American earning less than $400,000 per year.”

The White House is right to worry about the increased costs a carbon border tax would impose on all American consumers, including those earning less than $400,000. The proposed carbon border tax would be nearly indistinguishable from a tariff, resulting in higher prices for consumers that would be disproportionately felt by poorer Americans forced to spend a larger share of their income on the many everyday products containing imported materials subject to the tax. 

While details are still vague, the Democrat proposal would impose a tax on various imported goods including aluminum, cement, iron, steel, natural gas, petroleum, and coal. The level of tax would be dependent upon the level of greenhouse gas emissions from the exporting country. The proposal mirrors legislation introduced by Senator Chris Coons (D-Delaware) earlier this year which was estimated to be a $16 billion annual tax on American consumers and hit 12% of all U.S. imports.  

While Democrats message their carbon border tax as a “polluter fee” meant to incentivize the reduction of greenhouse gas emissions from exporting countries, in practice the brunt of the tax would be faced by American consumers paying higher prices for goods. Additionally, as Kyle Pomerleau of the American Enterprise Institute points out, the Democrats' proposal lacks a rebate on exports – meaning the plan is not a true border adjustment but a tariff - and would not offset the incentive to shift domestic production overseas.

Americans for Tax Reform urges lawmakers and President Biden to oppose Democrats’ proposed carbon border tax.

Photo Credit: Arian Zwegers

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Infrastructure Bill Contains $14.5 Billion Superfund Tax Hike, Hits Critical Minerals

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Posted by Jack Fencl on Wednesday, August 4th, 2021, 1:32 PM PERMALINK

The $1.2 trillion infrastructure bill making its way through the Senate contains a $14.55 billion tax hike on American chemical and mineral producers.

Section 80201 of the bill would revive long-expired Superfund excise taxes at twice their previous level. This direct tax hike on American producers would result in higher prices for consumers, threaten thousands of jobs, and undermine domestic critical mineral development.

Senator Ted Cruz (R-Texas) has introduced an amendment (#2388) that would strike the inclusion of the Superfund Excise Tax from the bill. Americans for Tax Reform supports the Cruz amendment and urges lawmakers to vote in favor of the amendment. 

The Superfund taxes were last in effect in the mid-1990s, when Congress allowed them to expire on the grounds that they were burdensome and unnecessary. Despite being sold as a "user-fee" to fund the Hazardous Substance Superfund, only $3.5 billion of $14.55 billion of new revenue projected by the Joint Committee on Taxation is authorized for the Superfund. 

Critical Minerals are hit by the tax

The tax would apply to a list of 42 chemicals and minerals. Four of these substances—Arsenic, Antimony, Chromium, and Cobalt—are listed as “critical minerals” by the Department of Interior, which means they are “essential to the economic and national security of the United States” and have supply chains that are “vulnerable to disruption.” 

Increasing taxes on critical minerals contradicts the stated goals of lawmakers seeking to ramp up our domestic critical mineral supply chain. It makes little sense to impose harsh tax hikes on these vital resources, especially at a time when policymakers are growing increasingly concerned about the potential for countries like China to cause problems for American supply chains. 

Coalition of taxpayer groups opposes the Superfund Excise Tax

A coalition of taxpayer advocacy organizations, including Americans for Tax Reform, wrote a letter in July expressing concern about the implications of reimposing the Superfund excise taxes: “A tax increase on job creators, individuals, or consumers is always a precarious endeavor, but in the midst of a recovery from a downturn precipitated by the response to the pandemic could threaten our economic vitality in the years to come.”

Threatens 7,500 Jobs

An economic analysis by the American Chemistry Council found that nearly 7,500 jobs would be at risk if the tax increase were passed. Moreover, 44 plants that produce critical chemicals, minerals, and metals could potentially be forced to shut down.

The following chemicals and minerals would be subject to Superfund excise taxes:

Substance

 Tax per ton 

Acetylene

$9.74 

Benzene

$9.74 

Butane

$9.74 

Butylene

$9.74 

Butadiene

$9.74 

Ethylene

$9.74 

Methane

$6.88 

Napthalene

$9.74 

Propylene

$9.74 

Toluene

$9.74 

Xylene

$9.74 

Ammonia

$5.28

Antimony

$8.90

Antimony trioxide

$7.50 

Arsenic

$8.90 

Arsenic trioxide

$6.82

Barium sulfide

$4.60 

Bromine

$8.90 

Cadmium

$8.90 

Chlorine

$5.40 

Chromium

$8.90 

Chromite

$3.04

Potassium dichromate

$3.38 

Sodium dichromate

$3.74 

Cobalt

$8.90

Cupric sulfate

$3.74 

Cupric oxide

$7.18

Cuprous oxide

$7.94

Hydrochloric acid

$0.58 

Hydrogen fluoride

$8.46

Lead oxide

$8.28

Mercury

$8.90

Nickel

$8.90 

Phosphorus

$8.90 

Stannous chloride

$5.70

Stannic chloride 

$4.24 

Zinc chloride

$4.44 

Zinc sulfate

$3.80 

Potassium hydroxide 

$0.44 

Sodium hydroxide

$0.56

Sulfuric acid

$0.52 

Nitric acid

$0.48

 

Lawmakers should put American consumers first and remove this tax increase from the bipartisan infrastructure package.  

Photo Credit: Meetthemets18

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Bernie’s Budget Spends More on SALT Cap Than Roads and Bridges

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Posted by Jack Fencl on Thursday, June 24th, 2021, 2:23 PM PERMALINK

Senate Budget Committee Chairman Bernie Sanders' wants more money for a tax break he has described as "for rich people in blue states" than he does for roads and bridges.

Sanders' $6 trillion budget resolution is billed as the Democrats' more progressive and "economically sweeping version" of an infrastructure package compared to narrower bipartisan negotiations. Yet Sanders' "infrastructure" package would spend $20 billion more on regressive SALT cap relief than it would on roads and bridges.

According to a draft budget outline, Sanders' plan allocates $120 billion for raising the state and local tax (SALT) deduction cap, a tax provision which Sanders himself previously admitted "sends a terrible, terrible message" to "working families." In contrast, the plan would spend only $100 billion on roads and bridges.

Sanders' prioritization of the SALT cap over roads and bridges demonstrates what little interest Democrats have in actual infrastructure and are instead focused on a grab bag of progressive priorities designed to reward Democrat constituencies. 

The SALT deduction permits individuals to write-off some of their state and local taxes when filing at the federal level. In 2017, the Republican Tax Cuts and Jobs Act (TCJA) capped the deduction at $10,000 in order to pay for much needed tax relief for working- and middle-class Americans. The change to the SALT cap left most Americans unaffected but did impact wealthy people living in high-tax, blue states like California and New York—aka the Democratic donor class. 

Despite its extreme regressively, congressional Democrats have been pushing to repeal the SALT cap from day one. According to the nonpartisan Tax Foundation, prior to the TCJA, 91 percent of the benefit of the SALT deduction went to people making over $100,000 per year. Even the left-leaning Tax Policy Center notes 70 percent of the benefit of SALT cap repeal would go to those making more than $500,000 per year; 96 percent of middle-income households would receive no benefit at all, and the return for those who do would be vanishingly small. 

Photo Credit: Gage Skidmore

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Bernie Sanders Flip-Flops on SALT Cap in Proposed Budget

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Posted by Jack Fencl on Tuesday, June 22nd, 2021, 6:15 PM PERMALINK

Senate Budget Chairman Bernie Sanders included $120 billion for raising the cap on the state and local tax (SALT) deduction in draft budget outline released Tuesday afternoon, a proposal which he previously opposed and labled as a "tax break for rich people in blue states."

In an interview with Axios last month, Sen. Bernie Sanders stated his opposition to efforts by congressional Democrats to repeal the state and local tax (SALT) deduction cap.

“It sends a terrible, terrible message,” Sanders said. “You can’t be on the side of the wealthy and powerful if you’re really going to fight for working families,” the self-proclaimed socialist continued.

Now, Sanders is singing a different tune. In a total flip-flop, Sanders now supports raising the SALT cap, according to a draft budget resolution outline obtained by Bloomberg comparing his proposals to those of President Biden. The plan allocates $120 billion for the SALT deduction and would overwhelmingly benefit wealthy residents living in blue states like California and New York. 

So much for fighting for working families. 

The SALT cap was first implemented as part of the 2017 Republican Tax Cuts and Jobs Act, which significantly reduced the tax burden for the vast majority of Americans.

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Biden's Press Secretary Makes False Claim about Gas Prices

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Posted by Jack Fencl on Monday, June 21st, 2021, 4:46 PM PERMALINK

White House Press Secretary Jen Psaki falsely claimed on Monday that current gas prices under President Biden are at the same level now as they were in June of 2018.

In a Twitter exchange with Rep. Jim Jordan (R-Ohio), Psaki wrote, “You forgot to mention that gas prices are the same now as they were in June 2018. Or that this time last year unemployment was 11.1% -- today it’s 5.8%.”

But in reality, the average price of a gallon of gas at this point of June of 2018 was $2.83—today, it is $3.07. This means consumers in June of 2021 are paying 24 cents more per gallon than they did three years ago, making Psaki’s claim that “gas prices are the same” laughably false. 

Psaki was obviously cherry-picking data by comparing current gas prices with those of 2018 rather than prices of June of 2019 - a better pre-pandemic baseline for comparison. Indeed, when one looks at the more appropriate comparison, the increase in gas prices is even starker. At this point in June of 2019, gas was selling for $2.65 a gallon, or $.42 less than today. 

The U.S. Energy Information Administration has conveniently compiled weekly gas prices going back to 1990. 

Additionally, Psaki’s treatment of unemployment data is extremely misleading. While in this case her numbers are at least accurate, she fails to mention that summer of 2020 was middle of the COVID-19 pandemic. A better comparison would be to June of 2019, as the economy had yet to suffer any pandemic-related effects. 

It appears that Psaki chose to obscure the comparison because it reflects poorly on the Biden administration. According to the Bureau of Labor Statistics, the unemployment rate in June of 2019 was 3.6 percent, whereas it is currently 5.8 percent, a full 2.2 percentage points higher. 

 

Photo Credit: The White House

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Judge Rips Biden’s Ban on Oil and Gas Leases

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Posted by Jack Fencl on Thursday, June 17th, 2021, 2:23 PM PERMALINK

A Louisiana judge issued a preliminary injunction on Tuesday against the Biden administration’s pause on new oil and gas leases on public lands. The decision is a major win for the rule of law and comes in response to a lawsuit filed by a group of 13 Republican state attorneys general, who claimed that Biden ignored legal rule-making requirements when he banned new drilling leases on federally owned land during his first week in office. 

Judge Terry Doughty, a 2017 Trump appointee, wrote, “The Plaintiff States’ claims are substantial. Millions and possibly billions of dollars are at stake. Local government funding, jobs for Plaintiff State workers, and funds for the restoration of Louisiana’s Coastline are at stake. Plaintiff States have a reliance interest in the proceeds derived from offshore and on land oil and gas lease sales.” The injunction applies nationwide and will remain in effect as the lawsuit proceeds throughout the court system. 

The lawsuit is led by Louisiana Attorney General Jeff Landry, who, upon announcement of the ruling, said, “This is a victory not only for the rule of law, but also for the thousands of workers who produce affordable energy for Americans. We appreciate that federal courts have recognized President Biden is completely outside his authority in his attempt to shut down oil and gas leases on federal lands.”

Louisiana Senator Bill Cassidy also celebrated the decision: “This is fantastic news for workers in Louisiana whose livelihoods are being threatened by the administration’s thoughtless energy policy. The president should not be able to take away tens of thousands of jobs to fulfill a campaign promise. We need a long-term, all-of-the-above strategy that does not pick winners and losers. The Department of the Interior should immediately begin moving forward with another offshore lease sale.”

The injunction is a major win for America’s energy sector, which has been battered in recent months by the Biden administration’s radical climate agenda. The episode serves as a key reminder of the importance of federalism and separation of powers, as it demonstrates that GOP-led states and the courts can serve as a bulwark against Biden’s most destructive policies. 

Photo Credit: CGP Grey

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ATR Applauds Scalise-McKinley Anti-Carbon Tax Resolution

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Posted by Jack Fencl on Tuesday, May 18th, 2021, 3:57 PM PERMALINK

House Republican Whip Steve Scalise (R-La.) and Congressman David McKinley (R-W.Va.) re-introduced their anti-carbon tax resolution on Monday. The lawmakers have presented the resolution to every Congress since 2013 in order to voice Republican opposition to the job-killing energy tax.  

"With the reintroduction of my anti-carbon tax resolution with Congressman McKinley, all members of Congress will have the opportunity to be on record opposing a costly, job-killing carbon tax that would devastate families and jeopardize America’s energy security,” Whip Scalise said in a statement.

The decision to re-introduction the anti-carbon tax resolution on Tax Day, May 17th, signals the continued opposition to energy taxes from House Republicans and GOP leadership.

Speaking in support of the resolution, ATR President Grover Norquist issued the following statement:

Americans for Tax Reform applauds today's re-introduction of the Scalise-McKinley anti-carbon tax resolution. A carbon tax is a gas tax on steroids that would kill hundreds of thousands of jobs and raise energy costs across the board.

A carbon tax would make it more expensive for Americans to fill up their cars, pay their utility bills, and shop at the grocery store. Congress should focus on reducing energy costs for American families, not adding to their burden.

The decision to introduce this resolution on Tax Day signals that Republican leadership is rightly committed to protecting affordable energy for American families and that the GOP will stand between taxpayers and a middle-class tax hike, regardless of how Democrats dress it up.

In March, a coalition of over 60 conservative and free-market organizations led by Americans for Tax Reform released a letter to Congress stating their unified opposition to "any form of a carbon tax."

The Scalise-McKinley resolution has enjoyed substantial support in years past, having passed the House in July of 2018 by a 229-180 vote margin. It offers members of Congress an opportunity to go on the record to demonstrate their opposition to the extreme policies being pushed by Joe Biden and Nancy Pelosi. 

ATR applauds Congressmen Scalise and McKinley for leading the fight against a carbon tax and applauds their commitment to protecting American families and businesses from a carbon tax.

Photo Credit: Martin Falbisoner

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New Research Examines State-By-State Growth In Per Capita State Spending

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Posted by Jack Fencl on Tuesday, August 11th, 2020, 2:46 PM PERMALINK

State government spending nationwide has grown steadily over the past two decades, according to new research conducted by Americans for Tax Reform, utilizing data from the National Association of State Budget Officers and the Census Bureau. 

After controlling for inflation, average per capita state spending rose by 25.58% between 2000 and 2018, with the vast majority of the growth taking place between 2000 and 2010. In 2000, inflation adjusted average per capita state spending was $4,885.30. In 2010, inflation adjusted average per capita state spending was $6,033.84. By 2018, inflation adjusted average per capita state spending had risen to $6,134.97.   

Inflation adjusted average per capita state spending in most states spiked rapidly from 2000 - 2010, rising by an average of 23.51% that decade (the Bush years were bad for spending at both federal and state levels). After the 2010 wave election, average per capita state spending was held nearly flat, rising only 1.68% between 2010 and 2018. 

Between 2000 and 2018, inflation adjusted per capita state spending rose in 49 states. Only Florida saw a reduction in per capita spending since 2000, with the Sunshine State experiencing a 14.67% decline over the 18 year period. Florida was also the only state that had a decline in per capita state spending in the decade from 2000-2010. Today, Florida has the lowest per capita state spending at $3,696.19 (2018 dollars). This, coupled with the state’s lack of an income tax, its supermajority requirement for the state legislature to raise taxes, and its national leadership in expanding school choice make Florida a limited government success story. 

Twelve states saw their per capita spending grow by more than 40% over the last two decades, with the table below listing the ten states where spending grew most rapidly. West Virginia has the unfortunate distinction of leading the pack, with the Mountain State’s spending growing by an astonishing 79.89%. While this is certainly a dubious honor, West Virginia has made some progress in recent years, with per capita state spending declining by 26.21% between 2010 and 2018. 

10 States Where Per Capita State Spending Grew The Most Since 2000

State

% Per Capita Spending Growth ('00-'18)

West Virginia

78.89%

Colorado

77.07%

Vermont

70.24%

Wyoming

62.88%

Arkansas 

54.87%

North Dakota

51.77%

New York

49.04%

Montana 

45.68%

Pennsylvania 

45.50%

Maryland 

44.02%

 

On the flip side, the table below lists the ten states that did the best job at keeping spending under control over the past two decades. Among this group, the four states that stand out for their superb fiscal restraint are Florida, Missouri, South Carolina, and North Carolina. These are the only states that held per capita spending growth to single digits (with Florida seeing a real reduction) since the turn of the century. 

10 States Where Per Capita State Spending Grew The Least Since 2000

State

% Per Capita

Spending

Growth ('00-'18)

Florida

-14.67%

Missouri

1.66%

South Carolina

2.02%

North Carolina

2.64%

Georgia 

10.53%

Michigan

10.58%

Utah

10.72%

Idaho

11.11%

New Hampshire

13.14%

Maine

13.40%

 

Below is current (2018 data) per capita spending for all 50 states, ranked lowest to highest. The national average is $6,134.97.   

50 States 2018 Per Capita Spending, Ranked Lowest to Highest

State

2018 Per Capita Spending

Florida

$3,696.19 

Texas

$4,024.22 

Missouri

$4,253.45 

New Hampshire

$4,529.85 

Idaho

$4,548.89 

Utah

$4,689.64 

Nevada 

$4,711.40 

North Carolina

$4,800.02 

Georgia 

$4,889.48 

South Carolina

$4,967.79 

Indiana 

$5,021.43 

Tennessee

$5,049.01 

South Dakota

$5,072.28 

Arizona 

$5,238.04 

Kansas

$5,473.05 

Alabama

$5,577.70 

Michigan

$5,670.43 

Illinois 

$5,720.55 

Oklahoma 

$5,753.21 

Ohio

$5,967.88 

Washington

$6,116.67 

Virginia

$6,125.66 

Maine

$6,281.29 

Nebraska 

$6,305.00 

Montana 

$6,554.38 

Mississippi

$6,592.71 

Pennsylvania 

$6,633.04 

Louisiana 

$6,707.10 

California 

$6,833.68 

New Jersey

$6,839.39 

Colorado

$6,995.61 

Minnesota

$7,102.61 

Maryland 

$7,256.04 

Iowa

$7,426.12 

Kentucky

$7,633.00 

Wyoming

$7,661.00 

North Dakota

$7,768.31 

Wisconsin

$8,299.57 

Massachusetts

$8,299.87 

New York

$8,384.08 

Arkansas 

$8,518.03 

Rhode Island

$8,751.88 

Vermont

$9,089.34 

Connecticut

$9,282.32 

West Virginia

$9,342.73 

Oregon

$9,713.08 

New Mexico

$9,776.65 

Hawaii

$10,699.05 

Delaware

$11,234.84 

Alaska

$14,013.68 


An examination of what happened following the 2010 wave election, a period during which Republicans achieved a level of control in state legislatures not seen in roughly a century, shows that states exerted much more fiscal restraint compared to the previous decade. 

The table below lists the ten states that experienced the most precipitous decline in spending per capita between 2010 and 2018. While these ten saw the most dramatic cuts in per capita state spending, 22 states in total experienced a reduction over the period. The overwhelming majority of states where spending declined are Republican led, and in the historically blue states that saw spending drop, Republicans held power at some point over that eight year period.

10 States Where Per Capita State Spending Declined The Most After 2010

State

% Per Capita Spending Growth ('10-'18)

Wyoming

-50.97%

West Virginia

-26.21%

Mississippi

-25.30%

North Carolina

-18.16%

Louisiana 

-16.49%

Maine

-13.32%

Alaska

-11.03%

Utah

-10.32%

Oklahoma 

-10.04%

Massachusetts

-7.74%

 

On the flip side, some states saw their spending per capita continue to rise at an unsustainable clip after 2010. The table below lists the ten states where spending rose most rapidly from 2010-2018. This list is mostly comprised of blue states, with the usual culprits like Illinois, Hawaii, and New York seeing some of the most egregious spending growth. 

10 States Where Per Capita State Spending Grew The Most After 2010

State

% Per Capita Spending Growth ('10-'18)

Nevada 

33.42%

Illinois 

29.30%

Connecticut

18.39%

Hawaii

15.71%

New Mexico

13.97%

Alabama

12.45%

Kentucky

11.06%

Maryland 

9.96%

New York

9.50%

Minnesota

9.33%


Overall, two clear pictures emerge from the data. The first is that per capita state spending has been growing at an alarming rate over the past two decades. The second is that continued profligacy is not inevitable and that course correction can occur. The post-2010 state spending trends prove that it is possible for states to exercise fiscal restraint, provided that those in positions of power have the necessary political will and courage. 

[State spending comes from the National Association of State Budget Officers annual spending reports for years 20002010 and 2018. Population information provided by the United States Census Bureau.]

Photo Credit: Peter Fitzgerald

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Ohio Expands Prevailing Wage Mandates, Unnecessarily Inflating The Cost Of Infrastructure In The Buckeye State

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Posted by Jack Fencl on Thursday, July 30th, 2020, 1:16 PM PERMALINK

The arrest and indictment of Ohio House Speaker Larry Householder on federal racketeering charges has made national headlines and shaken up Ohio’s political leadership. Unfortunately, bad decisions are nothing new in Columbus, as illustrated by the recent passage of Senate Bill 4 (SB 4). 

Recently enacted with bipartisan support and signed into law by Gov. DeWine, SB 4 allocates funding for construction and conservation projects, including money for new schools. But that’s not all it does. House Republican leaders, through an opaque process, amended the bill to include an expansion of the state’s prevailing wage law, which will increase the taxpayer cost of many construction projects, reducing the number of projects that can be undertaken in the first place. 

Prevailing wage laws require government funded construction jobs to pay workers inflated, typically union-dictated wages. These laws benefit unions by killing competition, but burden taxpayers with added costs, which is why many neighboring states, including West Virginia, Michigan, and Wisconsin, have repealed them in recent years. Alas, Ohio legislative leaders put special interests ahead of state interests and expanded, rather than repealed, prevailing wage in Ohio. 

In 1997, Republican lawmakers exempted Transportation Improvement Districts (TDIs) from prevailing/inflated wage laws as a way to save taxpayer money and promote economic development. Far from being a loophole, as some defenders of prevailing wage suggest, this exemption was well-crafted and merited. SB 4 expands prevailing wage by ending the exemption for TDIs, which include more than half the counties in Ohio. 

The expansion of prevailing wage is bad policy that will cost Ohio taxpayers dearly, also concerning is the process in which prevailing wage expansion was passed. As already mentioned, SB 4 allocates funding for capital improvement projects; it has nothing to do with prevailing wage laws and the amendment may even be illegal under the single subject rule of the Ohio Constitution. A similar attempt to expand prevailing wage was voted down less than two months ago, when Democrats in the Senate attempted to amend a land conveyance bill to include the exact same prevailing wage expansion. That time, Senate Republicans voted it down.  

At a time when the pandemic is putting a massive hole in Ohio’s budget, it makes no sense to expand prevailing wage mandates that needlessly and significantly increase costs for taxpayers. The bad news is that this move will harm Ohio taxpayers. The good news is that Ohio is an outlier here and most states are getting rid of their prevailing wage mandates. 

Photo Credit: Jeff Kubina

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D.C. Council Abandons Plans for Disastrous Advertising Tax Hike

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Posted by Jack Fencl on Monday, July 27th, 2020, 1:16 PM PERMALINK

In a last minute scramble, the Washington, D.C. City Council dropped its misguided plans to assess sales tax on advertising purchases. Had Council Chairman Phil Mendelson’s plan been approved, businesses throughout the nation’s capital would’ve been hit with a 3 percent sales tax on a critical business input at a time when many employers are struggling to stay afloat. 

The advertising tax was originally proposed as part of larger budget negotiations. As such, it never got a proper hearing and those who would have been harmed never had a chance to object. Aside from the opaque and hasty manner in which this misguided tax hike initially advanced, the now-aborted advertising tax was a terrible policy. 

Advertising costs are an ordinary and necessary business expense, along with payroll and rent. As such, advertising costs are and should be deductible for income tax purposes and should also be exempt from state and local sale tax. 

Taxation of business inputs like advertising, be that through the assessment of sales tax or another form of taxation, results in cascading, snowballing, and hidden additional costs for the ultimate consumer. This phenomenon is known as “tax pyramiding,” as a new tax is levied at each level of production, yielding higher and less transparent costs for the end consumer.

D.C. councilmembers aren’t the only politicians who have recently sought to raise taxes on advertising. Maryland state legislators approved a special tax on digital advertising, a levy widely viewed a clear violation of the Internet Tax Freedom Act, back in March. Governor Larry Hogan (R) smartly vetoed that tax hike last month, helping Maryland businesses avoid a costly tax hike in the middle of a recession on a crucial business input. Hogan’s veto also helped Maryland taxpayers avoid the cost of the legal suit that was sure to follow the enactment of any digital ad tax. 

The good news is that the proposal is dead. The D.C. Council approved the $16.2 billion budget on Thursday, opting to trim spending by $18 million and use accounting maneuvers to make up revenue forgone by dropping the advertising tax. Consumers and business in D.C. dodged a bullet on this one. 

Photo Credit: Mario Duran-Ortiz

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