Nathaniel Rome

States Could Learn from Reagan's 1986 Pro-Growth Tax Reform

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Posted by Nathaniel Rome on Thursday, August 6th, 2015, 4:59 PM PERMALINK

The successful 1986 Tax Reform Act, which reduced income tax rates by eliminating credits and deductions, is a great example of pro-growth tax reform. This simplification of the tax code gets government out of the business of picking winners and losers in the economy.

In recent years, state legislators have introduced proposals to “clean up” their tax codes by eliminating credits and deductions. But be careful; all too often, lawmakers look to eliminate credits and deductions without reducing rates on broad base taxes, which is nothing more than a tax increase. If lawmakers want to get rid of credits and deductions of questionable merit, fine, but that should be done as a way to pay for broad base tax rate reduction, as opposed to funding higher levels of government spending.

State tax codes are littered with billions in tax credits, deductions, exemptions, and exclusions that favor certain industries or activities. Americans for Tax Reform decided to investigate how much states could reduce their income tax by if they eliminated all income tax exemptions.

The information below is from the ten most populous states with an income tax: California, New York, Illinois, Pennsylvania, Ohio, Georgia, North Carolina, Michigan, New Jersey, and Massachusetts. (Note that large states like Texas and Florida do not have a state income tax, and Virginia does not calculate income tax expenditures.)

Between these ten states, there over $86 billion worth of income tax exemptions. If eliminated, these states could reduce their income tax rates across-the-board by between 19 and 43 percent, with four states cutting rates by over one-third.

California: If California eliminated its income tax expenditures – totaling over $40 billion – they could reduce their rates by 34 percent. Their updated tax code would look like this:

New York: If New York eliminated its income tax expenditures – totaling $11.5 billion – they could reduce their rates by 20 percent. Their updated tax code would look like this:

Illinois: If Illinois eliminated its income tax expenditures – totaling $4.35 billion – they could reduce their single rate by 20 percent. Their updated tax code would look like this:

Pennsylvania: If Pennsylvania eliminated its income tax expenditures – totaling $9 billion –they could reduce their single rate by 43 percent. Their updated tax code would look like this:

Ohio: If Ohio eliminated its income tax expenditures – totaling $2.1 billion – they could reduce their rates by 19 percent. Their updated tax code would look like this:

Georgia: If Georgia eliminated its income tax expenditures – totaling $2.65 billion – they could reduce their rates by 21 percent. Their updated tax code would look like this:

North Carolina: If North Carolina eliminated its income tax expenditures – totaling $2.7 billion – they could reduce their single rate by 19 percent. Their updated tax code would look like this:

Michigan: If Michigan eliminated its income tax expenditures – totaling $5.5 billion – they could reduce their single rate by 39 percent. Their updated tax code would look like this:

New Jersey: If New Jersey eliminated its income tax expenditures – totaling $7.8 billion – they could reduce their rates by 36 percent. Their updated tax code would look like this:

Massachusetts: If Massachusetts eliminated its income tax expenditures – totaling $2.7 billion – they could reduce their single rate by 32 percent. Their updated tax code would look like this:


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ATR Congratulates Primary Winners in Mississippi

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Posted by Nathaniel Rome on Wednesday, August 5th, 2015, 3:08 PM PERMALINK

On behalf of Americans for Tax Reform, we would like to congratulate the following incumbents and challengers for their success in the Mississippi primary. Each has signed the Taxpayer Protection Pledge, a written commitment to Mississippi taxpayers to oppose higher taxes.​


·        Gov. Phil Bryant

·        Josh Harkins (S-20)

·        Dean Kirby (S-30)

·        Angela Burks Hill (S-40)

·        Billy Hudson (S-45)

·        Gary Chism (H-37)

·        Jeff Smith (H-39)

·        Bobby Moak (H-53)

·        Alex Monsour (H-54)

·        John Moore (H-60)

·        Ray Rogers (H-61)

·        Bill Denny Jr. (H-64)

·        Stephen Horne (H-81)

·        Bill Pigott (H-99)

·        Mark S. Formby (H-108)

·        Richard Bennett (H-120)


·        Chris Caughman (S-35)

·        Dennis Quinn (S-38)

·        Dennis Debar (S-43)

·        Steve Hopkins (H-7)

·        Robert Foster (H-28)

·        Jerrerico Chambers (H-33)

·        Vance Cox (H-75)

Tony Smith, candidate for Public Service Commissioner, District 2, will be in a runoff election on August 25th

Leave “My Cash” Alone – Says Oklahoma Sheriff

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Posted by Nathaniel Rome on Wednesday, August 5th, 2015, 2:50 PM PERMALINK

Two Oklahoma Sheriffs held a question and answer session at the High Noon Club on Monday in an attempt to fight back against civil asset forfeiture reform. Sheriff Edwards of Canadian County, and his Under Sheriff, claimed that the reform bill introduced by State Senator Kyle Loveless is an attack on law enforcement and would limit their department’s ability to fight crime.

The legislation that Senator Loveless is proposing would alter the way law enforcement seizes assets from suspected criminals. His reform is not a wholesale assault on police – as the sheriff suggests – but instead an effort to restore the constitutional rights of Oklahomans.

The reform package would require law enforcement to file a conviction before assets are forfeited. Currently, the assets of many individuals who are never convicted of a crime get forfeited. It is often the responsibility of citizens who are not found guilty of any crime to go through a difficult legal process to get their assets back.

In Sheriff Edwards’ own words “whether or not [citizens] refute charges is beyond our control”. This means it is incumbent on innocent citizens to demand their money and property back from law enforcement. Instead, the burden of proof should be on law enforcement to determine if the assets were connected to a crime in the first place.

After a concerned individual recounted his unfortunate encounters with Oklahoma police, Sheriff Edwards dismissed him as having “bad luck.” It seems that Oklahomans must count on “luck” not to be improperly targeted for their property.

SB 838, the bill in question, would also transfer the assets seized to the State General Fund and away from police department budgets. Edwards claimed that this money was critical to combatting drugs and other public health risks. However, a federal audit of Oklahoma law enforcement agencies show that large sums of seized assets are returned to agency personnel in the form of salaries and benefits, for administrative tasks, and non-law enforcement purposes.

Sheriff Edwards said that his department used $400,000 of seized assets – which he states are part of “[his] cash funds” – to support operations last year. Additionally, as Senator Loveless notes, it introduces a profit motive into law enforcement. Finally, since the departments are using money that they generate themselves, they face little budgeting oversight by the state legislature. Having the seized assets go to the State General Fund allows for more predictable and responsible budgets, and removes the profit motive from local police officers so that they can better protect the peace without worrying about raising revenue.

Sheriff Edwards previously wrote a letter saying “This is without a doubt the single worst, most damning, most asinine and devastating bill I have ever seen for this State and local law enforcement.” He questioned whether Senator Loveless understood the importance of police officers in Oklahoman communities. Supporters of this reform clearly understand and appreciate the importance of law enforcement, but Oklahomans deserve to know that their property will not be taken without due process.

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Calvin Coolidge: Humility at the Highest Office

Posted by Nathaniel Rome on Monday, August 3rd, 2015, 4:31 PM PERMALINK

Ninety-one years ago today in the small town of Plymouth Notch, Vermont, something remarkable was taking place. In the early hours of the morning, a man stood in silence, staring at a recently delivered letter. “This is serious, isn’t it?” he whispers. Shortly after, the man stood in a room lit only with a kerosene lamp, with his hand on his mother’s Bible, and repeated after his father: "I do solemnly swear that I will faithfully execute the office of the President of the United States…"

And just like that, at 2:47am on August 3rd, 1923, Calvin Coolidge became the 30th president. Coolidge’s five and a half years as President would – like the story of his inauguration – be marked by humility and restraint.

The Coolidge administration was notably frugal and sought to reduce the size and scope of government. Whereas Harding was a yes man, Coolidge was just the opposite. Coolidge would issue more vetoes than all but 4 of his predecessors. He succeeded in cutting the size of government, not just slowing its growth. And he led by example, pushing for cutbacks within his own executive agencies. He once expressed dismay at the amount the federal government spent on pencils.

He did not just reduce spending; he reduced taxes commensurately. He slashed rates across-the board and simplified the code by cutting the number of rates in half. The top income rate plummeted from 70% to 28%. Coolidge made his support of tax relief clear when he said “Collecting more taxes than is absolutely necessary is legalized robbery.”

His fiscal restraint and tax reductions lead to a booming economy and shrinking national debt. Coolidge, addressing the nation in the first film recording ever of a US President, said “I want the people of America to be able to work less for the government -- and more for themselves. I want them to have the rewards of their own industry. This is the chief meaning of freedom.”

President Coolidge believed that the Government should work for the people, not the other way around. He fought against spending any dollar that was not crucial and taxing any dollar that was not absolutely necessary. When asked who lives in the White House, President Coolidge famously answered “Nobody, they just come and go.”

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Alabama Vape Shop Owner Says He'll Shut Down if Bentley Tax Hikes Pass

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Posted by Nathaniel Rome on Monday, August 3rd, 2015, 4:20 PM PERMALINK

Alabama lawmakers are currently considering a tax proposal from Governor Bentley that could shutter hundreds of small businesses and kill up to 2,000 jobs. The proposal would institute a new 25-cent per mL tax on e-cigarette liquid, making Alabama the 26th state this year to propose higher taxes on e-cigarette users.

E-cigarettes have grown in popularity as a way to quit smoking tobacco. E-cigarettes do not contain the carcinogenic chemicals that tobacco products do, and they allow users to regulate nicotine content so they can wean themselves off of the product. As one e-cigarette business owner put it: "We're not smokers, we are ex-smokers who found something we could use to get away from that nasty habit."

But according to the Breathe Easier Alliance of Alabama, a group representing e-cigarette users and business owners, the entire industry in Alabama could evaporate overnight if this tax is passed. The group argues that the tax “will force the vast majority of these businesses to close,” taking with them nearly 2,000 jobs for Alabamans.

None of Alabama’s neighbors impose a special e-cigarette excise tax, so Alabama businesses would be at an immense disadvantage. In fact, many businesses have already expressed a desire to take their business – and jobs – out of state. Lee Black, the owner of a 5 shops, put it bluntly: “If they do this tax… we’ll have to leave the state”.

The tax is an attempt by Governor Bentley to raise revenue during the state’s special budget session. The state faces a $200 million shortfall and the proposed e-cigarette tax – bundled with a tobacco tax increase – aims to raise $70 million. It is doubtful that this tax would generate anywhere near this revenue projection for a number of reasons. The proposed 25 cents per mL tax would make a 30 mL bottle of e-liquid $7.50 more expensive than at present time. Consumers would likely purchase these products from other states and online where they do not have to pay the tax. And, by forcing businesses and consumers out of state, the Alabama would lose out on potential and currently collected sales tax revenue.

Governor Bentley has been insistent on tax hikes to fill the budget hole, but there is a better alternative being discussed in the legislature: combined budget reform. Alabama is currently one of only three states that have separate Education and General Fund budgets. Combining these would free up funds and allow for more flexibility in appropriations. Legislators reconvene in Montgomery today, and will have nine days to reach their budget decision.

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ATR Sends Letter Opposing Bentley Tax Hikes

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Posted by Nathaniel Rome on Friday, July 31st, 2015, 2:45 PM PERMALINK

Americans for Tax Reform (ATR) sent a letter to Alabama legislators yesterday in opposition to Governor Bentley’s proposed tax hikes. The Governor has proposed increases in cigarette and e-cigarette taxes as well as reductions in state income tax deductions to address the $200 million shortfall in the General Fund. Next week, the legislature will reconvene with a Special Session to debate whether tax increases, spending reductions, or budgetary reforms are the best way to balance the budget.

ATR’s letter explains that tobacco taxes – like the one proposed by Governor Bentley – punish the poor and are an unreliable source of revenue. Of the 33 tobacco tax increases between 2009 and 2013, only three have them have met revenue projections. All others fell short, showing that balancing the budget on unpredictable revenue streams is irresponsible.

The letter also strongly opposes the proposed dramatic increase in e-cigarette taxes:

“With e-cigarettes, the free market has provided a solution to a problem that social engineers have not been able to address through stiff government regulations. The imposition of tax hikes on innovative products that reduce smoking and people’s dependence on tobacco cigarettes is misguided and will impede proven harm reduction methods. It will also kill jobs and discourage poor Alabamans from making the switch from cigarettes to tobacco-free alternatives.”

As an alternative to these destructive taxes, ATR encourages legislatures focus on reforming the budgetary process. Currently, Alabama is one of only three states with a separate Education and General Fund budget. Combining these budgets would allow for more flexibility when appropriating funds.

The letter concludes by pointing out that Alabama’s budget problems are not the result of undertaxation, but instead the result of overspending:

“Between 1999 and 2009, Alabama overspent beyond the rate of inflation and population growth by 21 percent. Tax hikes should be ruled out because Alabama doesn’t have a revenue problem; it has an earmarking and spending problem. As such, I would urge you to reject the Governor’s attempts to raise taxes, especially on those who can least afford it.”

Click here to see the full letter.

Good & Bad Tax Proposals Being Considered in North Carolina

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Posted by Nathaniel Rome on Monday, July 27th, 2015, 4:24 PM PERMALINK

With the recent appointment of the budget conference committee, North Carolina legislators continue to work to resolve differences between the House and Senate budgets plans. Among unresolved issues are a number of proposed tax changes. There are a number of positive changes being considered by lawmakers, such as cuts to personal income, corporate income, and franchise taxes. However, some changes have been proposed that represent bad tax policy and would cause the state to take a step back after the tremendously successful 2013 tax reform act.

Today, Americans for Tax Reform sent the following letter to North Carolina legislators assessing the various tax proposals being considered:

Dear Members of the North Carolina General Assembly,
On behalf of Americans for Tax Reform and our supporters across North Carolina, I write today to encourage you to keep North Carolina taxpayers in mind as you work through budget negotiations. In recent weeks, some proposals have been put forth that would build upon the successful 2013 tax reform plan, while some would move in the wrong direction and harm taxpayers.
One proposal that, if passed, would result in bad tax policy is the proposal to apply the state sales tax to advertising. Approval of this tax change would be a serious mistake. It is a principle of sound tax policy that business to business transactions should not be taxed. Applying the state sales tax to advertising would result in tax pyramiding and higher costs passed down to North Carolinians. North Carolina businesses would also be faced with onerous compliance costs.
Currently, no state applies the sales tax to advertising, and for good reason. One state, Florida, tried to impose an advertising tax and it was an unmitigated disaster. Because of Florida’s experiment with taxing advertising, the state lost 100 million in advertising revenue to neighboring states. Advertising purchases plummeted 12 percent in Florida, while rising 3 percent nationally during that same time. As such, Florida legislators repealed that misguided tax six months later.
While applying the sales tax to advertising is a proposal that should be rejected, several proposals have been put forth in budget negotiations that would help grow the state economy and build upon the successful 2013 tax reform package. Commendable proposals that would allow your constituents to keep more of their hard-earned income include reducing the income tax rate from 5.75 to 5.5 percent and raising the standard deduction to $18,500, which would save North Carolinians $3.1 billion over the next five years. Other proposals that would greatly benefit North Carolina employers and the state economy include the proposal to ensure the corporate tax rate falls to 3 percent and changing corporate tax apportionment to a “single-sales factor” formula, which would incentivize in-state investment and job creation. Legislators have also smartly proposed cutting the franchise tax on capital stock and tangible property.
Since 2013, North Carolina has been a national model for pro-growth tax reform. This year, the Tar Heel State has an opportunity to continue making itself more attractive to employers, investment, and new residents. Moving forward, Americans for Tax Reform will be working to educate your constituents on the tax proposals being considered in Raleigh and how their representatives and senators vote on these important matters. If you have any questions or if ATR can be of assistance, please contact Patrick Gleason, ATR’s director of state affairs at 202-785-0266.

Grover G. Norquist
Americans for Tax Reform

Dodd-Frank Hammers Small Banks

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Posted by Nathaniel Rome on Tuesday, July 21st, 2015, 4:48 PM PERMALINK

Small American banks have been hit with a brutal one-two punch over the past decade. First, it was the Financial Crisis. And five years ago today, the Government decided to kick small banks while they were down by passing Dodd-Frank.

Since Dodd-Frank, there has been only one new FDIC-insured bank. You read that correctly, only one new bank since 2010. Bank of Bird-In-Hand in Amish Country, with their horse-and-buggy drive-through, stands alone. In the three decades prior to Dodd-Frank, an average of more than one hundred banks opened annually. And even after past recessions, new banks have opened by the dozens. But since the recession and Dodd-Frank, new banks have been almost non-existent.


And it is not just a lack of new banks, it’s a decline of existing banks. Mergers and failures have erased thousands of independent banks. Since 2006, there has been a decline of 1,762 banks, one of the most precipitous declines in American history.


While Dodd-Frank was intended to target big institutions, it is becoming clear that small banks are being driven into insolvency as a result of heightened regulations and compliance costs.. A Harvard Kennedy School Report finds that community banks have seen their banking asset share decline by 12.4% percent while large banks (excluding the 5 biggest) have seen their asset share grow by 11.4%. 

According to the Mercatus Center, there are nearly 27,000 regulations associated with Dodd-Frank, more regulations than associated with all other laws passed during the Obama administration – combined. It is a basic fact of business that large institutions can better adapt to regulatory pressure than smaller ones. Small banks have stunted growth because all new resources must go into hiring compliance officers and potential new banks are daunted by the regulatory wall barring them from entering the market.

These developments should be viewed with grave concern. Not only do local banks provide more personalized services, but they also provide a critical life-line for small businesses seeking loans. Small banks – those with less than $1 billion in assets - account for only 8 percent of all banking assets, but make one-third of all small business loans. The decline of these banks will be a major blow to American innovators and entrepreneurs seeking investment.

The damage does not end there. More than a third of Dodd-Franks regulations have yet to be finalized. This means more regulations, costs, and uncertainty for small banks. To stop the decline of community banking and a concentration of banking assets in fewer and fewer banks, Congress must not celebrate Dodd-Frank’s birthday and instead address the problems with the law.  

Obama Administration Significantly Underestimated Impact of Woodwork Effect on Medicaid in States

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Posted by Nathaniel Rome on Tuesday, July 14th, 2015, 3:25 PM PERMALINK

On Friday, the Department of Health and Human Services (HHS) released the 2014 Actuarial Report on the Financial Outlook for Medicaid. Buried in the depths of the report is something crucial that all state legislators should look at with concern. The enrollment numbers for non-newly eligible Medicaid recipients increased at a rate 44% faster than expected in 2014.

Let’s break this down. Last year, HHS predicted that non-newly eligible Medicaid recipients would increase by 1.7 percent. Essentially, they predicted that people who had been Medicaid eligible before Obamacare would enroll in greater numbers because of “outreach efforts and enrollment simplifications”. This is known as the “Woodwork Effect” because these previously eligible individuals appear to come out of the woodwork to sign-up for Medicaid as a side effect of Obamacare. This is especially important to states because state governments are required to pick up an average of 40% of the costs of these individuals.

When the Obama Administration pitched Obamacare, a crucial part was that it would be almost costless to states since all newly eligible sign-ups would be covered 100 percent by the federal government. But it is now becoming clear that the Woodwork Effect is having a serious impact on states, whether or not they expanded Medicaid. The rate of growth of these non-newly eligible individuals in 2014 was 2.3 percent, 44 percent higher than the projected 1.7 percent increase. That difference alone is 410,000 individuals, adding nearly $2.9 billion in costs in 2014, of which $1.15 billion was borne by state governments.

After botching this calculation for 2014, HHS did not adjust their enrollment estimates upward to meet last years unexpected boost. Over the next decade, HHS projects an annual increase on 1.4 percent of non-newly eligible enrollees. Even at this rate, costs to states are projected to increase from 199 billion dollars in 2014 to 338 billion in 2023, representing a 70 percent increase. If the Woodwork Effect continues and the percentage of non-newly eligible enrollees continues at the rate it did in 2014, then some hypothetical back-of-the-envelope calculations show some scary figures. This would lead to over 7 million enrollees beyond the projection in 2023, at a cost of nearly 75 billion, with states legally responsible to pick up nearly 30 billion of that.

Though it’s doubtful that the Woodwork Effect will continue at the same magnitude over the next decade, what is clear is that HHS’s estimates yet again undersold the true cost of Obamacare to the states.

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Montgomery County Maryland's Misguided Vapor Tax

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Posted by Nathaniel Rome on Monday, June 29th, 2015, 10:01 AM PERMALINK

This August, Montgomery County, Maryland will become the first county in the country to adopt a specialized excise tax on e-cigarettes. A tax of 30 percent will be charged on distributors who operate in the county. This new tax - while masked as a public health initiative - is yet another attempt by local governments to raise cash while strangling new industries.

The lead sponsor of this bill, Councilman Tom Hucker, argued that “E-cigarettes should be treated similarly to tobacco products,” referring to the current 30 percent tax on tobacco products in Maryland.

This is fallacious for several reasons. First, e-cigarettes and vapor products are far healthier than traditional combustible cigarettes. E-cigarettes are tobacco-free and lack the carcinogenic chemicals that make smoking so deadly. Second, e-cigarettes are being used by many as an effective way to quit smoking, since users can wean themselves off of the nicotine. As one business owner put it, watching customers quit is a “concern we have for our business… but it’s very rewarding.”

If e-cigarettes are a healthier alternative to tobacco products and can help people quit smoking, why would the government want to subject the industry to a crippling tax?

Because it’s not about health, it’s about money. Advocates claim that this tax would raise between $1.5 and $2.5 million for county coffers. This is absurd. Many customers will simply purchase vapor products online or across county lines to avoid the tax. More likely than not, consumers will have no trouble getting their products tax-free and retailers may be forced across county lines or out of business.

A 20 cents per mL vapor tax that just passed statewide in Kansas is predicted to generate only $2 million in optimistic estimates. Given that Montgomery County has just one-third the population of Kansas and has much greater access to products in neighboring counties, it is hard to imagine that the Montgomery County tax would raise anywhere near the projections.

Electronic cigarettes and vapor products should not be subjected to “sin taxes”; the users are overwhelmingly people trying to atone for their sins by quitting their use of tobacco.

Montgomery County’s misguided new tax - and tax proposals like this all around the country - threatens to kill this fledgling new industry. It does this while adding a disincentive for consumers to make the switch from tobacco to tobacco-free technology products, working at cross-purposes of decades of anti-smoking efforts to improve public health. 

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