Shane Otten

Oregon Bike Tax Proves Nothing is Safe from Taxation

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Posted by Shane Otten on Monday, August 14th, 2017, 4:36 PM PERMALINK

The Oregon Legislature is about to make unfortunate history as the first state to enact a bike tax. This comes as a surprise since Oregon, especially Portland, is known for its avid cycling culture. The state is even home to the head of the Congressional Bike Caucus, Rep. Earl Blumenauer (OR-3). Despite these factors, government proves yet again that it will tax anything that moves.

This unprecedented tax is part of a $5.3 billion transportation package that Democratic Gov. Kate Brown is expected to sign into law later this month. Once enacted, all bike purchases over $200 with a wheel diameter of at least 26 inches will be subject to a $15 tax. It is expected to cost the taxpaying cyclists of Oregon $1.2 million per year.

While the government states the funds will be used to improve non-motorized transportation, some Oregonians remain skeptical, like Bill Cole, owner of Wheelworks Bicycle Shop in Eugene, OR.

“The idea of having money going directly to support bicycling I think is a good idea. But once a tax gets started, it never stops. And it only increases,” Cole said.

Not only are consumers adversely affected by this tax, but local bike shops will especially feel its consequences. In specialty bike stores where more mid- to high-end bikes are sold, the average price of a bicycle is $714. As a result, the vast majority of purchases will be subject to the tax. However, big box retailers that sell cheaper bikes, at an average of $82, will typically avoid the tax and its negative effects. By indirectly targeting “mom and pop” bike stores, Oregon’s new tax will harm these small businesses.

Opposition to this tax has brought together groups—conservatives and environmentalists—that generally find little to agree upon. By taxing biking, a healthy and environmentally friendly method of transportation and leisure, the Oregon legislature sends the message that it cares more about revenue than both taxpayer well-being and environmental concerns.

By singling out a single product and activity to punitive taxation, the Oregon bike tax represents the exact opposite of sound policy. As a lone positive takeaway from this misguided tax, this situation presents an opportunity to educate progressive bike tax opponents who typically endorse higher taxes in other areas. If a tax on new bikes leads to fewer people biking or purchasing bikes, as cycling advocates have stated, then the same can be said for higher taxes on income and investment. 

Photo Credit: Robert Ashworth

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Foxconn Deal Demonstrates Success of Gov. Walker’s Reforms

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Posted by Shane Otten on Friday, July 28th, 2017, 12:30 PM PERMALINK

Wisconsin Gov. Scott Walker (R) joined President Trump and House Speaker Paul Ryan at the White House this week to announce that Wisconsin has been selected as the location for Taiwan-based Foxconn’s first U.S. manufacturing plant. Foxconn, the world’s largest electronic manufacturing services provider, will invest $10 billion in a new facility, most likely in Racine or Kenosha county, that could create up to 13,000 jobs in the Badger State with an average salary of $53,875 plus benefits

The deal owes a lot of its success to reforms signed into law by Gov. Walker that have made Wisconsin more attractive to job creation and investment. Wisconsin beat out six other states for the Foxconn factory, which will produce liquid crystal display (LCD) screens. One of the states Foxconn passed over is Illinois, Wisconsin’s neighbor, and a state that is moving in the opposite direction from Wisconsin when it comes to fiscal policy. Illinois lawmakers have repeatedly raised taxes in recent years, imposing a massive 32% income tax hike earlier this month. Meanwhile, Illinois Speaker Mike Madigan and his caucus henchmen refuse to make structural spending reforms that are necessary to rectify the unsustainable growth of state spending or the state’s $130 billion unfunded pension liability.

Actions have consequences, so it should come as no shock that Illinois, given recent policy developments in Springfield, didn’t win this deal. While Illinois has become a less hospitable place to do business in recent years, Wisconsin has enacted reforms that provide tax relief, spending restraint, and regulatory reform, creating an environment that attracts investment and jobs from companies like Foxconn. Some of the top achievements under Gov. Walker include the following:

 

Other states, like Illinois, will continue to lose businesses, residents, and income if they keep stifling growth with higher taxes, heavy regulations, and a structural budget imbalance. Wisconsin, meanwhile, proves how conservative policy reforms that reduce taxes, rein in spending, and reform entitlements translate into economic growth and job creation.   

Photo Credit: Gage Skidmore

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Pennsylvania’s Budget Funding Quandary

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Posted by Shane Otten on Wednesday, July 12th, 2017, 9:12 AM PERMALINK

On Monday, Pennsylvania Governor Tom Wolf (D) announced he will let the $32 billion budget, approved by both legislative chambers on June 30th, pass into law without his signature. Before Gov. Wolf’s decision, Pennsylvania was one of seven states without a budget for the new fiscal year. However, the Pennsylvania legislature is not finished with their new budget, as no measure to fund it has been approved, marking the second consecutive year Gov. Wolf has allowed a budget to become law without a way to pay for it.

Pennsylvania legislators are split on how to address the Keystone State’s $2.2 billion deficit, also known as a $2.2 billion overspending problem. Back in February, Gov. Wolf introduced a $1 billion tax package, including an expanded sales tax and a tax on natural gas production. House Republicans have rejected these tax hikes and instead have proposed various measures to grow state revenue without raising taxes.

Proposals to raise revenue without raising taxes include allowing 40,000 slots-style video game terminals (VGT) in bars, bowling alleys, and other establishments across the state, which could raise over $500 million once fully implemented. Other proposals call for selling more liquor licenses and permitting online gambling as well as allowing online sales of state lottery tickets. However, Senate Republicans have expressed opposition to VGTs. As Pennsylvania is second only to Nevada in total gambling revenue, some in the legislature are worried that VGTs could take revenue away from the state’s casinos. 

House Majority Leader Dave Reed (R-Indiana) recently expressed his disagreement with Gov. Wolf and others who are calling for higher taxes to balance the budget. "Look, there's two sides to credit problems. One is not just more taxes, one is less spending," Reed said.

Both sides do agree on borrowing $1.5 billion from master tobacco settlement funds to close the shortfall. Settlement funds bring in approximately $350 million per year. Until the revenue portion of the budget is balanced, lawmakers plan to withhold $563 million of funding from four state universities. Gov. Wolf’s failure to offer sustainable budget solutions is creating a ripple effect that hurts the whole state.

ATR is urging Pennsylvania lawmakers to reject balancing the budget with tax increases, such as the tax hike on online travel agents now being demanded by Gov. Wolf. Pennsylvania already has the nation’s 11th highest state and local tax burden. If that weren’t bad enough, Keystone State taxpayers have been hit with more than 20 federal Obamacare tax increases over the last eight years. As the Commonwealth Foundation has documented, it is clear that Pennsylvania’s budgetary problems are found on the spending side of the ledger. If Pennsylvania lawmakers had kept spending in line with population growth and inflation over the last three years, the state would have increased spending by $1 billion and the budget would be balanced.

IRS data shows that citizens are voting with their feet and leaving Pennsylvania. From 2014-15, the most recent year for which data is available, Pennsylvania experienced a net loss of over 16,000 residents, who took $1 billion in income with them. Tax hikes like what Gov. Wolf has called for will only exacerbate this exodus and make it even more difficult to compete with the likes of North Carolina, Texas, Florida, and Tennessee, states that are enacting tax relief and keeping spending in check. Rather than balance the budget with job-killing tax increases, Pennsylvania should put spending in line with revenues, pass a budget that does not include tax increases, and go on summer vacation. 

 

Photo Credit: Gov. Tom Wolf

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Illinois on the Brink of Another Budget Disaster

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Posted by Shane Otten on Wednesday, June 28th, 2017, 2:30 PM PERMALINK

Threatening to enter a third fiscal year without a budget, Illinois lawmakers appear no closer to reaching an agreement. Legislators are currently in the middle of a ten-day special session called by Governor Bruce Rauner (R) to break the budget impasse. While unpaid bills build up, currently over $14.7 billion and growing, the special session has shown zero signs of progress.

In the first eight days of the session, both legislative bodies have met for only 122 minutes combined. On Wednesday, the House adjourned after a grand total of five minutes and five seconds. In the midst of this serious crisis, Illinois lawmakers do not seem to be prioritizing taxpayers interests, as the financial backlog increases and major fiscal problems, such as the state’s $130 billion unfunded pension liability, go neglected. To show how messed up the state legislature’s priorities are, instead of working towards pro-growth reforms and balancing the budget, the House used those scarce minutes to pass a resolution to promote tourism in the Bahamas. The price of this “work” does not come cheap for taxpayers in the Land of Lincoln, as it costs almost $50,000 per day.

Without a budget, state road construction may come to a halt. Public school administrators say they face major layoffs and the potential of closing schools in the fall. Making matters worse, at the beginning of June, both Moody’s Investors Service and S&P Global Ratings downgraded the state’s credit rating to one level above junk. If state legislators cannot come to an agreement to fund the government before July 1st, both companies have stated they will further downgrade the state’s bond rating. If this occurs, Illinois will become the first state with non-investment quality bonds and state financing will become even more difficult and expensive.

Gov. Rauner, having capitulated to calls for higher taxes, is urging lawmakers to pass a budget that includes a four-year $5.4 billion tax hike and a property tax freeze for the same period. The hike would be funded by increasing income and corporate tax rates, expanding the sales tax base, a new cable and satellite TV tax, and the elimination of various credits and deductions. While Gov. Rauner views this proposal as a compromise, Democrats strongly disagree with the duration of the tax hikes—wanting permanent increases instead. Before the special session, Democrats who control the state Senate passed a budget with the same tax increase now supported by Gov. Rauner, but without an expiration date four years from now and without the property tax freeze.

Gov. Rauner’s “compromise,” if enacted, would be a major loss for Illinois taxpayers, especially considering Rauner campaigned on lowering the income tax. This bill contains no structural reforms to help solve Illinois’ gargantuan pension debt, which stands at $130 billion. Including all state health benefits and local pensions, Illinois taxpayers are on the hook for $267 billion. Even with tax increases and spending caps, it is still expected the state will have a $5 billion budget deficit in 2018. Without making these needed changes, Illinois will continue on its debt spiral.

The Illinois economy is in no condition sustain further tax increases. From the start of 2007 to the end of 2016, Illinois was tied with Nevada for the worst personal income growth in the U.S. at a rate of 0.8 percent. With incomes growing at slow pace, the imposition of further tax hikes from Springfield piled on top of the 20 federal tax hikes enacted during the Obama administration, would do great harm to Illinois taxpayers and the state economy. Enactment of more state tax hikes will no doubt motivate even more taxpayers to flee for a state with a less dysfunctional and burdensome government.

As evidenced by a 2016 poll from the Paul Simon Institute, the citizens of Illinois are also tired of high taxes and ineffective government. The poll found that 47 percent of citizens want to move to another state. Of these people, 27 percent cited taxes as their main reason to leave the state. The government was also a popular choice with 15 percent of responses, falling just behind weather for third. Not only do taxpayers want to leave Illinois, many of them already are. For the third straight year, Illinois lost more citizens than any other state. After 37,508 people left in 2016, Illinois’ population has dropped to a ten year low.

Illinois needs pro-growth reforms that lower taxes, cut spending, and reform the pension system. By looking to states like Indiana, North Carolina, Texas, Tennessee, and its friendly northern neighbor, Wisconsin, Illinois can find solutions that will begin to rectify the state’s financial problems and will help create an environment that encourages business development and is more conducive to economic growth.

 

Photo Credit: Jeff Sharp 

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Anthem’s Exit Further Demonstrates Need to Repeal Obamacare

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Posted by Shane Otten on Tuesday, June 27th, 2017, 5:15 PM PERMALINK

As further proof of Obamacare’s collapse, last week Anthem announced that next year it will be pulling out of the Obamacare exchanges in Wisconsin and Illinois. Anthem, one of largest insurance providers in the nation, also stated earlier this month that it will leave Ohio’s individual insurance market. As the last statewide insurer in Ohio, the move will leave at least 18 counties and approximately 10,000 Ohioans without insurance options in the Obamacare exchanges.

With Obamacare continuing to self-destruct, Anthem joins Aetna, Humana, and other major insurers either completely exiting the market or drastically raising premiums. Until meaningful healthcare reform passes, this growing trend will only continue. Medica, the only insurer in most Iowa counties, just announced it will be increasing premiums by an average of 43.5 percent in 2018. Americans were promised that premiums would be lower under Obamacare, but as many predicted, the exact opposite is occurring. A new federal report states that 47 counties will be without any insurer while 1,200 will only have one option next year. Obamacare promised to increase insurance accessibility, but the law's many regulations and mandates have led to care that is unaffordable or out of reach for too many.

It was also promised that no American family earning less the $250,000 would pay higher taxes under Obamacare. However, this was another lie. Of the almost 20 new taxes from the Affordable Care Act, the health insurance tax is one of the most egregious, which will cost Americans $14.3 billion in 2018. The American Action Forum estimated that this tax will increase premiums by $5,000 over a decade, directly affecting millions of families and small businesses.

Last Thursday, the Senate Republicans released the Better Care Reconciliation Act, their version of health care reform. It includes measures that put people in charge of their healthcare decisions, like freeing Americans from the onerous individual and employer mandates and almost doubling the amount people can put in health savings accounts. In order to lower costs and expand choices, the Senate bill cuts the burdensome taxes imposed by Obamacare by $701 billion. The proposal also contains needed Medicaid reforms that phase out its expansion and provides states with the flexibility to best serve their citizens.

Republicans also need to fix the system as the public is anxious for reform. 64 percent of Americans, including 53 percent of Republicans, state that Trump and Congressional Republicans are responsible for any further problems with Obamacare. Anthem’s exit adds urgency to the cause and as millions of Americans struggle to find affordable health care under Obamacare, it is imperative that the system is reformed sooner rather than later.

 

Photo Credit: Dustin Gaffke

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ATR Supports Proposals to Scale Back & Repeal Wisconsin's Minimum Markup Law

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Posted by Shane Otten on Thursday, June 8th, 2017, 12:49 PM PERMALINK

Wisconsin consumers may soon be paying less for gasoline, prescription drugs, and other merchandise. There are proposals in both chambers of the Wisconsin Legislature that, if enacted, would scale back the state’s misguided minimum markup requirements.

Wisconsin’s minimum markup law, dubbed the Unfair Sales Act, was passed in 1939 with the intent to prevent predatory pricing. Wisconsin’s law prohibits all merchandise, unless in a clearance sale, from being sold below cost and requires alcohol and tobacco products be marked up 3 percent for wholesalers and 6 percent for retailers. Gasoline must also be marked up a minimum 9.18 percent. This misguided policy results in higher costs for all Wisconsin consumers. In fact, Wisconsin consumers have to pay more than other states on many things, such as “Back to School” specials and Black Friday deals.

Currently, 15 states have minimum markup laws that apply to most retail goods and an additional 8 states have gasoline-specific laws. If minimum markup laws were effective in achieving its stated goal, it would be expected that states without such laws would have relatively fewer small business retailers and gas stations. However, a comprehensive study conducted by the Wisconsin Institute for Law and Liberty analyzed data across the 50 states and found that minimum markup laws have no effect on the number of small business retailers or gas stations in a state.

The Federal Trade Commission (FTC) has twice spoken against this law. In its more recent commentary on Wisconsin’s minimum markup law, the FTC said “the Act protects individual competitors, not competition, and discourages pro-competitive price cutting.” Along with disapproval from the FTC, economic literature demonstrates that predatory pricing is a rare event and is even less likely to be successful.

In the Wisconsin Assembly, Rep. Dale Kooyenga (R-Brookfield) has a proposal that reduces the state’s markup law on gasoline from 9.18 percent down to 3 percent. However, his proposal contains a provision to include the state’s sales tax on all gasoline purchases. In the state’s upper chamber, Sen. Leah Vukmir (R-Brookfield) has introduced Senate Bill 263, which repeals minimum markup requirements for prescription drugs and merchandise not including alcohol, tobacco, gasoline, and groceries.

“Government shouldn’t be policing low prices,” Sen. Vukmir said. “Repealing this law and letting free markets bring down prices is in consumers’ best interest.”

Overall, minimum markup laws are a hidden price increase on all goods and a determinant to Wisconsin consumers. While full repeal of Wisconsin minimum markup law would be ideal, the proposed bills are a step in the right direction and would mitigate the harm caused by this misguided requirement.  

 

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