Tom Hebert

ATR Supports Sen. Toomey's "Bicameral Congressional Trade Authority Act"

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Posted by Tom Hebert on Thursday, June 13th, 2019, 11:35 AM PERMALINK

Americans for Tax Reform President Grover Norquist has released a letter in support of S. 287, the “Bicameral Congressional Trade Authority Act of 2019.” This legislation, sponsored by Senator Pat Toomey (R - Pa.), restores important trade responsibilities to Congress.

In contrast to the careful checks and balances outlined in the Constitution, Congress has ceded its trade authority to the executive branch in recent decades. To remedy this, S. 287 addresses and updates Section 232 of the Trade Expansion Act of 1962, legislation that allows the president to take trade action in the interest of national security.

Among other reforms, this legislation gives Congress 60 days to approve Section 232 trade actions, and narrows the Section 232 justification to its original national security intent. The reforms contained in S. 287 will give Congress input on executive branch trade actions as the Framers intended. Congress should pass this legislation, and President Trump should sign it into law. 

You can read the letter here or below:

Dear Senator Toomey:

I write in support of S. 287, the Bicameral Congressional Trade Authority Act of 2019. This legislation restores important trade responsibilities to Congress, giving the legislative branch vital input on trade actions taken by the executive branch.

The Framers designed our constitutional system with careful checks and balances in mind. Article I, Section 8 of the U.S. Constitution gives Congress the express authority to “regulate commerce with foreign nations.” Historically, Congress has carefully deliberated and executed trade policy. Unfortunately, over the past several decades, Congress has ceded its trade authority to the executive branch.

To remedy this, S. 287 addresses and updates Section 232 of the Trade Expansion Act of 1962, a provision that allows the executive branch to levy tariffs on imports that “threaten to impair” U.S. national security. Under Section 232, the President can formally levy tariffs or other trade actions after the Department of Commerce conducts an investigation, with non-binding input from the Secretary of Defense. 

The current administration has used the Section 232 statute to levy 25 percent tariffs on imported steel and 10 percent tariffs on imported aluminum. These sweeping tariffs have had a ripple effect on the world stage. While President Trump is right to target bad actors and renegotiate trade deals to benefit Americans, the impacts of steel and aluminum tariffs demonstrate that Congress should have input on the executive branch’s trade actions.

S. 287 protects the original intent of Section 232 by including several important reforms that vest trade power back in the hands of Congress. Specifically, the bill: 

  • Gives Congress 60 days to approve any Section 232 actions. If Congress does not pass an approval resolution in the 60-day window, the President’s proposed trade actions do not go into effect.
  • Narrows the Section 232 justification to its original national security intent. The Department of Commerce uses an overly broad definition of national security in determining whether or not the President is justified in using his Section 232 authority. This legislation restricts the national security justification to imports with applications in energy resources, military equipment, or critical infrastructure.
  • Transfers the investigative authority from the Department of Commerce to the Secretary of Defense. This ensures that a rigorous national security justification is met. Commerce can offer input about trade action severity after the Secretary of Defense renders a judgment.
  • Imposes retroactivity on Section 232 steel and aluminum tariffs. If Congress does not pass an approval resolution for existing Section 232 tariffs in 45 days, any tariffs and quotas within the past 4 years are repealed.
  • Requires the International Trade Commission (ITC) to conduct reports on the economic impact of Section 232 tariffs, as well as implement an exclusion process for Section 232 tariffs.

The reforms contained in your important legislation will give Congress input on executive branch trade action as the Framer intended. Congress should pass this legislation, and President Trump should sign it into law. 

Onward, 

Grover Norquist
President, Americans for Tax Reform  

Photo Credit: Gage Skidmore


ATR Opposes Legislation That Busts Spending Caps

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Posted by Tom Hebert on Wednesday, June 12th, 2019, 10:00 AM PERMALINK

The House of Representatives is set to vote on a H.R. 2740, a nearly $1 trillion spending bill that will increase government spending to fund the left’s partisan policies.

This “minibus” legislation appropriates approximately $986 billion in discretionary funding. Not only does this bill fail to address deficit reduction, it appropriates $35 billion over the enacted level for FY 2019.

Congress should reject H.R. 2740 and any other legislation that fails to uphold the BCA spending caps.

Compared to current spending levels, the minibus provides twice as much additional funding in FY 2020 for non-defense programs than for defense, and underfunds the Department of Defense by $8 billion. In addition, this legislation spends $52 billion over what President Trump requested in his budget.

This legislation follows the failure of the Democrat-controlled House Budget Committee to do its job and release a budget resolution. Instead, Democrats passed a $1.3 trillion “deeming resolution” in April, violating budget caps laid out in the Budget Control Act of 2011 (BCA). The BCA contained an enforcement mechanism that capped discretionary spending in the event an agreement on $1.2 trillion in deficit reduction could not be reached. 

Discretionary spending accounts for 30 percent of total federal spending, and Congress appropriates funding for these programs on an annual basis. The other 70 percent of the federal spending is automatically funded, and comprises programs like Medicare and Social Security. If lawmakers are serious about reducing federal spending in the short term, holding the line on discretionary spending caps is the only option.

Unfortunately, members of Congress from both parties have routinely disregarded the BCA spending caps. In 2018, Congress passed H.R. 1892, the “Bipartisan Budget Act.” The bill broke the BCA spending caps by $296 billion over 2018 and 2019. 

The legislation being taken up today will only worsen the failure to constrain spending. Instead of working to constrain spending and pass a fiscally responsible budget, Democrats have been trying to raise their own pay.

Between failing to offer a budget resolution and forcing a vote on this minibus train wreck, Democrats have shown themselves to be totally incapable of governance. If Democrats were serious about fiscal responsibility, they would produce a budget resolution through regular order that abide by the BCA spending caps.  

Photo Credit: Gage Skidmore


Senate Should Restore 529 Expansion As It Considers SECURE Act

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Posted by Tom Hebert on Tuesday, June 11th, 2019, 2:03 PM PERMALINK

Middle class families all across the country use 529 education savings plans to invest in their children’s futures.

These tax-advantaged 529s are tax advantaged savings accounts that allow parents to save and invest after-tax income for education costs. Any money earned through 529 investment is tax-free, making these plans a popular choice for parents looking to save for future education expenses. 

529s are getting more popular as time goes on. In 2018, total investment in 529 plans reached an all-time high of $328.9 billion, and the number of total accounts rose to 13.6 million. As of mid-2018, the average account side is up to $24,153, another record high.  

In 2017, the Republican-passed Tax Cuts and Jobs Act legislation included an amendment from Senator Ted Cruz (R-Texas) that expanded 529 savings accounts to cover K-12 expenses and religious school tuition. This expansion provided real relief for millions of American families and was big win for freedom in education.

Now, Congress has an opportunity to expand 529s even further. Sen. Cruz and Rep. Jason Smith (R-Mo.) recently introduced the Student Empowerment Act. For the first time ever, 529s could be used to cover homeschool expenses, student loan expenses, books, tutoring, testing fees, and educational assistance for students with disabilities. 

Crucially, the legislation expands 529s to cover apprenticeship expenses as well. This expansion would help alleviate the skilled worker shortage in our country by allowing 529 funds to be spent on apprenticeship costs. As with a traditional college, there are many ancillary expenses associated with apprenticeship programs. This bill levels the playing field between students and apprentices by allowing apprentices to use 529 funds to cover these costs.

All of these reforms were initially included in the SECURE Act, retirement savings legislation sponsored by Ways and Means Chairman Richard Neal (R-Mass.). Despite the legislation passing unanimously in the House Ways and Means Committee and having bipartisan support, Speaker Nancy Pelosi (D-Calif.) and Democrat leadership unilaterally removed key 529 provisions from the final bill. According to media reports, Democrat leadership caved to pressure from teachers unions and a “small handful” of radical leftists that oppose homeschooling.

Expanding 529s to include funding options for K-12 and religious school tuition was a big win for American families. Now, Congress has another shot to bring similar relief to even more families. Democrats should stand with American families, not a small minority of special interests, and ensure that 529s are strengthened.

Photo Credit: Flickr - KidTruant


The Rise of IRS Injunction Suits Threatens Taxpayer Rights

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Posted by Alex Hendrie, Tom Hebert on Monday, June 10th, 2019, 9:34 AM PERMALINK

The Internal Revenue Service (IRS) has a history of harassing law-abiding taxpayers. Congress sought to address this through legislation in 1998, but problems have persisted.

More recently, the IRS, working with the Department of Justice, has increasingly turned to “injunction actions,” as a tool to go after taxpayers as noted in a recent report by Tax Notes.

The IRS has authority to launch an injunction action against a taxpayer under U.S. Code Section 7402(a). They are typically launched under one of two circumstances: cases involving tax preparers and cases involving suspected tax shelters. In recent years, the IRS has also used Section 7402 to seek disgorgement against taxpayers, which requires the defendant to turn over all money that they have made in conduct associated with the injunction claim.

Instances of disgorgement (and of Section 7402 in general) have skyrocketed in recent years – since 2015 there have been over 40 cases involving disgorgement, while there were just five between 1954 and 2014.

The agency’s increasingly aggressive use of Section 7402 lawsuits violates the pro-taxpayer reforms passed two decades ago. Section 7402 was little used until passage of the IRS Restructuring and Reform Act of 1998 (RRA), a landmark law which created important protections for taxpayers.

RRA was enacted with several pro-taxpayer provisions and curbed the IRS’ enforcement authority, created the Treasury Inspector General for Tax Administration, an independent watchdog office, and codified the Taxpayer Bill of Rights, a document that the IRS must send every taxpayer who faces an enforcement action.

The Taxpayer Bill of Rights guarantees a basic level of service to American taxpayers. For instance, taxpayers are guaranteed the right to be informed, the right to privacy, the right to challenge the IRS, and the right to not pay more money in taxes than you owe.

Section 7402 injunction lawsuits effectively allow the agency to disregard many of these rights. For instance, these lawsuits are searchable on the Justice Department’s website, subjecting taxpayers to public shaming and damaging their reputation   

The IRS has used its broad authority to file injunction suits in complex cases where it is unclear whether taxpayers are at fault. This was the case in United States v. Zak, where the government filed a complaint asking the court to block six defendants from promoting use of the conservation easement deduction. Without alleging any specific facts, the agency made a blanket claim that defendants impermissibly inflated the value of the deduction by overstating the value of donated easements. The government also seeks to confiscate via disgorgement any income the defendants made from facilitating conservation easement donations.  

To be clear, Section 7402 has legitimate uses. For instance, injunctions have been used against tax preparers that have committed clear fraud by claiming false deductions for unwitting taxpayers in an attempt to defraud the Treasury. However, its use should be limited in scope.

Alarmingly, the IRS has been using Section 7402 as an end run around enshrined taxpayer protections and using this provision to subject taxpayers to extensive litigation. Given the increasing use of this provision, it may be necessary for Congress to step in and reaffirm the congressional intent of RRA by updating the law to stop IRS abuse over taxpayers. 

Photo Credit: Martin Haesemeyer


Norquist: Mexico Tariffs Are Taxes on Americans


Posted by Tom Hebert on Friday, May 31st, 2019, 3:20 PM PERMALINK

The Trump administration has announced its intention to impose new tariffs against Mexico starting at 5 percent on June 10th and gradually rising to 25 percent by October 1st. 

These new tariffs will undermine the progress made toward passage of the United States-Mexico-Canada Trade Agreement (USMCA) and undercut the recent positive news that Section 232 steel and aluminum tariffs on Mexico and Canada were being lifted. 

These new tariffs will increase the price of top imports from Mexico, including cars, TVs, cell phones, medical instruments, and fresh produce. 

On CNBC’s Squawk on the Street this morning, Americans for Tax Reform President Grover Norquist told host Rick Santelli that the new tariffs are harmful to American consumers:

“Tariffs are taxes,” Norquist said. “They are taxes on American consumers and American producers who use imported products. We need to get those tariffs down as quickly as we can. I understand the President's using tariffs to try and get other countries to be more free trade. The sooner we can come to an agreement, the more certainty we have. And we can get those taxes off the American consumer.”

Trade is vital for America’s economy and employment – with more than 20 percent, or 41 million jobs in the U.S. directly tied to trade.  

While Trump is right to fight for secure borders, these new tariffs risk undercutting all the good his administration has achieved for the economy thus far, such as the Tax Cuts and Jobs Act.

These new tariffs also threaten to undermine passage of the USMCA, which updates NAFTA to include new automotive rules, new protections for intellectual property rights, and modernizing agricultural trade to benefit American farmers. A recent report shows that the USMCA would raise U.S. real GDP by $68.2 billion and create approximately 176,000 jobs. As Mexico moves toward ratification of the agreement, these new tariffs could torpedo the Trump trade deal.

If the Administration follows through on its threat to impose new tariffs, it would wipe out future economic growth and obliterate a generational chance for an updated NAFTA agreement. 


Sasse Wins Fight to Permanently Ban Earmarks

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Posted by Tom Hebert on Friday, May 24th, 2019, 2:05 PM PERMALINK

In a huge victory for American taxpayers, the Senate Republican conference Thursday adopted Senator Ben Sasse’s (R-Neb.) amendment to permanently ban earmarks in the 116th Congress and beyond. 

“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.”

ATR has had a longstanding opposition to earmarks and pork barrel spending. Put simply, earmarks are spending programs that members of Congress hide in appropriation or authorization bills to “bring home the bacon” for their districts. This kind of frivolous spending is disrespectful to the taxpayers and a flagrant violation of Congressional duty to be careful stewards of public funds.

“It’s pretty simple: Earmarks are a crummy way to govern and they have no business in Congress,” said Sasse. “Backroom deals, kickbacks, and earmarks feed a culture of constant incumbency and that’s poisonous to healthy self-government.” 

Congress banned earmarks in 2011, but the moratorium expired at the beginning of the 116th Congress in January. Sasse’s amendment bans earmarks for all future Congresses. Without Sasse’s amendment, earmarks would have returned.

 

Photo Credit: Gage Skidmore


NAM Study Shows Dem Threat to Repeal Tax Cuts Will Devastate Manufacturers

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Posted by Tom Hebert on Wednesday, May 22nd, 2019, 3:08 PM PERMALINK

Democrat 2020 frontrunner Joe Biden is calling for a repeal of the Tax Cuts and Jobs Act. A survey released by the National Association of Manufacturers (NAM) shows such a repeal would be a massive blow to manufacturing jobs, wages, and investments.

According to NAM’s Manufacturers’ Outlook Survey from Q1 of 2019, if the tax cuts were repealed:

  • 66 percent of manufacturers would have to scale back investment in the United States.
  • 62 percent of manufacturers said that they would scale back projected wage increases and bonuses.
  • 54 percent of manufacturers said they would cut back on hiring entirely

Small manufacturers have benefited greatly from the 20 percent passthrough deduction, and would be greatest hit if the tax law were repealed.

In 2018, NAM found that manufacturing confidence and job growth hit record-highs.

The survey also showed that 89.5 percent of manufacturers are optimistic about their company’s outlook. This optimism continues a record-high streak averaging 91.8 percent spanning the past 9 quarters.

NAM’s survey also forecasts that:

  • Employee wages will continue to rise 2.3 percent over the next 12 months.
  • Full time employment will increase 2.1 percent over the next 12 months, suggesting a tight labor market.
  • Capital investments will rise 2.8 percent over the next 12 months.
     

The NAM Shop Floor blog is an excellent resource documenting examples of how the Tax Cuts and Jobs Act has helped manufacturers of all sizes.

The effects of the tax reform bill are being felt all across the economy. In April, the economy added 263,000 jobs, and unemployment is at a 50-year low of 3.6 percent. Over the past year, the economy has added an average of 218,000 jobs per month. Families all across the country are seeing direct tax reduction — on net, households are paying an average of 24.9 percent in lower taxes according to a report released by H&R Block based on their clients’ tax returns.

Biden fashions himself a champion of manufacturing, yet remains obsessed with repealing the very tax cuts which helped revive manufacturing in the United States.

See:

Bernie Sanders: I will raise your taxes

Biden: “First thing I’d do is repeal those Trump tax cuts.”

Joe Biden broke his middle class tax pledge

“Mayor Pete” Calls for Steep Tax Hike on Homes and Businesses

Kamala Harris Vows Repeal of Tax Cuts “on Day One”

Biden: “When I’m President, if God willing I am, we’re going to reverse those Trump tax cuts.”

Photo Credit: Adam - Flickr


Trump Reaches Deal with Mexico & Canada to End Tariffs

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Posted by Tom Hebert on Tuesday, May 21st, 2019, 1:38 PM PERMALINK

President Trump recently announced a deal with Mexico and Canada to remove steel and aluminum tariffs on imports and remove retaliatory tariffs imposed on American businesses. This is a big win for American workers and paves the way for swift ratification of the president’s United States-Mexico-Canada Agreement (USMCA).

Ending the 25 percent tariff on steel and the 10 percent tariff on aluminum from Mexico and Canada will have broad, positive effects. On net, the tariffs impacted over $400 billion of traded goods on an annual basis. According to a report released by the American Action Forum, steel tariffs increased imported steel costs by $5.8 billion, and aluminum tariffs increased imported aluminum costs by $1.7 billion.

Retaliatory action by Mexico has adversely impacted the cost of American exports by $3.7 billion. Furthermore, Canadian retaliatory action has adversely impacted the cost of American exports by $16.6 billion. 

Trump has been steadfast in his desire to renegotiate trade deals for the benefit of American workers and businesses and the end of these tariffs should pave the way for approval of the USMCA. 

The USMCA updates NAFTA to include new automotive rules, new protections for intellectual property rights, and modernizing agricultural trade to benefit American farmers.

A recent report shows that the USCMA would raise U.S. real GDP by $68.2 billion and create approximately 176,000 American jobs. 

The USMCA would increase U.S exports to Canada by $19.1 billion, and increase U.S. exports to Mexico by $14.2 billion. Under the new agreement, U.S. imports from Canada are projected to increase by $19.1 billion, and U.S. imports from Mexico are projected to increase by $12.4 billion. The report estimates that the USMCA would have a positive impact on all U.S. industry sectors, with the manufacturing and services sectors experiencing the most gains. 

The trade deal would also be a boon for the automotive industry. The Office of the United States Trade Representative estimates that USCMA ratification would add $34 billionin new automotive manufacturing investment, $23 billion in new annual purchases of U.S. automotive parts, and 76,000 jobs in the next five years. 

If implemented, the USMCA would contribute to already robust economic growth. 

In April, the economy added 263,000 jobs, and unemployment is at a 50-year low of 3.6 percent. Over the past year, the economy has added an average of 218,000 jobs per month, and unemployment for key demographics are at all-time lows. Families all across the country are seeing direct tax reduction — on net, households are paying an average of 24.9 percent in lower taxes according to a report released by H&R Block based on their clients’ tax returns. 

Trump’s removal of tariffs on Mexico and Canada is a huge win for American workers. Now, it is time for Congressional Democrats to work with Republicans in a bipartisan fashion to ratify USCMA.

Photo Credit: Gage Skidmore


Binding Arbitration for Medicare Would Establish Backdoor Price Controls

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Posted by Tom Hebert on Friday, May 17th, 2019, 9:00 AM PERMALINK

Recent media reports indicate that a top aide to Speaker Nancy Pelosi (D-Calif.) wants to impose binding arbitration into the healthcare system as part of drug pricing reform.

This proposal would specifically apply a dispute settlement process to physician-administered drugs under Medicare Part B but could easily be applied to other parts of the healthcare system.

Binding arbitration is a flawed proposal. While there are many unknowns behind how the proposal would work in practice, it should be concerning as it would be another way for Washington bureaucrats to implement backdoor price controls on lifesaving medicine. 

Binding arbitration would be used to settle disputes between two different parties without going through the court system. Each party appeals to a neutral third party that considers the options and chooses one of them as the binding decision.

Under this proposal,  binding arbitration would apply when a subjective value of a drug is exceeded, for new drugs entering the market, and for drugs with no competition. HHS would pick a supposedly neutral third party to arbitrate between the department and the drug manufacturer.

This arrangement creates a critical problem — why would HHS pick panels that routinely rule against the department in arbitration? This would lead to selection bias which would all but ensure that HHS would be able to establish price controls on lifesaving medicine.

Binding arbitration resembles Obamacare’s Independent Payment Advisory Board (IPAB), which instituted price controls and rationing within the Medicare system. Thankfully, Congressional Republicans repealed the IPAB.

Currently, Medicare Part B drugs are calculated based on market prices using a formula which calculates the “Average Sales Price” of U.S. drugs. This formula factors in discounts negotiated between payers, hospitals, and health plans. In recent years, this system led to a 0.8 percent decrease in the cost of Top 50 Medicare Part B drugs. 

Using government power to lower prescription drug costs would have the unfortunate effect of reducing access to lifesaving medicine for American healthcare consumers.

Price controls reduce access to lifesaving medicine for patients. As noted in a recent study by the Galen Institute, roughly 290 new medical substances were launched worldwide between 2011 and 2018. Of these medicines, the U.S. had access to 90 percent. In contrast, foreign countries have access to far fewer. The United Kingdom had 60 percent of medicines, Japan had 50 percent, and Canada had just 44 percent.

The United States is a world leader in research and development of lifesaving medicine because our healthcare system is based around the free market. Rejecting price controls in all forms is essential to maintaining a healthcare system that encourages innovation and near-total access to lifesaving medicine.

While binding arbitration may sound like a reasonable proposal, it would actually put healthcare policy in the hands of faceless Washington bureaucrats and should be rejected by policymakers.

Photo Credit: Flickr


Return-Free Tax Filing Would Be a Disaster

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Posted by Tom Hebert on Friday, May 10th, 2019, 11:44 AM PERMALINK

Tax season is inherently stressful for Americans across the country because of the extensive complexity and compliance requirements of the tax code.

Senator Bernie Sanders (I — Vt.), Senator Elizabeth Warren (D — Mass.), and Representative Alexandria Ocasio-Cortez (D — N.Y.) want to solve this problem by giving the IRS the power to file your taxes for you. This massive expansion of government would be a disaster if implemented in the U.S as noted in a new report from the Bipartisan Policy Center. 

Return-free tax filing would require a dramatic overhaul of the tax code that could increase taxes on middle and low-income families all across the U.S. 

Under this system, the IRS would also have a perverse incentive to overcharge taxpayers and withhold information as the agency would calculate how much you owe in taxes, and then give you the opportunity to contest.

As noted by the BPC report, countries that use return-free filing have tax codes vastly different than the U.S. For instance, these countries: 

  • Apply something close to a flat marginal tax rate on most taxpayers
  • Tax individuals as opposed to households or couples
  • Little to no taxes on capital gains
  • Few deductions, exemptions, and exclusions
     

In order to make return-free filing work in the U.S., Congress would have to repeal widely-used deductions and credits like the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). 

Both provisions are inherently complex and taxpayers would be required to provide detailed information to the IRS in order for them to properly administer the provisions. 

Return-free filing has been tried in California, and it was an abject failure. Only 3 percent of taxpayers used the system, and its total participants topped out at 90,000 filers. Giving the government the power to file taxes is also broadly unpopular with taxpayers.

Return-free filing is also wildly unpopular. A recent poll shows that:

  • 60 percent of taxpayers oppose letting the government file their taxes
  • 72 percent of taxpayers thought the IRS would make mistakes when calculating tax returns.
  • 82 percent of taxpayers said they would feel comfortable rejecting the IRS-prepared return and preparing their own return.
  • 64 percent of taxpayers believed that the IRS did not have the necessary personal and financial information to calculate an accurate return.
  • 68 percent of taxpayers said that they would not trust the government to produce “accurate and fair” tax returns.
     

Despite what Democrats are saying, giving the government the power to file your taxes would raise taxes on the middle class, has failed spectacularly in California, and is broadly unpopular. Congress should reject any attempt to move towards a return-free filing system.

 

Photo Credit: GotCredit


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