Tom Hebert

ATR Urges Senate Passage of Trump Rescissions Bill

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Posted by Tom Hebert on Tuesday, June 19th, 2018, 3:42 PM PERMALINK

This week, the Senate is expected to vote on S. 2979, the Spending Cuts to Expired and Unnecessary Programs Act, introduced by Senator Mike Lee (R-Utah). This package would rescind approximately $15 billion of previously appropriated but unspent funds, a good first step towards cutting federal spending. All Senators should vote for this legislation.

Since the passage of the 1974 Budget Control and Impoundment Act, presidents have proposed 1,174 rescissions totaling $76 billion. Every president from Gerald Ford to Bill Clinton successfully rescinded funds, but there has not been a rescissions package since Congress passed Bill Clinton’s proposal in FY 2000

The unanimous Democrat opposition to the Trump rescissions package is confusing since Clinton’s rescissions packages passed Congress with bipartisan support. The House already passed President Trump’s rescissions package last week, and the Senate should follow suit.

Congress routinely claws back unspent funds and returns the money to taxpayers. While Democrats are trying to demagogue Trump’s proposal, which includes $5 billion in rescinded CHIP funding in this rescissions package, Democrats have often proposed similar rescissions.  Just two months ago, Chuck Schumer and Nancy Pelosi voted to rescind $6.8 billion from CHIP. Just two years ago, Democrats offered their own amendment to rescind $5.7 billion from CHIP, and every Democrat on the Appropriations Committee voted for it.

Trump’s nearly $15 billion rescissions package is the largest in history. Some of the proposed rescissions are listed below:

  • $4.3 billion from the Advanced Technology Vehicles Manufacturing Loan Program
  • $5 billion from Children Health Insurance Fund and $1.8 billion from the Child Enrollment Contingency Fund. The funds rescinded from this program either cannot be spent because the authority to obligate the funding ended last year or is not needed to operate the program. The nonpartisan CBO confirmed that this rescission would not affect the program, and no children will lose health insurance as a result of this rescission.
  • $800 million from Center for Medicare and Medicaid Innovations
  • $356 million in unobligated balances of conservation programs that were not extended in the Agricultural Act of 2014, and $144 million in unobligated balances of the Environmental Quality Incentive Program. These funds are in excess of the amounts needed to sustain the programs in FY 2018.
  • $142 million from the Housing and Economic Recovery Act of 2008. This rescission allows the private sector and local governments to play a greater role in addressing affordable housing needs.
  • $523 million from the Title 17 Innovative Technology Loan Guarantee Program
  • $500 million from the Farm Security and Rural Investment Programs
  • $50 million in prior year balances from the Department of Agriculture’s Watershed and Flood Prevention Operations Program. These funds are in excess of the amounts needed to sustain the programs in FY 2018.

Photo Credit: Gage Skidmore


In Win for Rule of Law, Trump Admin Refuses to Defend Constitutionality of Obamacare

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Posted by Tom Hebert on Thursday, June 14th, 2018, 1:41 PM PERMALINK

Attorney General Jeff Sessions announced last week that the Department of Justice will not defend the constitutionality of Obamacare. This is a major victory for the rule of law, as Obamacare is manifestly unconstitutional and disproportionally harms the most vulnerable in our society.

The DOJ declined to defend the controversial health care law against a legal challenge from Texas and 19 other states. Specifically, the DOJ is declining to defend two central tenets of Obamacare. First, the individual mandate tax, which forced people to buy health insurance and imposed steep penalties on the noncompliant. The DOJ argues that President Trump’s repeal of the Obamacare individual mandate tax means that the tax is no longer a tax, and is therefore unconstitutional based on Supreme Court precedent. Second, the DOJ is not defending the pre-existing conditions mandate on insurance companies, arguing that the provision cannot be decoupled from the mandate.

The individual mandate tax was the centerpiece of Obamacare. The individual mandate tax required a family of four to pay 2.5 percent of their income or $2,085 – whichever was higher. The tax required an individual to pay $695 or 2.5 percent of his income – whichever was higher.

The tax was one of the most regressive in history. 79 percent of households that got hit with the Obamacare individual mandate tax in 2015 made less than $50,000 a year. 37 percent of households made less than $25,000 a year. In total, 6,665,480 households paid $3,079,255,000 in individual mandate tax penalties in 2015.

Thankfully, President Trump eliminated the individual mandate tax when he signed the Tax Cuts and Jobs Act into law. And now, with Sessions announcing that the DOJ won’t defend Obamacare’s constitutionality against a recent legal challenge, the harmful law is as good as dead.

Trump has enacted free market health care reform in other ways. In May, Trump and Health and Human Services Secretary Alex Azar announced the administration’s American Patients First plan to lower costs and increase access to medicine. This plan rejects the broken and failed socialized system of health care that President Obama and his administration championed.

Instead, the plan addresses the underlying problems with our current health care system. First and foremost, Trump recognizes that Obamacare has increased health care prices through onerous taxes and regulations. Obamacare imposed a staggering $1 trillion in new or higher taxes. The law taxed everything from health insurance to prescription drugs to medical devices. The tax on medicine alone totals $30 billion over the next decade.

Throughout his presidency, Trump has rightfully taken foreign countries to task for taking advantage of the United States. Drug prices are yet another area where foreign countries freeload off of Americans. The United States has the only free market for medicine in the world. And yet, America is forced to subsidize its trading partners because of excessive foreign price controls. A recent study from the President’s Council for Economic Advisors said that the U.S. bears 70% of the world’s costs for medicine because of foreign price controls. In renegotiating America’s free trade agreements, Trump should focus on minimizing or eliminating foreign price controls.

Finally, several agencies within the Trump administration recently proposed a rule that would allow for more flexibility regarding short term, limited duration health insurance plans. These plans are stopgap measures for individuals transitioning between health insurance plans. The Trump administration increased the duration of these plans from three months to twelve months, ensuring that all Americans have affordable access to health care when transitioning between plans.

Ultimately, federal health care reforms should focus on patient-centered, free market solutions instead of failed top-down systems. The Trump administration has already made progress by dismantling Obamacare and elongating short term, limited duration health insurance plans. But there is much work to be done. Future reforms should emulate the success of Medicare Part D by using government forces to encourage free market competition and maximize access to health care.

Photo Credit: Wikimedia Commons


ATR Urges House Passage of Trump Rescissions Package

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Posted by Alex Hendrie, Tom Hebert on Thursday, June 7th, 2018, 4:30 PM PERMALINK

Tonight, the House is expected to vote on H.R. 3, the Spending Cuts to Expired and Unnecessary Programs Act. This measure rescinds approximately $14.7 billion in previously appropriated but unspent funds, a good first step towards reducing federal spending. All members of Congress should vote for this legislation.

Since the passage of the 1974 Budget Control and Impoundment Act, presidents have proposed 1,174 rescissions totaling $76 billion. Every president from Gerald Ford to Bill Clinton successfully rescinded funds. The last president to submit a rescissions package to Congress was Bill Clinton in 2000. The unanimous Democrat opposition to the Trump rescissions package is confusing since Clinton’s rescissions packages had a 67% passage rate.

Trump’s nearly $15 billion rescissions package is the largest in history. Some of the proposed rescissions are listed below:

  • $4.3 billion from the Advanced Technology Vehicles Manufacturing Loan Program
  • $5 billion from Children Health Insurance Fund and $1.8 billion from the Child Enrollment Contingency Fund. The funds rescinded from this program either cannot be spent because the authority to obligate the funding ended last year or is not needed to operate the program. The nonpartisan CBO confirmed that this rescission would not affect the program, and no children will lose health insurance as a result of this rescission.
  • $800 million from Center for Medicare and Medicaid Innovations
  • $356 million in unobligated balances of conservation programs that were not extended in the Agricultural Act of 2014, and $144 million in unobligated balances of the Environmental Quality Incentive Program. These funds are in excess of the amounts needed to sustain the programs in FY 2018.
  • $142 million from the Housing and Economic Recovery Act of 2008. This rescission allows the private sector and local governments to play a greater role in addressing affordable housing needs.
  • $523 million from the Title 17 Innovative Technology Loan Guarantee Program
  • $500 million from the Farm Security and Rural Investment Programs
  • $50 million in prior year balances from the Department of Agriculture’s Watershed and Flood Prevention Operations Program. These funds are in excess of the amounts needed to sustain the programs in FY 2018.
  • $150 million in prior year balances from the National Service Trust. This rescission will not impact the agency’s operations.
  • $148 million from Animal and Plant Health Inspection Service
  • $133 million from Railroad Unemployment Insurance Extended Benefits

Photo Credit: Gage Skidmore


New Jersey Resuscitates Obamacare Mandate Tax

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Posted by Tom Hebert on Thursday, May 31st, 2018, 12:45 PM PERMALINK

78% of New Jersey households hit by the tax make less than $50,000 per year

The Republican tax cuts signed by President Trump repealed the Obamacare individual mandate tax nationwide, but New Jersey residents will be stuck paying it due to the state’s Democrat legislature and governor. Governor Phil Murphy on Wednesday signed the new tax into law that will impose the tax on residents who choose not to purchase “qualifying” health insurance as defined by Obama-era regulations.

New Jersey’s Obamacare tax will disproportionately hit low and middle income New Jersey taxpayers:

-78% of New Jersey households hit by the Obamacare mandate tax make less than $50,000 per year. According to the IRS, the Obamacare mandate tax hit 188,570 New Jersey families and individuals in the most recent year of available data. 146,910 of these taxpayers made less than $50,000 per year – 78 percent of those impacted by the mandate.

-38% of New Jersey households hit by the Obamacare mandate tax make less than $25,000 per year. That’s 70,830 New Jersey households.

-New Jersey households paid a total of $93,342,000 in Obamacare individual mandate taxes in the most recent year of available data.

The new tax, just like the old one, forces New Jerseyans to purchase health care whether they want it or not. The original Obamacare tax required a family of four to pay 2.5 percent of their income or $2,085 – whichever was higher. The tax required an individual to pay $695 or 2.5 percent of his income – whichever was higher.

On a federal level, the results are also grim. 79 percent of households that got hit with the Obamacare individual mandate tax in 2015 made less than $50,000 a year. 37 percent of households made less than $25,000 a year. In total, 6,665,480 households paid $3,079,255,000 in individual mandate tax penalties in 2015.

Photo Credit: TravelingMan


Trump Tax Cuts Boosting Housing Market

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Posted by Tom Hebert on Thursday, May 31st, 2018, 11:00 AM PERMALINK

Several months after President Trump signed the landmark Tax Cuts and Jobs Act (TCJA) into law, the economy is finally booming again. The nonpartisan Congressional Budget Office (CBO) projects GDP growth to be 3.3% by the end of 2018, proving that the Trump tax cuts have been a catalyst to rapid economic growth. This new growth is a welcome relief from 8 years of anemic economic stagnation under the Obama presidency. 

The revitalized economy is a rising tide that lifts all boats. The tax cuts have been a boon to the housing market in several important ways.

First,  the TCJA will inject at least $40 billion into the housing market in 2018 according to a recent report from Zillow. The report estimates that Americans will invest a collective $13.2 billion directly in the housing market by buying or renting larger homes. The report also states that Americans will use a collective $24.7 billion of their tax savings to renovate their existing homes.

Second, home prices are also growing at the fastest pace since 2006, and the median U.S. home value is up over 8.7% in the past year. This is great news for homeowners looking for a return on their investment when selling their homes.

Third, the GOP tax cuts have also incentivized Americans to buy homes. A record 7.8% of respondents to the Conference Board’s consumer confidence survey reported that they plan to buy a home within the next six months.

Fourth, homeownership is on the rise. After hitting an all-time high in 2017, homeownership is projected to increase from 73.9 million homeowners in 2017 to 74.6 million in 2018. In 2026, homeownership is expected to increase to 78.7 million.

Finally, Data from Bloomberg shows that home values are even rising in high-tax states like New York and California. Home values in the Hamptons rose 20% compared to a year ago, and home values in parts of San Francisco and California rose 25% compared to a year ago. Even the disastrous tax-and-spend liberalism plaguing much of the country can’t stop the booming housing market.

The facts are clear: Americans all across the country are benefiting from the Trump tax cuts. Individual provisions in the Tax Cuts and Jobs Act (TCJA) have put more money in the pockets of hard-working Americans. Over 90% of Americans have received a tax cut under the new tax code. Between 2018 and 2025, American individuals and families will see a $1.17 trillion tax reduction as a result of the bill. A family of four earning $73,000 will see over $2,000 in tax cuts, a tax reduction of 58%  A single parent with one child earning $41,000 per year will see $1,304 in tax cuts, a tax reduction of 73 percent.

All of this has rejuvenated the economy. Under President Trump, the unemployment rate is at a 17 year low of 3.9%. The economy has added 800,000 jobs since Trump signed the GOP tax cuts into law, and the IMD World Competitiveness Center just named the U.S. the most competitive economy in the world. Hundreds of companies have announced pay increases, increased employee benefits, or bonuses since December.

The Trump tax cuts have made the housing market great again. Capital investments, home prices, home values, and homeownership are all on the rise. American families and individuals are using their tax savings to buy larger homes or renovate their existing homes. The strong housing market is yet another example of how tax reform has revitalized the economy.  

Photo Credit: Gage Skidmore


The JOBS For Success Act Promotes Upward Mobility and Long-Term Work

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Posted by Alex Hendrie, Tom Hebert on Wednesday, May 23rd, 2018, 2:55 PM PERMALINK

Under President Trump, the economy is roaring.

In the wake of tax reform, the economy has grown at 2.9 percent annual growth in the past year, while the unemployment rate is at a 3.9 percent - the lowest level since 2000. Real disposable income rose 3.4 percent in the first quarter of 2018, and nearly 800,000 jobs have been created since tax reform passed in December.

However, job openings have hit a record high of 6.6 million and labor force participation remains low, indicating that more needs to be done to promote upward mobility and ensure that Americans have long-term employment.

Congress can take an active role in narrowing this jobs gap by reforming the Temporary Assistance for Needy Families (TANF) program.

H.R. 5861, the JOBS for Success Act, introduced by Ways and Means Chairman Kevin Brady (R-Texas) and Human Resources Subcommittee Chairman Adrian Smith (R-NE) reforms TANF to encourage and equip able-bodied adults with the tools they need to find long term work, while simultaneously protecting the vulnerable in our society.

In addition, these reforms will ensure states will spend resources more effectively.

As noted in a study by the Center on Budget and Policy Priorities, states frequently do not spend funds on one of three core welfare programs (basic assistance, child care, and work programs). For instance, Michigan spends $100 million a year on college aid, much of which goes to families earning more than $100,000 per year, while Arizona spends half of its TANF funds on child welfare, rather than helping individuals return to work.

H.R. 5861 implements numerous reforms to strengthen the TANF program:

  • The JOBS for Success Act ensures everyone eligible to find work can get work. Millions of men have left the workforces, so the Jobs program realigns TANF’s focus from single women (as the 1996 reform prioritized) to both men and women.
  • The JOBS for Success Act holds states accountable. Currently, TANF measures the success of the program by the number of participants. The JOBS for Success Act realigns this incentive by making states accountable for tangible work outcomes, while giving them more flexibility to allocate funds where they are most appropriate. The bill also requires states to universally engage with struggling Americans to ensure that they get and keep a job.
  • The JOBS for Success Act ensures that funds are going to those who need it most. The bill prioritizes funds to those under 200% of the poverty line to ensure that taxpayer dollars go to those who need it most. These funds will be used to support job training and child care services for those reentering the workforce.
  • The JOBS for Success Act promotes innovation, transparency, and program coordination by allowing up to 50% of a state’s allocation to be transferred to the Child Care and Development Fund, child welfare (up to 10%), and workforce programs under the Workforce Innovation and Opportunity Act.

The legislation also recognizes that more government is not the answer and wisely does not increase spending over what the government is currently spending.

Since President Lyndon Johnson’s Great Society plan was enacted, the federal government has spent trillions of dollars on welfare programs with few tangible results.

The poverty rate in 2014 (14.8 percent) is actually worse than it was in 1966 (14.7 percent) before the vaunted Great Society programs were implemented. The current system fails to promote upward mobility – 34 percent of Americans raised in the bottom fifth of income remain there as adults.

Meanwhile, the costs of running these programs have skyrocketed. According to CBO, federal spending on welfare has nearly doubled between 2006 ($369 billion) to 2016 ($744 billion). When factoring in state government spending, total government spending on welfare programs already exceeds $1 trillion annually.

Without reform, CBO projects that federal spending alone will exceed $1 trillion by 2026.

Instead of throwing more money at federal programs, the JOBS for Success Act ensures that funds are responsibly used for the purpose this money is intended for. Reforming TANF will build on the success of tax reform by promoting upward mobility so that Americans can get a job and keep their job.

 

Photo Credit: Jim Grey


A Vote for the Farm Bill is A Vote for Welfare Reform and Upward Mobility

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Posted by Alex Hendrie, Tom Hebert on Thursday, May 10th, 2018, 9:00 AM PERMALINK

The Farm Bill Strengthens the Safety Net, Encourages Work, Promotes Upward Mobility, and Ensures Taxpayer Funds Are More Responsibly Spent

Next week, Congress is expected to take up H.R. 2, the Agriculture and Nutrition Act of 2018.

This legislation includes important reforms to the Supplemental Nutrition Assistance Program (SNAP) and represents an important step forward in enacting welfare reform.

The 2018 farm bill includes important reforms to the SNAP program that will help ensure the program is achieving the goal of promoting upward mobility while simultaneously protecting the most vulnerable in our society. For instance:  

  • The farm bill requires requiring individuals on SNAP that are between ages 18 to 59 to work and/or participate in employment training for at least 20 hours per week (individuals with a disability, are pregnant, or are caretakers are exempt from this requirement).
  • The farm bill increase funds available for a work training program for SNAP recipients from $90 million to $1 billion per year. The plan also mandates that states provide a training slot to every work-eligible SNAP recipient. Estimates show that this would free one million Americans from government dependency over the next decade.
  • The farm bill establishes a Duplicative Enrollment Database to make sure recipients aren’t receiving SNAP benefits from multiple states.
  • The farm bill introduces a pilot program where food stores provide bonuses to SNAP households that buy fruits, vegetables and milk.

There is a clear need to reform the safety net. SNAP is just one example of the failure of government to provide a welfare program that works.

President Ronald Reagan famously said: “The Federal Government declared a war on poverty, and poverty won.” Unfortunately, this statement still rings true over three decades later.

Despite the trillions of dollars spent on welfare programs since President Johnson’s Great Society plan was enacted, the poverty rate in 2014 (14.8 percent) is actually worse than it was in 1966 (14.7 percent). Programs are still not helping Americans get out of poverty. 34 percent of Americans raised in the bottom fifth of income are still trapped there as adults.

Meanwhile, the costs of running these programs have skyrocketed. According to CBO, federal spending on welfare has nearly doubled between 2006 ($369 billion) to 2016 ($744 billion). Without reform, CBO projects that federal government spending on welfare will exceed $1 trillion by 2026.

Throwing billions of dollars at the problem has clearly failed to solve the problem. Instead, expensive, poorly-run government programs have kept low-income Americans from achieving the American dream for far too long.

In 2016, the Mercatus Center reported that 18 percent of Americans receive food stamps. Yet, only 1 percent of American households likely need them. As a result, the program costs about $70 billion per year. Further, there are currently more than 20 million able-bodied adults on SNAP, even though there are 6 million open jobs across America.

Interestingly, Governor Sam Brownback implemented similar work requirement reforms (and time limits) in the Kansas food stamp program in 2013.

The Foundation for Government Accountability studied the results in 2016 and found that the reforms were a success. Before the Kansas food stamp reforms, 1 in 5 able-bodied food stamp recipients worked, and 93 percent of them were in extreme poverty. After the reforms, 75 percent of the able-bodied adults in the program dropped out. 60 percent of able-bodied adults that no longer needed food stamps found jobs within 12 months. Further, their incomes rose by about 127 percent per year, and average income for able-bodied working adults is now above the poverty line. 

On the federal level, Kansas-style welfare reform centered on upward mobility would help low-income Americans move up the economic ladder by incentivizing work.

The Agriculture and Nutrition Act is far from perfect and lawmakers should continue to strengthen the bill by offering other common sense reforms, such as fixing the outdated, wasteful sugar subsidy.

Even so, the welfare reforms including in the Farm Bill represent a step in the right direction toward reducing poverty, encouraging work, fostering upward mobility, and ensuring taxpayer dollars are responsibly spent.

Photo Credit: Carrie Larimer


The RSC Budget Proposal Builds on the Success of Tax Reform

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Posted by Alex Hendrie, Tom Hebert on Friday, April 27th, 2018, 11:30 AM PERMALINK

Republican Study Committee (RSC) Chairman Mark Walker (R-NC) and RSC Budget and Spending Task Force Chairman Tom McClintock (R-CA) released the RSC’s budget proposal this week. The budget, entitled “A Framework For Unified Conservatism,” enacts important policies like free market health care reform and responsible entitlement reform. 

Most importantly, the budget calls for pro-growth tax reform and making middle class tax cuts permanent. Chairman Walker and Chairman McClintock should be commended for this conservative budget outline.

The RSC budget calls for making the individual tax cuts from the Tax Cuts and Jobs Act permanent. Under the TCJA, 90 percent of wage earners are seeing increased take-home pay. A family of four earning the median income of $73,000 will receive a tax cut of more than $2,000 this year. Similarly, a single parent with one child earning $41,000 per year will see tax reduction of 73 percent, resulting in a $1,304 tax cut.

Unfortunately, arcane Senate procedure and the refusal of Democrats to support tax cuts meant that the individual provisions in the Tax Cuts and Jobs Act could not be made permanent. If Congress does nothing, these important tax cuts will sunset in 2026.

The RSC budget would make these important provisions permanent:

  • The doubling of the standard deduction to $12,000 and $24,000 for a family. This provision is a $690 billion tax cut between 2018 and 2025. If allowed to sunset, the standard deduction would revert to $6,000 for individuals or $12,000 for a family.
  • The reduction of nearly every individual income tax bracket, a tax cut of $1.2 trillion between 2018 and 2025.
  • The doubling of the child tax credit to $2,000 Child Tax Credit. This is a $533 billion tax cut between 2018 and 2025. If allowed to sunset, the CTC would revert to $1,000 per child.
  • A 20% deduction for pass-through businesses (LLCs, partnerships, S-corporations etc.). This is an 88 billion tax cut between 2018 and 2025.
  • The doubling of the death tax exemption to $11 million. This is a $69 billion tax cut between 2018 and 2025. If allowed to sunset, the exemption would revert back to $5.49 million, meaning more taxpayers, including many family owned businesses, would be hit by the death tax.
  • An increase in the threshold that the Alternative Minimum Tax hits individuals so that it kicks in at $1 million of annual income. This is a tax cut of $572 billion between 2018 and 2025. If this sunsets, millions of families will be hit by the AMT.

The RSC budget also calls for making full business expensing permanent ensuring strong economic growth continues. Prior to passage of the TCJA, businesses were forced deduct, or “depreciate” the cost of any new investments and assets over multiple years depending on the asset they purchase, as dictated by arbitrary IRS rules. Tax reform implemented immediate, full business expensing for five years with a phase-out of the provision over the next five years.

Expensing allows businesses to immediately deduct the cost of new equipment, and so encourages businesses to make more investment in the U.S. economy. Full expensing gives businesses a zero percent rate on the cost of new investments, which incentivizes more capital flowing into the economy, leading to stronger growth. 

According to research by the Tax Foundation, implementing permanent full business expensing increases GDP by five percent after a decade and increases wages by 4 percent, creating more than one million jobs.

Lastly, the RSC budget calls for entitlement reforms that ensure these programs grow at a sustainable rate. If entitlement spending is not reined in, these programs will continue to add hundreds of billions to the national debt each year. Without reform, the Social Security Trust Fund will be completely depleted by 2035 and the Medicare Trust Fund will be empty by 2029. Modernizing Social Security and Medicare are imperative in order to save the programs.

This RSC budget makes multiple changes to Social Security, starting with implementation of the Social Security Reform Act to achieve long-term sustainable solvency. Second, the plan gradually phases in an increase of the eligibility age to 70 to keep up with a rising mortality rate. Third, the framework modernizes the benefit formula for new retirees, provides additional support for the most vulnerable, reduces the barriers to staying active in retirement, and prohibits overpayment debt discharge.

The framework also implements needed reforms to Medicare. First, the plan reduces costs for beneficiaries by implementing premium support in 2023 while including traditional fee-for-service as an option. Second, the framework phases in an increase in the eligibility age to account for longer lifespans. The plan combines Parts A & B, reforms Medigap, and phases in increase premiums and means testing.

These reforms will place important programs on a sustainable path, ensuring they continue to serve those in need.

Photo Credit: Flickr


Senator Cornyn Introduces the Small Business Taxpayer Bill of Rights Act

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Posted by Tom Hebert on Friday, April 27th, 2018, 11:15 AM PERMALINK

With all the time and effort that goes into running a successful small business, worrying about tax compliance should be near the bottom of any entrepreneur’s to-do list.

S. 2689, the “Small Business Taxpayer Bill of Rights Act,” introduced by Senator John Cornyn (R-Texas) and co-sponsored by Senator Dean Heller (R-NV) and Senator Pat Roberts (R-KS), implements numerous IRS reforms so that small business owners are treated fairly and adequately protected from IRS overreach.

Senators should co-sponsor and support this bill to ensure that business can spend more time creating jobs and increasing wages, and less time complying with burdensome IRS rules.  

Bringing Relief to Small Businesses

Small businesses are the engine of the American economy. There are approximately 30 million small businesses, and workers employed by small businesses comprise approximately 99% of the workforce. The reforms in this bill will bring much-needed relief to small business owners who have struggled under a dysfunctional IRS for far too long.

As its name suggests, the Small Business Taxpayer Bill of Rights Act bill brings much-needed relief to small businesses. If passed, this legislation would require the IRS to release a levy (a seizure of assets) if it is creating an economic hardship for the taxpayer. This would give small businesses another chance to comply with the IRS without having to shut down or fire employees.

Compensates Taxpayers for IRS Bureaucracy and Misconduct

One of the most ridiculous ways that the IRS abuses taxpayers is by subjecting them to random audits by the IRS’s National Research Program. These random audits are called “super-audits” because they are performed to improve tax administration. Even if the taxpayer is fully compliant with the audit, the NRP’s audits are significantly burdensome. Taxpayers selected for super-audits are essentially guinea pigs: they have to contend with random and intensive audits as well as pay for their own representation. The Cornyn bill would alleviate the financial burden by allowing taxpayers to deduct $5,000 for NRP-related expenses.

The bill also increases the ability of taxpayers to seek compensation to taxpayers in the case of IRS misconduct. For instance, Sen. Cornyn’s bill expands eligibility for small businesses to recoup attorney fees when the IRS takes action against them that are not substantially justified.

In addition, the law allows taxpayers to claim up to $5,000,000 in damages in a civil action when the IRS engages in abusive or reckless conduct, increases the maximum penalty imposed on IRS agents that engage in extortion, fraud, and bribery to $25,000, and allows taxpayers to receive $10,000 (indexed for inflation) for every unauthorized inspection or disclosure of their tax information by a government employee or officer.

Strengthens Taxpayer Protections

The bill contains numerous also contains provisions to ensure the IRS is acting in the best interests of taxpayers. The new legislation bans secret communications between the IRS and the IRS Office of Appeals when discussing a taxpayer’s case, and makes violations of this new rule a fireable offense. This safeguard ensures that the Office of Appeals is truly independent. The Cornyn bill also requires taxpayer consent before including IRS Counsel or compliance officials to participate in an Appeals conference, overturning a recent rule that needlessly increases the contentiousness of the appeals process.

In addition, the Cornyn bill increases the fine for unauthorized disclosure of taxpayer information by IRS employees from $5,000 to $10,000. Leaking taxpayer information is a felony and can land the offending IRS employee in jail for up to 5 years.

Equal Treatment Under the Law

In order to ensure that taxpayers are not targeted for audits by their race, religion, or political ideology, S.2689 would require the Treasury Inspector General for Tax Administration (TIGTA) to consult with the IRS on any criteria it uses to select tax returns for audits. Conservatives know the importance of maintaining safeguards against being targeted for political ideology.

A notable example of the IRS’s abuse of taxpayers is its systemic targeting of conservative groups. IRS employee Lois Lerner’s hatred for conservatives and tea party groups led to only one of them gaining non-profit status in 3 years. Lerner targeted tea party groups with onerous audits to sideline them from participating in the 2012 election. This bill would be an excellent first step in ensuring that taxpayers aren’t targeted for audits based on race, religion, or political ideology.

Photo Credit: Gage Skidmore


House To Vote On IRS Reforms

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Posted by Tom Hebert on Monday, April 16th, 2018, 12:00 PM PERMALINK

The Internal Revenue Service is an agency that is long overdue for modernization and reform. It has been two decades since the agency faced significant reform, when Congress passed the IRS Reform and Restructuring Act of 1998 (RRA). Since then, the IRS has been plagued with mismanagement and has struggled to adapt to the modern digital age.

This week, the House of Representatives will vote on a number of bills that update the IRS. One of the most significant bills is H.R. 5444, the “Taxpayer First Act,” sponsored by Ways and Means Oversight Subcommittee Chair Lynn Jenkins (R-KS).

This legislation implements several necessary IRS reforms that would improve the efficiency of the agency, ensure taxpayers are protected from the agency, and ensure that Americans can more easily comply with the tax code.

Ensuring Americans Can Comply with the Tax Code

For many American families, filing taxes is a time consuming and overly complex process. Recent estimates of tax complexity have found that families and businesses spend more than 8.9 billion hours and $400 billion complying with the code every year.

One way these problems are mitigated is through the Free File Program, a public-private partnership available that has served more than 40 million taxpayers and saved $1.3 billion in preparation costs since its inception. The program offers 70 percent of taxpayers, or those making with less than $66,000 in adjusted gross income, access to electronic filing software provided by leading private companies free of charge.

H.R. 5444 expands and strengthens Free File by making the program permanent and requiring the IRS to work with state governments in order to ensure the program is available at the state level and promotes simplicity and efficiency. The legislation also requires the IRS to work with the private sector to design new programs that make it easier for taxpayers to complete and file their tax returns.

Implementing Taxpayer Protections from the IRS 

The Taxpayer First Act implements several reforms to protect taxpayers from the IRS in the case of an audit.

First, the legislation increases the protection over confidential taxpayer data by prohibiting the IRS from outsourcing taxpayer information to outside contractors unless necessary for expert evaluation of the information at hand.

Second, H.R. 5444 also safeguards the designated summons process against abuse by requiring the IRS to disclose a documented history of reasonable requests of information from the taxpayer to the head of the relevant operating division and its division counsel.

Third, H.R. 5444 improves enforcement of tax laws in several different ways, the first being adjustments to structuring laws. Under present law, banks are required to report currency transactions exceeding $10,000 to the IRS. This proposal would require the IRS to issue a 30-day notice to the owner of any seized assets to inform him of his rights in any post-seizure hearings. 

Lastly, H.R. 5444 makes adjustments to notice of contact of third parties. The new bill requires that the IRS to give taxpayers a 45 day notice before contacting a third party to collect taxpayer liabilities.

While more remains to be done, these reforms move in the right direction toward ensuring taxpayers are protected from IRS overreach.  One of the most egregious examples of IRS abuse in recent memory is when the agency broke federal law to hire a Democrat white-shoe law firm to audit Microsoft. Quinn Emmanuel’s services, which cost taxpayers $1,000 an hour, could have easily been performed by the IRS’s 40,000 in-house enforcement officers. The IRS’s decision to hire an outside law firm to audit Microsoft calls the agency’s judgment into question as well as its use of limited resources. 

Reforms that safeguard the American people against abuse from IRS career bureaucrats is long overdue. The Taxpayer First Act is an excellent first step in reforming and modernizing the troubled agency and should be supported by all members of Congress. 

Photo Credit: Tim Evanson


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