Biden Chief of Staff Dodges "Any Spending Cuts At All?" Question from CBS
White House chief of staff Ron Klain dodged a spending cuts question during a CBS Face the Nation interview with John Dickerson.
Dickerson: "Even believers in activist government think that the government can be very inefficient. With a government plan this big, is the President going to offer any spending cuts at all?"
Klain: [dodge]
Dickerson: "I didn't hear an answer on spending cuts."
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Biden’s $600 Financial Reporting Requirement Could Lead to Even More Violations of Taxpayer Rights
The IRS Criminal Investigation Division (IRS-CI) regularly violated taxpayers’ rights and skirted or ignored due process requirements when investigating taxpayers for violating the $10,000 currency transaction reporting requirements, according to a 2017 report by the Treasury Inspector General for Tax Administration (TIGTA). In addition, less than one in ten investigations uncovered violations of tax law.
These findings should be alarming to taxpayers given that President Biden has proposed creating a new comprehensive financial account information reporting regime which would force the disclosure of any business or personal account that exceeds $600. Not only would this include the bank, loan, and investment accounts of virtually every individual and business, but it would also include third-party providers like Venmo, CashApp, and PayPal.
Under the Bank Secrecy Act, financial institutions are currently required to report transactions exceeding $10,000 or multiple transactions in aggregate of $10,000 in a single day. TIGTA examined 306 investigations undertaken by IRS-CI between 2012 and 2014 for violating this law, where a total of $55.3 million assets were seized. During the audit, the sample size was narrowed to 278 investigations, as several did not meet the criterion for inclusion.
TIGTA found that only 8 percent of investigations uncovered violations of tax law. In many cases, IRS-CI had not considered reasonable explanations from those investigated, property owners were not adequately informed of their rights nor informed of seizure of their property, and outcomes in cases lacked consistency, violating the Eighth Amendment to the Constitution.
Given these findings, a new reporting regime that includes the financial accounts of virtually every business and individual could see countless new cases of taxpayer abuse.
Very few taxpayers investigated by IRS-CI were found to have violated tax law.
Taxpayers investigated by IRS-CI were found to have violated tax law in just 21 of the 252 cases, or 8 percent. Similarly, out of the 278 cases, only 26, or 9 percent, of investigations established that funds came from an illegal source or was involved in another illegal activity.
Instead of establishing tax crimes, it appears that many of these investigations were merely IRS-CI fishing expeditions.
Businesses that dealt with a high number of currency transactions, such as retail, wholesale, service, automobile, restaurant, and gas stations were the primary targets for seizures. This involved the seizing of deposits into a bank account and blocking withdrawals from a bank account, which would likely have disrupted owners’ ability to run their business.
Many of these owners explained that funds withdrawn were simply used for business purchases. Over 90 percent of them were telling the truth.
Interviews with property owners were primarily conducted after seizures.
TIGTA found that in 92 percent of cases, interviews were conducted after the seizure of the interviewee’s property, oftentimes on the same day. This is important, as judges did not receive any information from interviews before making their probable cause determination.
In many cases, with explanations given by property owners, judges’ decisions would have been affected.
This history of seizing property with little to no information outside of simple banking patterns should be alarming to taxpayers, given that the IRS is proposing to force the collection of new banking patterns.
IRS-CI did not consider reasonable explanations given by property owners.
In many cases, there was little or no evidence that property owners’ reasonable explanations were considered by the IRS-CI. In fact, in 54 of the 229 investigations, owners provided reasonable explanations, such as “depositing business funds, withdrawing funds for inventory purchases, or conducting transactions under $10,000 due to insurance policy restrictions.”
In most instances, TIGTA found no evidence that CI attempted to verify the property owners’ explanations.
In other cases, the property owners provided other types of reasonable explanations, such as “friends or unidentified bank representatives told them to conduct transactions under $10,000, they did not want to handle more than $10,000 cash due to the time and “hassle” of filling out forms, a desire to avoid bank fees, or for personal safety reasons.”
Again, TIGTA found no evidence that CI considered the defense offered or tried to verify them.
CI procedures require that all “realistic” defenses are considered before a seized asset is forfeited. Against the rights of these owners, CI agents failed to even verify realistic defenses. Given the failure to follow procedure here, there is a compelling case that these owners’ Fourth Amendment right against unreasonable searches and seizures was violated.
Taxpayers under investigation were not adequately informed of pertinent information, such as the purpose of the interview, proper agent identification, and that a seizure of their property took place.
In 171 of 229 cases, special agents did not properly identify themselves as assistants to the United States Attorneys’ Office (USAO) when they were assisting on an investigation or TIGTA did not find evidence they did. This violates the Internal Revenue Manuals (IRM), which states, “that IRS employees... should advise those contacted that they are acting as assistants to the attorney for the government in conjunction with an investigation.”
In 106 of 229 cases, the agents did not state the purpose of the interview or TIGTA did not find evidence they did. IRM procedures in Title 26 cases require special agents to advise the property owner regarding the purpose of the contact.
For 181 of 229 cases, TIGTA identified a problem with the information provided to the property owner about the seizure. In 110 cases, the property owners were not informed until the end of the interview that a seizure took place. In 60 cases, the property owners were not informed that a seizure took place. As the TIGTA report explains, “For Title 26 cases, the IRM procedures requires special agents to advise the property owner regarding the purposes of the contact, and we believe this also relates to the requirement in Title 26 cases for special agents to advise the property owner that a seizure took place.”
Outcomes in cases lacked consistency, violating the Eighth Amendment to the Constitution.
The Eighth Amendment to the Constitution of the United States, precludes excessive fines and requires that penalties be proportionate to the offense. Additionally, under 18 U.S.C. § 983(g)(1), “a court is required to consider whether a forfeiture is proportional to the gravity of the offense giving rise to it.”
TIGTA explains that many of the individual outcomes in seizure cases were disproportionate to the conduct of the taxpayers and were disproportionate to the outcomes in cases of similarly situated taxpayers.
Worse, outcomes did not appear to be consistently determined by the facts of the cases but rather by how willing a taxpayer was to engage in costly litigation against the government and the potential of a criminal prosecution if no settlement was not reached.
The few cases where structuring cash transaction was proven, often through owners’ own admission, is where the most disproportionate outcomes were identified:
“The most disproportionate outcomes identified for our sample results included cases for which the property owners were criminally charged and entered into plea agreements solely for legal source structuring. In nine cases from our sample, legal businesses and their owners were indicted for structuring cash transactions for which there was no evidence of any unlawful conduct other than structuring. The businesses included water amusement parks, pharmacies, used car sales, and coin and stamp dealers.”
Disproportionate outcomes are a tell-tale sign of a violation of Eighth Amendment rights, as these rights demand proportionate penalties for the offense itself. The IRS-CI’s practice of determining outcomes by taxpayers “risk tolerance” is a dreadful, egregious violation of their rights.
TIGTA found numerous cases where IRS-CI failed to uncover tax crime, violated taxpayers’ due process rights, failed to notify taxpayers of pertinent information, and improperly determined outcomes in violation of the Constitution.
Given that these investigations were conducted due to possible violations of the $10,000 currency transaction threshold, the Biden proposal to create an entirely new reporting regime for financial accounts that exceed $600 should be alarming to taxpayers. If this proposal is implemented, it is inevitable that we will see new cases of the IRS targeting and harassing taxpayers.
Photo Credit: IRS-CI
New York City Council Proposal Places Consumer Privacy at Risk and Hurts Small Businesses
Earlier this morning, Americans for Tax Reform wrote to New York City’s council, urging them to oppose Intro 2331, a bill that would force meal delivery services to share private consumer data with restaurants.
“Intro 2331 would be a disaster for consumers and businesses, placing consumer security and safety and risk, and exposing small family-owned restaurants to significant legal liability” said Director of Consumer Issues Tim Andrews. “With no privacy safeguards in place, customer’s private details could be sold to third parties without their consent, restaurant staff could know the personal addresses of customers subjecting them to stalking and harassment, as has occurred in other countries, and the lack of any security provisions means consumer private data could be easily hacked.”
Andrews continued: “This Bill is not only bad for consumers; it is bad for businesses. Family-owned restaurants don’t have the resources to protect their data from being extorted in increasingly common ‘ransomware’ attacks. Security breaches would not only harm users, but they could also force small businesses to cease operations as a result of multi-million-dollar legal liability costs, in addition to the inevitable loss of customers.”
Andrews added: “Consumer data is one of the most valuable assets of the modern era. To allow restaurants to sell this private information to credit firms, banks, political campaigns, or unscrupulous bad actors with no privacy protections whatsoever violates every rule of sound public policy. Should the very delivery firms that were responsible for keeping restaurants in businesses, and families fed, throughout the pandemic be forced to turn over their valuable data for free to businesses unable to manage it securely, all New Yorkers will suffer as a result."
The full letter can be read here.
Photo Credit: Jörg Schubert
More from Americans for Tax Reform
Lisa Scheller First to Sign “No New Taxes” Pledge in PA-07 Race
Americans for Tax Reform (ATR) commends congressional candidate Lisa Scheller for becoming the first candidate in Pennsylvania’s Seventh Congressional District election to sign the Taxpayer Protection Pledge, a written commitment to Keystone State taxpayers that they will oppose and vote against all tax hikes.
Candidates running for public office like to say they will not raise taxes, but often turn their backs on the taxpayer once elected. The idea of the Taxpayer Protection Pledge is simple enough: Make them put their no-new-taxes rhetoric in writing, so the promise is much harder to break.
For those candidates who refuse to sign the Pledge, voters should wonder why this politician chooses to leave the door open to tax hikes.
“Pennsylvania voters are looking for solutions that get Americans back to work and grow the economy. Signing the Taxpayer Protection Pledge and holding the line on taxes is the first step in that process,” said Grover Norquist, President of Americans for Tax Reform
There are currently 178 Pledge signers in the U.S. House and 44 Pledge signers in the U.S. Senate. 88 percent of all congressional Republicans have made the written commitment to oppose higher taxes. In contrast, ZERO congressional Democrats have made that promise.
President Joe Biden has already promised a slew of tax increases – totally over $3.42 trillion. These tax hikes range from repealing the Trump tax cuts to an increase in the Death Tax and higher energy taxes.
“Voters have a right to know where candidates stand on taxes before heading to the voting booth. The Taxpayer Protection Pledge is a simple litmus test that tells voters I’ll work to protect your wallet. I applaud Lisa Scheller for her commitment to the taxpayers of Pennsylvania and I encourage all candidates running in this race to make the same commitment today,” continued Norquist.
New candidates sign the Taxpayer Protection Pledge regularly. For the most up-to-date information on this race or any other, please visit the ATR Pledge Database.
Photo Credit: The Morning Call
Maine's New Recycling Law Is a Regressive Tax That Will Harm Consumers
Low-income Mainers are already struggling with record high inflation and the twelfth highest state and local tax burden in the country. But a recycling law signed by Governor Janet Mills on Tuesday will make matters worse for those residents with higher prices at the grocery store and on other goods, doing the most harm to families who can least afford the higher costs.
The new program, known as Extended Producer Responsibility (EPR), will charge packaging manufacturers for collecting and processing recyclable materials, in addition to fees for discarding non-recyclable packaging. The Maine Department of Environmental Protection will set a packaging fee schedule on producers based on the per-ton costs of recycling their materials.
While environmentalists and other proponents of the program claim it will lead to funding for new recycling equipment and more efficient procedures, there is no evidence the new law will reduce the amount of trash in landfills. Nor will it improve recycling technology or allow for local tax relief, as some backers of the EPR program have claimed.
Instead, the EPR program will serve as a regressive, hidden tax as producers shift their higher costs onto consumers. Dr. Calvin Lakhan, a researcher at York University in Toronto, estimates that consumer prices will skyrocket anywhere from $99 million to $134 million every year as a result of the EPR program. For a family of four in Maine, monthly costs are estimated to rise between $32 and $59, thanks to higher costs on products that use disposable packaging.
Though the burden is concealed and indirect, all Maine residents will ultimately bear the economic consequences of the EPR legislation. But for low-income individuals and families, who already struggle to afford basic necessities, higher prices at the grocery store will have a far weightier impact.
From May 2020 to May 2021, Maine saw inflation of 6.6% – the largest rise in the final demand index since the Bureau of Labor Statistics started tracking the figure in 2010. Compared to a national rate of 4.9% over that same period, low-income Mainers are already struggling more than their friends and family in other states. The EPR program will cause even further price inflation during a period when those residents would be better served with tax relief.
At the same time that Governor Mills is imposing what is effectively a regressive tax hike, she’s shunning efforts to tax upper income filers. Lawmakers considered several bills to increase taxes on the wealthy during this year’s legislative session in Maine. LD 498 would have hiked the top income tax rate from 7.15% to 10.15%, an increase of more than 41%, while another bill would have raised the corporate tax rate from 8.93% to 12.4%. But even if they had passed, those bills would never have become law due to Governor Janet Mills’ firm opposition to the proposals.
While she won’t support a direct, progressive tax hike on the wealthy, Governor Mills takes little issue with imposing a hidden, regressive one that harms her poorest residents the most. Mills will have a tough time defending that duplicitous decision against her potential Republican challengers in 2022.
Maine was the first to impose an EPR fee scheme, but it may soon have company. Oregon lawmakers recently passed a similar EPR program under SB 582, which is awaiting Governor Kate Brown’s signature. That bill would raise recycling costs by 30% while only raising the recycling rate by 3%, according to a letter signed by nearly 40 manufacturing and business groups. Like in Maine, those higher costs will be passed on to consumers with higher prices for basic goods, many of which use disposable packaging. If Governor Brown blesses the program with her signature, Oregon will become the second state in the nation to impose a regressive recycling tax on its residents.
Expect lawmakers and governors in other states will continue to pursue EPR legislation in the coming years. This effective regressive tax first enacted in Maine should serve as a cautionary tale to avoid, and not a model for other states to emulate, though progressives will certainly try.
Photo Credit: Blahedo
Removal of $40 Billion in Extra IRS Funding From Senate Bill is Win for Taxpayers
Media reports indicate that $40 billion in new funding for the IRS has been removed from the bipartisan Senate infrastructure proposal. The purpose of this new IRS funding is not to help taxpayers navigate the tax code or receive better customer service, but to raise $100 billion in new revenues. It would have empowered the IRS to audit and harass millions of American families, self-employed people, and small businesses including cash heavy businesses like nail-salons, barbershops, and food trucks.
While the removal of $40 billion in IRS funding from the Senate package is a win for taxpayers, President Biden and Congressional Democrats are pushing to include $80 billion in new funding for the agency in the partisan $3.5 trillion proposal that will be passed through budget reconciliation. This funding would add 87,000 new IRS agents that Biden claims will squeeze taxpayers for an additional $787 billion. 87,000 IRS agents could fill Nationals Park twice.
Any new IRS funding should be alarming given the IRS has a history of incompetence and corruption. In fact, just a few weeks ago, the progressive group ProPublica announced it had the tax returns of thousands of taxpayers stretching back 15 years. This sensitive taxpayer data was either obtained through an unauthorized leak by an IRS employee or through a data breach – either way the IRS failed to safeguard taxpayer information.
65 Percent of Voters say the IRS has Too much Power
A June 19 - 22 Fox News National Survey of 1,001 registered voters asked if the IRS has "too much power." 65 percent said yes, 31 percent said no. The same question asked in June 2019 produced a result of 60 percent yes, 34 percent no.
More IRS Funding Will Mean Thousands of New IRS Agents
Legions of new IRS agents will be unleashed for invasive and time-consuming audits of middle class Americans and small businesses.
As previously reported by CNBC, experts say a fattened-up IRS would go after small businesses that necessarily depend on cash transactions:
Certain small businesses may face an audit under the plan.
“I think the industries that should be concerned are those in cash,” said Luis Strohmeier, a Miami-based CFP and partner at Octavia Wealth Advisors.
He expects the agency to scrutinize cash-only small businesses like restaurants, retail, salons and other service-based companies.]
Even Obama-era IRS chief John Koskinen – a longtime advocate of increasing the IRS budget – thinks President Joe Biden’s proposal to increase IRS funding by $80 billion is too much.
As reported by the New York Times:
“I’m not sure you’d be able to efficiently use that much money,” Mr. Koskinen said in an interview. “That’s a lot of money.”
Rather than fix the agency's longstanding mismanagement, ineptitude and abuse problems, Biden's approach will make the problem worse.
IRS Funding is Yet Another Way to Funnel Taxpayer Money into Democrats’ Campaigns.
New IRS funding will be a boon for the union that represents IRS employees. This union overwhelmingly supports Democrat candidates so new IRS funding will also shovel more money into Democrat campaign coffers:
- The left-wing National Treasury Employees Union represents 150,000 taxpayer-funded federal employees across 31 departments and agencies. The NTEU is famous for aggressive use of lawsuits in order to advance Democrat union priorities.
- NTEU collects dues from roughly 70,000 IRS employees, nearly half of NTEU’s total membership.
- NTEU shovels 97 percent of their money into Democrat campaign coffers. In the 2019-2020 campaign cycle, NTEU’s political action committee raised $838,288. Out of $609,000 in spending on federal candidates, an overwhelming 97.04 percent went to Democrats.
- IRS employees regularly perform Democrat union work on the taxpayer dime. In fiscal year 2013, IRS employees spent over 500,000 hours on union activity, costing taxpayers $23.5 million in salary and benefits. To add insult to injury, the IRS had at least 40 out of 201 workers solely devoted to union activities that made $100,000. In 2019, 1,421 IRS and other Treasury Department employees spent 353,820 hours of taxpayer-funded union time (TFUT), costing $19.77 million in salary and use of government property.
Under Biden, the IRS Will Snoop on Your Venmo Account, Bank Accounts, and more.
The Biden administration also wants to sic the IRS on your Venmo account and bank accounts. As part of the proposal, banks and third-party payment providers, like Venmo and CashApp would be required to report ALL account holders’ aggregate account outflows and inflows to the IRS.
President Biden claims that this proposal is designed to “crack down on millionaires and billionaires who cheat on their taxes.” However, it is unclear how monitoring Venmo accounts – many of which are held by younger Americans – contributes to this goal. The average Venmo transfer amount is $60 and is popular among young people, with over 7 million Venmo users belong in the 18-34 age group. For users who have undergone identity verification, the weekly spending limit is $7,000. These trends exist for most third-party payment providers. It is hard to see how millionaires and billionaires are using Venmo or CashApp to launder mass amounts of money.
The IRS will use these powers against Americans of all income levels. Requiring banks and third-party payment providers to report this kind of information is an indefensible invasion of privacy. Giving the IRS access to this private information is a disaster waiting to happen.
New IRS Funding Would Reward Incompetence and Irresponsibility.
The IRS has proven time and time again it cannot spend responsibly and complete the most basic of tasks. The agency needs reform, not more money and more power.
Several audit reports have demonstrated how the agency’s inability to do its job is due to incompetence, not lack of funding:
- A Treasury Inspector General for Tax Administration (TIGTA) report on the 2021 Filing Season found that almost 40 percent of printers were not working at tax processing centers in Ogden, Utah and Kansas City, Missouri. However, in many cases the only thing wrong with the printers is that no employee had replaced the ink or emptied the waste cartridge container: “IRS employees stated that the only reason they could not use many of these devices is because they are out of ink or because the waste cartridge container is full.”
- This year, despite having funding for new hires, the IRS only achieved 37 percent of their hiring goal. They had trouble onboarding new hires as well, as it was “difficult to find working copiers (as noted previously) to be able to prepare training packages.”
- In 2016, the IRS has lost track of laptops containing sensitive taxpayer data. TIGTA estimates that the IRS had failed to properly document the return of 84.2 percent, or more than 1,000 computers due to be returned by contract employees.
- A TIGTA report in 2017 showed that the IRS rehired more than 200 employees who were previously employed by the agency, but fired for previous conduct or performance issues.
- Each year the IRS hangs up on millions of callers -- a practice they refer to as “Courtesy Disconnects.” Currently, if you call the IRS, you have a 1-in-50 chance of reaching a human being.
- According to the National Taxpayer Advocate’s 2014 Annual Report to Congress the IRS was unable to justify spending decisions. As the report stated: "The IRS lacks a principled basis for making the difficult resource allocation decisions necessitated by today’s tight budget environment.”
- The agency has repeatedly failed to compile legally required tax complexity reports. These reports are supposed to contain the IRS's specific recommendations on how to make the tax code easier to comply with. Since 1998, the IRS has done so just twice – in 2000 and 2002.
- In 2015, the IRS was spending $1,000 an hour hiring a litigation-only white shoe law firm for an investigation, despite having over 40,000 employees dedicated to enforcement efforts.
- In 2015, the agency has been caught red-handed wasting taxpayer dollars on Nerf footballs, the world’s largest crossword puzzle, extravagant $100 dollar lunches, and more.
As Norquist wrote in a recent op-ed, “The IRS should not be rewarded for failing to reform, failing to obey the law, failing to fire those who break the law, and spending tax dollars to act as the enforcer for a partisan political machine.”
Photo Credit: Ted Eytan
$3.5 Trillion Democrat Spending Blowout Contains Anti-Worker PRO Act
The $3.5 trillion spending blowout announced by Senate Democrats will include the job-killing “Protecting the Right to Organize Act,” according to media reports.
The PRO Act would benefit Big Labor at the expense of the American worker. The PRO Act’s inclusion in the spending blowout gives further insight into the Senate Democrats’ proposal, the details of which are below:
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The PRO Act nullifies Right to Work laws across the country, which protect 166 million Americans in 27 states. Right to Work laws prevent employers from being able to force workers to join a union as a condition of employment. If Right to Work laws were banned, every American worker would be forced to choose between paying a union boss and putting food on the table.
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The PRO Act enacts a stringent three-step test that would force independent contractors to reclassify as W-2 employees. This would jeopardize the livelihoods of the more than 59 million Americans that engage in freelance work.
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Codify the NLRB’s disastrous 2015 Browning-Ferris Industries decision that muddled the definition of “joint-employer,” overturning decades of labor law precedent. If implemented, this would decimate the franchise business model that employs 7.6 million Americans in 733,000 locations.
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Change union elections to allow union bosses to collect cards from workers to demonstrate support for the union, rather than holding a secret ballot election. If labor bosses fail to unionize a workplace via a secret ballot election, the union can appeal to the NLRB for a second chance to unionize the workplace.
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Violate worker privacy by forcing employers to give union organizers sensitive employee contact information, including home addresses, cell phone, shift information and landline numbers, and email addresses. This would allow union bosses to intimidate workers into joining unions at homes or workplaces.
In addition, the PRO Act would increase costs for employers, harming businesses and consumers. According to the American Action Forum, the independent contractor provision would impact 8.5% of GDP and cost between $3.5 billion and $12.1 billion annually. The joint employer provision would cost between $17.2 billion and $33.3 billion annually for the franchise business sector and affect 44% of private sector employees. Finally, the provision that restricts employers from replacing strikers permanently could cost employers an additional $1.9 billion every year.
The PRO Act is a return on the investment of the hundreds of millions of dollars that Big Labor poured into the Democrat party's campaigns to capture the House, Senate, and White House. Employers will be able to force workers into unions as a condition of employment, and union bosses will have access to personal information to bully workers into compliance. Tens of millions of independent contractors would face losing their jobs.
1.4 Million Small Businesses Will Face a Tax Hike Under Biden’s Corporate Tax Increase
1.4 million small businesses organized as C-corporations will face a tax hike under President Biden’s corporate income tax hike, according to the U.S. Chamber’s analysis of IRS and Census data.
President Biden’s proposal would raise the corporate income tax rate from 21 to 28 percent. What the administration fails to mention is that numerous small businesses are organized as C-corporations. Thus, the tax rate these small businesses pay would be increased by one-third. The rate would also be higher than Communist China's corporate income tax, which stands at 25 percent. This comes at a time when main street businesses are still trying to recover from months of shutdowns, restrictions, and increased costs.
To be clear, the corporate tax hike will not be the only tax increase on small businesses. Biden's increase in the top marginal income tax rate to 39.6 percent will hit small business organized as sole proprietorships, LLCs, partnerships and S-corporations. Also, Biden seeks to eliminate stepped up basis, creating a second death tax on small business. Thus, the amount of small businesses negatively affected by Biden’s tax hikes will certainly exceed 1.4 million.
As noted by the U.S. Chamber of Commerce, the corporate income tax hike will hurt small businesses in every sector of the economy: “agriculture, construction, health care, real estate, finance, and more.”
The analysis also details the state-by-state impact of this tax hike on small businesses:
- In Arizona, 31,315 employers will see their taxes increased, including 21,646 small businesses with fewer than 500 employees. Under Joe Biden’s plan, Arizona’s combined state and federal corporate tax rate would be 31.5 percent.
- In West Virginia, 6,081 employers will face tax hikes, including 4,203 small businesses. West Virginia’s state corporate tax rate, in addition to the federal 28 percent, would result in a 32.7 percent tax rate for these small businesses.
- In New Jersey, which has the highest corporate tax rate, 45,053 small businesses would face a combined state and federal corporate tax rate of 36.3 percent.
Construction, retail trade, and professional/scientific/technical service industries across the nation would be hit the hardest by Biden’s tax hike.
Biden’s corporate tax hike will lead to fewer jobs and lower wages. In a 2017 report, Stephen Entin of the Tax Foundation notes that 70% of corporate taxes are borne by labor. Other economists argue that anywhere from 20% to 50%, to even 100% of the tax hits workers.
During his campaign, President Joe Biden promised the American people that he would not raise taxes on small businesses. The promise was made on Feb. 20, 2020 before a national audience during a Democratic debate hosted by MSNBC:
MSNBC's Hallie Jackson: "I want to ask you about Latinos owning one out of every four new small businesses in the United States. Many of them have benefited from President Trump's tax cuts, and they may be hesitant about new taxes or regulations. Will taxes on their small businesses go up under your administration?"
Biden: "No. Taxes on small businesses won't go up."
Now that he is in office, he has shown no sign of keeping this promise. Many of the tax increases proposed by Biden including the corporate income tax hike directly violate this pledge.
Despite Democrats’ claims, millions of main street businesses will foot the bill for their wasteful spending projects.
Photo Credit: Randy von Liski
Washington State Prohibits Voters From Having a Say Over Unconstitutional Income Tax
Washington state legislators are making their latest attempt to impose an unconstitutional income tax on its residents. With the passage of S.B. 5096, Washington residents may soon be subject to a 7% tax on the sale of stocks, bonds, businesses, and other investments whose profits exceed $250,000.
Progressives have long tried to impose an income tax on Washingtonians. However, since the passage of a 1930 constitutional amendment that made all taxes “uniform upon the same class of property,” with property defined as “everything, whether tangible or intangible, subject to ownership,” Washington has successfully evaded every attempt to impose an income tax. Just two years after the passage of the 1930 amendment, a graduated income tax was ruled unconstitutional by the state supreme court – a precedent that holds today. Courts also struck down a 2017 Seattle ordinance establishing a progressive income tax.
That hasn’t stopped legislators from repeatedly proposing an income tax to voters. Since 1930, Washington voters have defeated 10 ballot measures to impose a personal or corporate income. Most were rejected by a resounding 2/3 majority. Voters expressed their opposition most recently in 2010 with a 64-36% vote against a state income tax – even though it would only have affected income higher than $200,000 and reduced other taxes in return.
Washingtonians have frequently made their preferences clear. But this year, politicians have shrewdly labeled their capital gains tax legislation as an excise tax. Excise taxes are imposed on the sale of specific goods and services. They’re legal under the state constitution – in fact, the state already imposes a real estate excise tax that ranks as the highest in the region. Democrats insist that the labeling ploy will allow the capital gains tax to withstand scrutiny in the courts, where several lawsuits have already been filed by the Freedom Foundation and the Opportunity for All Coalition.
But capital gains are already considered income in every other state that taxes them. According to the IRS, capital gains are taxable as income since “almost everything you own and use for personal purposes, pleasure, business or investment is a capital asset” – including your home, stocks, jewelry, and business property.
“The Washington Constitution is unambiguous,” said Freedom Foundation CEO Aaron Withe. “Taxpayers can’t be treated differently based on the amount of their income. It’s both punitive and illegal.” Indeed, besides its unconstitutional status as an income tax, the capital gains tax would not be uniform, as is required under the constitution. Moreover, the Freedom Foundation points out in its lawsuit that the capital gains tax is unlawful under the Commerce Clause of the United States Constitution because it treats all sales of capital by Washington residents as taxable gains – including sales that occurred out-of-state.
Democrats have also carefully worded their legislation to ensure that voters will not have the opportunity to consider it as a referendum. Allowing voters to have a say could seriously endanger the capital gains tax proposal – judging by history, voters would likely make it the 11th consecutive income tax proposal to fail. So, Democrats wrote an emergency clause into the law, thereby prohibiting voters from collecting signatures and mobilizing against the new tax in a referendum movement. With the inclusion of the phrase that the bill is “necessary for the support of state government and its existing public institutions,” Democrats have insulated the proposal from the likelihood that it will appear on the ballot in November. The courts, not the people, are now left to decide the validity of the tax.
Rather than tiptoeing around the state constitution to create an income tax, Washington legislators should look to their record state revenues to advance their priorities. Washington has more than $3.8 billion in surplus funds, primarily as a result of Covid-era policies. 12 states across the country, including regional competitors like Arizona, Wisconsin, and Montana, used their surpluses to cut taxes across the board, often on both income and property.
If enacted, a capital gains tax will ultimately create a less competitive business environment in the state of Washington. Entrepreneurs in Washington will start looking to business-friendly states like Florida, Texas, and regional competitors, rather than subject themselves to a high capital gains tax on their burgeoning profits. Rather than hobbling their competitive advantage and burdening their residents with a historic new tax, Washington should follow the example of these states and promote pro-growth, low-tax policies to facilitate a flourishing economy.
Photo Credit: Masaccio
More from Americans for Tax Reform
The Threat of Labor Actions in Democrat-Controlled State Governments
The Biden administration continues advocating for the PRO Act to increase Big Labor’s power at the expense of jobs for workers and opportunities for small businesses. Despite the numerous threats on the federal level, serious pro-union damage has been occurring at the state and local level to the detriment of the American people.
One of the biggest pro-big labor pushes, for example, is occurring in Illinois. Next November, voters will vote on a so-called “Worker’s Rights Amendment” that ironically eliminates the rights of workers by banning “right-to-work.” Effectively this law will force Illinois workers to choose between paying off a union boss and putting food on the table.
The 27 states that have implemented right-to-work laws have generally seen positive economic outcomes. Economic output from 2001-2016, for example, rose by 38 percent in right-to-work states compared to 21 percent in non-right-to-work states. This had a beneficial effect on workers, as from 2001-2016, personal income in right-to-work states increased by more than 10% compared to non-right-to-work states. Based on household survey data from the Bureau of Labor Statistics, from 2007-2017, the percentage of growth in the number of people employed in right-to-work states was 8.8% compared to 4.2% in forced-unionism states. Additionally, the growth in total private sector employment increased by 13.0% in right to work states compared to 10.1% in forced-unionism states. The Illinois constitutional question essentially would cap the capacity for states to take measures to enhance the rate of economic progress for workers and businesses.
This amendment would crush Illinois workers. All the surrounding states to Illinois, besides Missouri, qualify as right-to-work states. The states that Illinois competes with most economically have the exact right-to-work laws that the Worker’s Rights Amendment will permanently abolish. Historical data supports these trends as, according to the Bureau of the Census, the growth in the number of residents aged 35-54 was 1.6% in right-to-work states compared to a 7.4% decline in growth in forced-unionism states. More businesses will develop outside of Illinois than within the state, due to the immense, unchecked power granted to labor unions, permanently harming their economy. Due to the geographically convenient and beneficial surroundings for businesses, there is a unique ease of access for businesses to move outside Illinois.
If the Worker’s Rights Amendment removes rights from workers or employers, then who gains rights from this amendment? Big Labor. By giving Big Labor the right to force workers to enter unions, their power in workplaces increase. They also would receive more money from more workers as workers would be forced to pay union dues, even if they normally would prefer to keep their paycheck over any potential union benefits. This money many times also gets spent for partisan purposes. In the last election cycle, over 85% of the Laborers Union PAC donations went to Democratic political candidates. Furthermore, the Illinois Policy Institute pointed out that unions gave $15.1 million to the Illinois lawmakers who pushed to put this amendment on the ballot. Even if an employee identifies as a Republican, their paychecks may go to increasing the electoral chances of Democratic candidates without their consent or awareness. Under the Worker’s Rights Amendment, unions would have the right to greater control over workers and their paychecks, while workers lose the right to opt out of this disastrous arrangement.
The sweeping pro-union boss anti-worker effort in Illinois presents an example of developments that threaten workers and businesses at the state level, even if the PRO Act has received more national attention.
Photo Credit: Harry Carmichael
Democrats Announce Funding for Green New Deal Hall Monitors in $3.5 Trillion Spending Package
Included in the $3.5 trillion spending package announced by Senate Democrats on Tuesday is funding for the creation of a uniformed “Civilian Climate Corps” tasked with the vague mission of “advancing environmental justice.”
The Civilian Climate Corps’ (CCC) inclusion in the package is a major concession to far-left environmental advocates calling for the creation of the CCC as a year one priority of the Green New Deal while lauding the “government jobs” it would create for climate activists.
The CCC is a make-work program for progressive activists complete with free government housing and transportation to work. Enrollees would be paid to wag their finger and lecture taxpayers on climate change activism. CCC members would be the government-stamped Hall Monitors of the Green New Deal.
The CCC's inclusion in the Democrats’ spending package comes after Senate Majority Leader Chuck Schumer vowed last week that he would “work tirelessly to achieve a big and bold Civilian Climate Corps that places justice at the center and urgently addresses our interlocking climate and economic crisis.”
Details on the level of proposed funding for the CCC are not yet available, but President Biden’s own proposal previously called for $10 billion in new spending while progressive House members such as Rep. Alexandria Ocasio Cortez have called for a number as high as $132 billion to hire 1.5 million climate activists.
While details are still forthcoming, the plan is modeled off of the 21st Century Civilian Conservation Corps Act introduced by House Democrats last Congress.
The legislation provides further insight into Senate Democrats' proposal, the details of which are below:
Taxpayer-funded housing, clothing, and feeding of Climate Corps members.
According to the legislation, taxpayers would be responsible for paying the cost of Climate Corps members’ housing, clothing, feeding, allowance, and medical expenses. Nothing screams good-paying jobs like an “allowance” from the government. Here it is straight from the bill’s text:
“The President may provide housing for persons employed in the Civilian Conservation Corps and furnish them with such subsistence, clothing, medical attendance and hospitalization, and cash allowance, as may be necessary, during the period they are so employed.”
Taxpayer-funded transportation to “work” for Climate Corps members.
Not only will the government provide food, clothing, housing, and an allowance, it will also pick up members of the Climate Corps and drive them to work for them.
"The President may provide for the transportation of persons employed in the Civilian Conservation Corps to and from the places of employment."
Allows President Biden to seize private property through land condemnation.
President Biden would be empowered to seize public land deemed necessary to construct projects authorized under the bill.
“The President, or the head of any department or agency authorized by the President to construct any project or to carry on any public works under this Act, may acquire real property for such project or public work by purchase, donation, condemnation, or otherwise.”
Jobs are prioritized for individuals who have already used up unemployment benefits
According to the text of the legislation, the President shall prioritize “unemployed citizens who have exhausted their entitlement to unemployment compensation,” over other citizens still “eligible for unemployment compensation payable under any State law or Federal unemployment compensation law.”
80 percent of funding used on employment, not conservation.
While the Biden administration claims the proposal is about conservation and addressing climate change, the legislation mandates that 80 percent of funding is to be used just on the salaries of staff.
“Not less than 80 percent of the funds utilized pursuant to paragraph (1) must be used to provide for the employment of individuals under this Act.”
Based on a failed 1930’s program that housed “employees” in military camps.
The effort is reportedly an attempt by the Biden administration to revive a long-defunct jobs program created in 1933 as part of the New Deal and similarly titled the Civilian Conservation Corps (CCC). In 1937, shortly after the CCC’s creation, Congress elected to phase out funding for the program, officially ending the CCC in 1942.
According to a September report from the Congressional Research Service, The CCC was a government employment program for unemployed males aged 18-25 in which “enrollees were recruited, hired, and trained by the federal government, worked under federal supervision, lived in government-run military camps, and received stipends paid for with federal funding.”
CCC was extremely accident-prone.
It turns out taking untrained youths and asking them to perform manual labor in the wilderness is a dangerous idea. “Given the nature of the work (“most of which consisted of manual labor”) and the inexperience of most enrollees, accidents were inevitable,” according to a National Archives report cataloging the accident reports of the CCC program.
According to the report, over 7,600 workplace accidents were filed during the CCC’s short existence and included several workplace deaths and life-threatening injuries. The report details cases of drownings and construction accidents.
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