Conservatives Strongly Oppose Foreign Price Controls & Tax Hikes in HR 3  

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Posted by Alex Hendrie on Wednesday, April 7th, 2021, 12:15 PM PERMALINK

After unveiling a $2 trillion tax hike and “infrastructure” plan, President Joe Biden is expected to unveil another $1 to $2 trillion spending plan in the coming weeks that will include foreign price controls on the American healthcare system.

Recent reports indicate that House Democrats are pushing to include “The Lower Drug Costs Now Act,” legislation that will force pharmaceutical manufacturers to accept government-set prices as dictated by foreign countries and federal health bureaucrats or pay a 95 percent excise tax on hundreds of medicines. While this bill has not been introduced this year, it was designated as H.R. 3 in the last Congress.

Lawmakers should reject this radical proposal.

In 2019, as Democrats were working to pass H.R. 3, ATR led a coalition letter signed by 71 groups and activists urging Members of Congress to reject the proposal.

The letter was signed by federal and state organizations including the American Conservative Union, National Taxpayers Union, Heritage Action for America, Club for Growth, Council for Citizens Against Government Waste, FreedomWorks, Taxpayers Protection Alliance, Small Business Entrepreneurship Council, and the Competitive Enterprise Institute.

H.R. 3 would impose foreign price controls through a system of international reference pricing. This would set prices based on the prices of foreign countries which utilize socialist price controls. As the letter notes, these price controls will reduce access to new medicines:

“The bill imposes new government price controls that would decimate innovation and distort supply, leading to the same lack of access to the newest and best drugs for patients in other countries that impose these price controls.

A study by the Council of Economic Advisors estimated that H.R. 3 would lead to 100 fewer lifesaving medicines over the next decade and could reduce life expectancy of the average American by four months.

The legislation enforces these price controls through the creation of a 95 percent excise tax imposed on hundreds of life-saving and life-preserving drugs including cures for cancer, hepatitis C, epilepsy, and multiple sclerosis. As the letter notes:

“Pharmaceutical manufacturers would face a retroactive tax of up to 95 percent on the total sales of a drug (not net profits). This means that a manufacturer selling a medicine for $100 will owe $95 in tax for every product sold with no allowance for the costs incurred. No deductions would be allowed, and it would be imposed on manufacturers in addition to federal and state income taxes they must pay.”

The fact is, the American people do not want price controls and socialist healthcare. Congressional Democrats ran on H.R. 3 in the 2020 election and hammered Republicans that voted against the proposal claiming they were obstructing efforts to lower prices.

However, voters were not fooled. Instead, they punished swing-state Democrats over their support for socialist policies, including price controls on prescription medicine.

As lawmakers begin taking up Biden’s next major legislative package, they should reject any effort to adopt H.R. 3 in part or in full and should stand against price controls and taxes on American medicines. Conservatives strongly oppose these policies and the effort by the Left to increase the power the federal government has over the healthcare system.

See Also: 10/15/2019 - ATR leads coalition of 71 groups and activists opposed to price controls and taxes in H.R. 3

Photo Credit: Geoff Livingston


Biden Wants $10 Billion for Green New Deal Hall Monitors

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Posted by Mike Palicz on Tuesday, April 6th, 2021, 4:09 PM PERMALINK

Joe Biden’s proposed $2.25 trillion wishlist of progressive spending priorities branded as an “infrastructure” package would spend $10 billion in taxpayer dollars on a uniformed “Civilian Climate Corps” tasked with the vague mission of “advancing environmental justice.”

The proposal is an attempted revival of the Civilian Conservation Corps that existed briefly during the 1930s where members often lived in military barracks and wore military-style uniforms

Left-wing advocates of the Green New Deal celebrated the announcement of Biden’s “Civilian Climate Corps” for meeting the year one priorities of the Green New Deal and for providing “government jobs” to climate activists. 

The $10 billion will be enough funding to hire upwards of 200,000 "climate workers," according to environmental economists. That’s 200,000 professional environmental activists in uniform lecturing Americans about their contribution to climate change and how they need to change their lives, all while living on the taxpayer’s dime. The hall monitors of the Green New Deal. 

While Biden’s proposal provides few details on the Climate Corps’ actual responsibilities, Biden’s plan is modeled on the 21st Century Civilian Conservation Corps Act introduced by House Democrats last Congress. Additionally, Biden made sure to stress that employees under the Civilian Climate Corps will be unionized workers with “good-paying union jobs.” 

This is a make-work program for progressive activists complete with free housing.

The legislation introduced by House Democrats provides further insight into Biden’s 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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Bernie Sanders Pushing Biden Admin for Even Higher Taxes

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Posted by Isabelle Morales on Tuesday, April 6th, 2021, 2:30 PM PERMALINK

President Joe Biden has proposed at least $2 trillion in tax hikes to finance his new spending proposals. However, he has said that he is open to additional and alternative tax increase.

Budget Committee Chairman Bernie Sanders (I-VT) is now pushing for the administration to go further and raise taxes by trillions more and has introduced a pair of bills which would raise the corporate tax rate to 35 percent and raise the death tax to a top rate of 65 percent. 

Echoing other progressives, Sanders has said that he doesn't think President Biden’s infrastructure plan "goes far enough in terms of climate.” Because Biden's spending plan will be done through the legislative process known as budget reconciliation, Sanders will have a significant role in shaping the legislation. 

Sanders is proposing to raise the corporate income tax rate to 35 percent, which would create a combined corporate tax rate of 38.9 percent after state taxes. While Sanders claims to be a champion of workers, this tax hike would disproportionately harm American workers and families.   

Numerous studies have found that between 50 percent and 70 percent of the corporate tax is borne by workers with the remaining being borne by shareholders. This is because capital is highly mobile, while labor is the least mobile factor in structuring ways to pay for higher corporate taxes. Thus, there is nowhere else for the cost of the corporate tax to land on than the American worker.

A corporate income tax hike would also make the United States’ corporate tax rate the highest rate in the developed world, as European countries have continually lowered their corporate tax rates in recognition of the competitive edge they receive from this tax cut.  

The average OECD corporate tax rate is 23.51 percent. Because of the 2017 tax cut, the United States’ combined tax is now 25.8 percent. Though it is still higher than the OECD average, it was a significant improvement. Under Bernie Sanders' plan, the United States' combined corporate tax rate would be over 60 percent higher than the OECD's average. This would make the U.S. significantly less competitive.

study by Ernst and Young found that, under the 35 percent corporate tax rate, American companies suffered a net loss of almost $510 billion in assets between 2004 and 2017. A net of $1.7 trillion in assets were lost because of the high U.S. rate, compared to if the U.S. rate was competitive.

Senator Sanders also wants to increase the death tax to 65 percent.

The Death Tax is fundamentally unfair and is bad tax policy. It is levied on assets that have been taxed previously through income taxes, capital gains taxes, and the corporate income tax.  

In addition, this tax disproportionately impacts family-owned businesses like farmers and ranchers especially, that tend to be asset rich but cash poor. Not only will people have difficulty paying the tax, but compliance with the tax is difficult as well: compliance may require liquidation, families may encounter difficulty figuring out the value of assets, etc.  

The wealthy often evade the death tax through loopholes and armies of lawyers and accountants, which inheritors of small businesses, farms, and ranches do not have the same access to. Further, the wealthy's use of tax avoidance mechanisms is inefficient and bad for the economy at large. 

Numerous studies have found that repealing the death tax would grow the economy. For instance, a 2017 study by the Tax Foundation found that the US could create over 150,000 jobs by rolling back the estate tax. Similarly, a 2012 study by the Joint Economic Committee found that the death tax has destroyed over $1.1 trillion of capital in the US economy. The economic growth created by repealing the Death Tax would produce $221 billion in federal revenue because of increased wages and more jobs. 

This tax should be repealed, not strengthened and expanded.  

To be clear, these tax hike proposals are just two of the countless tax hikes Bernie Sanders has come out in support of. Other proposals include a wealth tax, a financial transaction tax, a carbon tax, and trillions of dollars in other tax hikes for Medicare for All. 

President Joe Biden has already said that he wants trillions of dollars in higher taxes. Bernie Sanders is using his influence to push for even higher taxes. Biden's tax hikes would prolong the economic downturn--Bernie's would exacerbate this economic damage. If these tax hikes are included in budget reconciliation, and passed, the result would be a painfully slow economic recovery.

Photo Credit: Matt Johnson


New Hampshire Residents Will Get Stuck with Higher Utility Bills Due to Biden Corporate Tax Rate Hike

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Posted by John Kartch on Tuesday, April 6th, 2021, 12:21 PM PERMALINK

If Hassan and Shaheen vote for Biden's corporate income tax rate increase, they will have to explain why they just increased your utility bills

If President Biden and Sens. Maggie Hassan and Jeanne Shaheen raise the corporate tax rate, New Hampshire households and businesses will get stuck with higher utility bills. Democrats plan to impose a corporate income tax rate increase to 28%, even higher than communist China's 25%.

Customers bear the cost of corporate income taxes imposed on utility companies. Corporate income tax cuts drive utility rates down, corporate income tax hikes drive utility rates up.

Electric, gas, and water companies must get their billing rates approved by the respective state utility commissions. When the 2017 Tax Cuts and Jobs Act cut the corporate income tax rate from 35% to 21%, utility companies worked with officials to pass along the tax savings to customers, including Liberty Utilities in New Hampshire.

As noted in a May 2018 New Hampshire Public Utilities Commission Order excerpt:

In this order, the Commission approves a distribution revenue decrease for Liberty Utilities, passing on to ratepayers the benefits of reduced corporate taxes resulting from recent changes to state and federal tax laws. This order also approves Liberty’s proposal to forego other distribution rate increases that were scheduled to take effect June 1, 2018, as a way to pass additional benefits of corporate tax reductions on to customers.

Conversely, a vote for a corporate income tax rate hike is a vote for higher utility bills right as the USA is trying to recover from the pandemic.

Sens. Hassan and Shaheen would be wise to stay away from tax increases.


Yellen Previews Biden Tax Collaboration with Russia, China, Saudis

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Posted by Alex Hendrie on Monday, April 5th, 2021, 4:35 PM PERMALINK

Treasury Secretary Janet Yellen today said the Biden administration will yoke the United States to a tax regime with the likes of China, Russia, Saudi Arabia, and Indonesia.

Yellen and the Biden administration want to surrender U.S. sovereignty to foreign leaders in Russia, China, Saudi Arabia, Indonesia, and the EU in order to bind the world into higher taxes and bigger government.

This would take the form of a corporate global minimum tax, designed to “end the pressures of tax competition” and “make all citizens fairly share the burden of financing government.”

According to Yellen, the Biden administration will achieve these goals by working with the G20 – a global forum that includes Argentina, Australia, Brazil, Canada, China, France, Germany, Japan, India, Indonesia, Italy, Mexico, Russia, South Africa, Saudi Arabia, South Korea, Turkey, the United Kingdom, and the European Union. 

If this pact for global minimum taxes goes into effect, it will harm American workers and businesses who will be paying higher taxes to finance wasteful spending in the U.S. and across the world.

Can the U.S. really trust foreign countries – many of which have a history of undemocratic governance and human rights violations -- to play by the rules in a way that ensures American businesses and workers are treated fairly?

The push to impose a global minimum tax shows that the Biden administration is not prioritizing American workers, families and businesses but instead wants to expand the size and scope that the federal government has over the U.S. economy and the power that global organizations have over economies across the world. 

This is not the first time Democrats have taken aim at tax competition in recent months. During consideration of the $1.9 trillion Biden spending plan passed last month, Congressional Democrats snuck in a provision giving federal bureaucrats veto power over any state tax cut until 2024 if the state accepted a portion of the $350 billion in state and local aid.

Democrats are pushing these policies to suppress competition because they know that imposing tax hikes in the U.S. will make America less competitive. Biden is calling for a $2 trillion tax hike on businesses and workers which calls for a 21 percent global minimum tax and proposes raising the corporate from 21 percent to 28 percent, a 33 percent increase. 

If enacted, these tax hikes will send American jobs overseas and reduce wages and economic opportunity for U.S. workers.

Rather than colluding with foreign governments to keep taxes high, the Biden administration should ensure our tax code remains globally competitive. After Republicans passed the 2017 tax cuts, the U.S. was named the most competitive economy in the world.

The U.S. grew faster than rest of the world and was the only G7 industrialized country to record annual real GDP growth exceeding 2 percent in 2018 or 2019. The U.S. growth rate of 2.9 percent in 2018 was significantly higher than other developed countries like Germany, which saw 1.5 percent growth and the United Kingdom, which grew by just 1.3 percent.

Yellen’s push to impose a global minimum tax shows that the Biden administration is not focused on helping American workers, families and businesses. Not only do they want higher taxes in America, they also want to work with foreign countries including Russia and China to lock in higher taxes across the world and end tax competition.

Photo Credit: European Central Bank


Joe Biden is Wrong: The Tax Cuts and Jobs Act Benefited the Middle Class

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Posted by Alex Hendrie on Monday, April 5th, 2021, 3:30 PM PERMALINK

President Joe Biden has proposed $2 trillion in higher taxes on American businesses and workers to fund new federal spending. In announcing this plan, Biden falsely claimed that the 2017 Tax Cuts and Jobs Act (TCJA) passed by the Congressional Republicans and President Trump overwhelmingly benefited “the rich” and large corporations and did little or nothing to help middle class families.

This is not true. The TCJA directly reduced taxes for American middle-class families and grew the economy, increasing wages and creating more job opportunities for Americans.

Even left-leaning media outlets have (eventually) acknowledged the tax cuts benefited middle class families. The Washington Post fact-checker gave Biden’s claim that the middle class did not see a tax cut its rating of four Pinocchios. The New York Times characterized the false perception that the middle class saw no benefit from the tax cuts as a sustained and misleading effort by liberal opponents."

Here are some of the ways the TCJA benefited middle-class Americans:

American families and individuals saw strong tax reduction from the TCJA. According to IRS statistics of income data analyzed by Americans for Tax Reform, households earning between $50,000 and $100,000 saw their average tax liability drop by over 13 percent between 2017 and 2018. By comparison, households with income over $1 million saw a far smaller tax cut averaging just 5.8 percent.

This tax reduction was seen in across the country including in key swing states. In Pennsylvania households earning between $50,000 and $100,000 saw their tax liability drop by over 14 percent, while households with incomes over $1 million saw their tax liability drop by just 3.1 percent.

In Ohio, American families with AGI of between $75,000 and $99,999 saw an average reduction in tax liability of 15.3 percent. In contrast, Americans with AGI of $1 million or above saw an average reduction in tax liability of just 0.4 percent.

Thanks to the TCJA, millions of Americans saw an increased child tax credit, and millions more qualified for this tax cut for the first time. The TCJA expanded the child tax credit from $1,000 to $2,000 and raised the income thresholds so millions of families could take the credit. In 2017, 22 million households earning $200,000 or less took the child tax credit. These households received an average tax credit of $1,213.

By 2018, 36 million households earning $200,000 or less took the child and other dependent tax credit. These households received an average credit of $2,002.

The TCJA repealed the Obamacare individual mandate tax by zeroing out the penalty. Prior to the passage of the bill, the mandate imposed a tax of up to $2,085 on households that failed to purchase government-approved healthcare. Five million people paid this in 2017, and 75 percent of these households earned less than $75,000.

This tax hit 153,000 Pennsylvania households, 353,000 Florida households, and 143,000 Georgia households

The tax cuts grew the economy, leading to more jobs, higher pay, and increased economic opportunity.

Following passage of the tax cuts, the unemployment rate dropped to 3.5 percent in 2019, a 50-year low. In the same year, median household income increased by $4,440 or 6.8 percent, the largest one-year wage growth in history.

This wage growth dwarfed the wage growth experienced under the entire eight years of Barack Obama's presidency, which was just 5 percent.

Under this economy, there were more job openings than job seekers for 24 consecutive months. In March 2018, the ratio of unemployed persons to job openings dropped to 0.9. It remained at this low level until the pandemic hit America.

This economic prosperity was experienced by key demographics and income levels. For instance, Black and Hispanic Americans saw their median income hit record levels, while the poverty rate declined to 10.5 percent, the lowest rate in decades. The bottom 25 percent of wage earners also experienced wage growth faster than the top 25 percent of wage earners, according to the Atlanta Fed.

Key demographics experienced the growth, including Black Americans, Hispanic Americans, and women, with each group seeing their unemployment rates drop to all-time lows and wage growth increasing by record levels.

The tax cuts resulted in businesses giving their employees pay bonuses, pay raises, increased 401(k) matches, and new employee benefit programs. 

Large and small businesses passed the Tax Cut to their Employees

  • Wells Fargo raised base wages from $13.50 to $15.00 per hour.
  • Apple provided $2,500 employee bonuses in the form of restricted stock.
  • Pfizer provided $100 million worth of bonuses to non-executive employees.
  • Guy Chemical, a Pennsylvania Based small businesses was able to raise wages, expand bonuses by 50 percent, start a 401(k) retirement program and create 29 new jobs.
  • Firebird Bronze, an Oregon-based manufacturer was able to afford to give its nine employees health insurance for the first time.
  • Anfinson Farm Store, a family owned business in Cushing, Iowa (population 223) has given its employees a $1,000 bonus and raised wages by 5 percent.
  • Five Senses Spa, Salon and Barbershop based in Peoria, Illinois gave $500 bonuses to its 20 employees and provided its employees with health insurance for the first time.

 

Businesses Created New Employee Benefit Programs

  • Walmart and Lowes provided $5,000 to help cover the cost of adopting a child.
  • Express Scripts in Missouri created a $30 million education fund for their employees’ children.
  • Boeing provided $100 million in workforce development programs
  • McDonald’s employees who work just 15 hours a week received $1,500 worth of tuition assistance every year per year.
  • Walt Disney announced $50 million in employee educational programs.
  • Visa doubled its 401(k) employee contribution match to a maximum of 10 percent of employee pay.
  • Cigna spent $30 million on 401(k) matches.

 

The corporate rate reduction also resulted in lower utility bills, including electric bills, gas bills, and water bills, for American households and businesses in all 50 states.

The Pennsylvania Public Utility Commission (PUC) today issued an Order, requiring a “negative surcharge” or monthly credit on customer bills for 17 major electric, natural gas, and water and wastewater utilities, totaling more than $320-million per year. The refunds to consumers are the result of the substantial decrease in federal corporate tax rates and other tax changes under the Tax Cuts and Jobs Act (TCJA) of 2017, which impacted the tax liability of many utilities.

  • Utilities in Arizona also reduced rates as noted in a June 2018 statement from EPCOR: ​​​​​​​More than 57,000 EPCOR wastewater customers will receive more than $1.1 million in federal corporate tax cut savings, reducing the amount of their monthly wastewater bill starting with the July 2018 billing cycle.

Today, the Arizona Corporation Commission (ACC) approved EPCOR’s request to refund $1,106,392 in tax reform savings to all of the company’s residential and commercial wastewater customers.

“We are extremely pleased to help our wastewater customers save more than $1 million each year, and it’s important to us that we put this into effect as soon as possible,” commented Joe Gysel, President of EPCOR USA, Arizona’s largest regulated water utility. “All our customers deserve to share in the savings generated by federal tax reform. It's positive for them, for their communities and for our state.” - June 12, 2018 EPCOR press release

Georgia Power has completed an assessment of the impact of the Tax Cuts and Jobs Act for the company – including approximately $1.2 billion in benefits for customers. The benefits were confirmed as part of an agreement with Georgia Public Service Commission (PSC) Staff and include approximately $130 million in reduced taxes on financing costs for the Vogtle nuclear expansion; $330 million in direct credits to customers as a result of lower federal income tax rates over the next two years and approximately $700 million in future benefits to be addressed in the company's next base rate case in 2019, which also includes the benefits of last week's reduction in state of Georgia income tax rates. If approved by the Georgia PSC, the typical residential customer using an average of 1,000 kilowatt-hours per month could receive approximately $70 in refunds over the two-year period.

Photo Credit: Kelly Kline


Montana's SB 398 Is a Common Sense, Good Governance Reform That Will Save Lives

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Posted by Karl Abramson on Monday, April 5th, 2021, 2:28 PM PERMALINK

Earlier today, Americans for Tax Reform wrote to legislators in Montana, urging them to vote Yes on SB 398, common sense legislation that safeguards the state’s revenue base and ensures appropriate transparency and accountability over decisions impacting public health. The proposed legislation would also protect Montana businesses and consumers from harmful taxes and unnecessary regulation, while defending the ability of consumers to access lifesaving reduced harm tobacco alternatives.  

Tim Andrews, ATR’s Director of Consumer Issues, wrote “It is the fundamental responsibility of state governments to protect their citizens, even when these threats come from local government officials. Acting without the degree of accountability and scrutiny found at the state level, these officials may impose punitive taxes on the most vulnerable in their communities.” 

Andrews encouraged members of the Montana Senate to follow the science on e-cigarettes, writing “local restrictions may act contrary to the science and data that clearly illustrate that e-cigarettes are 95% less harmful than traditional cigarettes. E-cigarettes have also been proven to be more than twice as effective at helping adults quit the deadly habit of cigarette smoking than traditional nicotine replacement therapies like nicotine patches and gum.” 

Andrews also noted the importance of protecting state revenues, writing “This is a matter better addressed at the state, not local, level as restricting the use of e-cigarettes and vapor products would lead to further strains on the state budget due to the healthcare costs incurred by people prevented from using them to quit smoking. Further, local tax increases would lead to an increase in smuggling and the sale of illicit products, adversely affecting state tax collections while increasing criminal activity.” 

Andrews concluded by pointing out to lawmakers the lifesaving impacts that SB 398 would have, noting that “According to Georgetown University Medical Center, e-cigarettes could save over 27,000 lives in the Treasure State if a majority of smokers made the switch from cigarettes to vaping. SB 398 would preserve the ability of Montana residents to access these lifesaving products. As such, in the interests of protecting consumers and businesses, ensuring state tax collections are not depressed by local taxes and regulations, and improving public health, we call on you to support SB 398.” 

The full letter can be read here

Photo Credit: Timothy G. Lumley

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American Rescue Plan Blocks Tax Cuts, Multiple States File Lawsuits Against Biden Administration

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Posted by Sheridan Nolen on Monday, April 5th, 2021, 1:21 PM PERMALINK

The $1.9 trillion COVID-19 spending plan enacted by President Joe Biden includes an additional $350 billion to states and localities on top of the hundreds of billions they have already received from other packages. Unfortunately for taxpayers, Senate Democrats found a way to make this blue state bailout even worse. The spending plan, disingenuously named the American Rescue Plan Act (ARPA), contains an unconstitutional amendment that attempts to scare states out of providing much-needed tax relief. The amendment states:

“A State or territory shall not use the funds provided under this section or transferred pursuant to section 603(c)(4) to either directly or indirectly offset a reduction in the net tax revenue of such State or territory resulting from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase.”

In response to this unprecedented infringement on state sovereignty, which is partially an attempt to protect Democrat-run states from competition with low-tax states, 21 state attorneys general sent a joint letter to U.S. Treasury Secretary Janet Yellen in March seeking confirmation that ARPA does not strip states of their well-established sovereign authority to set their own tax policy.

"Absent a more sensible interpretation from your department, this provision would amount to an unprecedented and unconstitutional intrusion on the separate sovereignty of the States through federal usurpation of essentially one half of the State’s fiscal ledgers," the AGs wrote in their joint letter to Yellen. "We ask that you confirm that the American Rescue Plan Act does not prohibit States from generally providing tax relief through the kinds of measures listed and discussed above and other, similar measures, but at most precludes express use of the funds provided under the Act for direct tax cuts rather than for the purposes specified by the Act."

In response to the letter, Secretary Yellen wrote that Congress does have the authority to place conditions on how states use federal funding. Having deemed this response from Yellen to be insufficient, multiple state attorneys general have filed lawsuits.

“We will now take the final steps necessary to meet the Biden administration in court,” said West Virginia Attorney General Patrick Morrisey on March 24. “West Virginia cannot accept the statute’s ambiguity, and given the administration’s failure to correct this problem, we are left with no option other than seeking a court order to protect West Virginia’s interests.”

A lawsuit was filed by Morrisey and 12 other attorneys general on March 31. A similar lawsuit had already been filed by Arizona Attorney General Mark Brnovich.

“Arizona needs clarity on the legality and meaning of this provision,” Attorney General Brnovich said. “Policymakers in the state have real and present interest in tax policy which could potentially decrease net tax revenue against some baselines. Those policymakers need to know how their decisions could interact with their use of funds under the Act.”

Prior to Attorney General Brnovich’s action, Ohio Attorney General Dave Yost had filed a similar lawsuit against the Biden administration as well.

“Ohio’s argument with the federal government is not about cutting taxes; it is about whether the federal government may use its disbursal of funds to dictate state policy — about this or any other subject that is not the province of the federal government under the Constitution,” Attorney General Yost explained in a column for National Review. “The Supreme Court has held that, when the federal government wants to attach strings to the money it sends back to the states, a few thin strings are okay; coercion is not.” 

Ironically, this unconstitutional restriction on state tax cuts inhibits ARPA from actually achieving its intended purpose: helping millions of Americans recover from the pandemic. If Democrats in Congress really wanted a strong and speedy economic recovery, they would allow and encourage states to provide much-needed tax relief to individual taxpayers, families, and businesses. It’s telling that congressional Democrats sought to prevent states from providing tax relief, while green lighting states to raise taxes further despite being showered with federal cash. In fact, lawmakers in Hawaii, Maine, and other blue states are pushing forward right now with tax increases despite state coffers being awash in federal cash.

Senator Mike Braun (R-Ind.) and Congressman Dan Bishop (R-N.C.) have filed bills that would repeal the unconstitutional amendment to ARPA blocking state tax cuts. Democrats are unlikely to support it, however, so it will take a court ruling to remove this federal restriction. In the meantime, expect lawmakers in many states to proceed as though this unconstitutional provision, added at the last minute at the request of Senator Joe Manchin, will ultimately be struck down by a judge.

Photo Credit: John Brighenti

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Manchin's Corporate Tax Hike Will Stick West Virginians with Higher Utility Bills

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Posted by John Kartch on Monday, April 5th, 2021, 10:23 AM PERMALINK

If Manchin votes for a corporate income tax rate increase, he will have to explain why he just increased your utility bills

If President Biden and Senator Joe Manchin raise the corporate tax rate, West Virginia households and businesses will get stuck with higher utility bills. Manchin today said he was eyeing a tax rate increase to 25%, which would stick West Virginia with a combined federal-state corporate tax rate around 30%, a higher rate than communist China.

But regardless of the tax rate Manchin settles on, customers bear the cost of corporate income taxes imposed on utility companies. Corporate income tax cuts drive utility rates down, corporate income tax hikes drive utility rates up. So Manchin will have some explaining to do.

Electric, gas, and water companies must get their billing rates approved by the respective state utility commissions. When the 2017 Tax Cuts and Jobs Act cut the corporate income tax rate from 35% to 21%, utility companies worked with officials to pass along the tax savings to customers, including at least three West Virginia utilities.

As Noted in a 2018 MetroNews article excerpt:

Appalachian Power Company saved $235 million dollars from the federal tax cuts and the company is proposing passing the money back to its customers in a variety of ways.

The multi-pronged proposal is in a filing with the state Public Service Commission due Wednesday. The PSC is requiring all utilities to tell it their tax cut savings and what they plan to do with it.

West Virginia Consumer Advocate Jackie Roberts told MetroNews the money clearly belongs to the customers.

“They (the utilities) had taxes in their rates and now the taxes in their rates have significantly decreased—so they shouldn’t be able to keep collecting and keeping those higher taxes in their rates,” Roberts said.

Appalachian Power Company Communications Director Jeri Matheney agrees–the $235 million Appalachian Power will save belongs to its customers.

“It is customer money. What we propose to do is provide a method to keep rates as stable as possible over the longterm and as much as possible eliminate the need for rate increases,” Matheney said.

The Appalachian Power distribution proposal for West Virginia customers includes:

–$131 million to completely offset the company’s fuel and vegetation control program funding request that was part of an April filing with the PSC

–$19 million reduction in the company’s base rate case filed earlier this month (taking the $115 million request down to $96 million)

–$51 million to reduce next year’s fuel recovery cost rate case

–$1 million for a pilot economic development grant program – May 30, 2018, MetroNews article excerpt

Potomac Edison passed along their savings to customers as well:

‘More than 85,000 Potomac Edison customers in the Eastern Panhandle should see lower bills in the coming weeks thanks to federal tax reforms adopted in December.

The West Virginia Public Service Commission announced Friday that it approved rate reduction settlements for utility companies totaling almost $85 million annually, starting next month.

West Virginia American Water passed along their savings to customers as well:

West Virginia American Water Company announced a settlement plan last week which — if approved by the PSC — would result in an average savings of $3.77 a month for water and sewer customers in the state.

“The recent federal tax reform will save our customers an estimated $4.6 million annually, so we are passing these savings on to our customers beginning next month,” Brian Bruce, president of West Virginia American Water.

Conversely, a vote for a corporate income tax rate hike is a vote for higher utility bills right as the USA is trying to recover from the pandemic.

Senator Manchin would be wise to stay away from tax increases.

See also: Manchin flip-flops on taxes

 


Biden Says Tax Hikes "Will not slow the economy at all."

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Posted by John Kartch on Friday, April 2nd, 2021, 3:50 PM PERMALINK

Today at a press briefing President Joe Biden said:

"Raising taxes, the studies show, will not slow the economy at all. It will make the economy function better and will create more energy."

Huh?

WATCH:


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