EPA Administrator Pruitt Announces Repeal of Obama's Clean Power Plan

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Posted by William Paul on Wednesday, October 11th, 2017, 2:32 PM PERMALINK

EPA Administrator Pruitt Announces Repeal of Obama’s Clean Power Plan

This week Environmental Protection Agency (EPA) Administrator Scott Pruitt announced the end of one of the most onerous and costly regulatory regimes put forth under former President Obama, the Clean Power Plan (CPP).

Administrator Pruitt made the announcement at a local coal equipment business in Eastern Kentucky. Pruitt noted that Obama’s CCP exceeds the authority granted by the Clean Air Act, among other issues, and by signing the notice of proposed rulemaking the EPA can proceed in planning a repeal strategy. Once the rule is published in the Federal Register, stakeholders will have 60-days to submit public comments.

In March of this year President Trump signed the “Energy Independence” executive order, targeting costly Obama era regulatory policies, the focus of which was the CPP. In the release issued by the EPA this week, the Agency noted the CPP was estimated to cost $33 billion annually, with annual compliance costs estimated to reach over $70 billion.

American businesses and consumers have dodged an economic bullet from the CPP that would have raised electricity costs from 12-17 percent, with every state seeing increases, 44 of which would see double-digit rate increases. This is music to the ears of middle-income families that would have seen job losses and a projected decrease in household spending power between $64 and $79 billion.

Even with the CPP having not gone into effect, and having been stayed by the Supreme Court, power companies have been reducing carbon emissions on their own for years. This hasn’t stopped Democrats and activists from pledging lawsuits against the agency.

Pruitt stated that there could be a more industry-friendly replacement rule, but did not confirm. Either way, the actions taken by EPA Administrator Pruitt and the Trump Administration this week to reign in the regulatory overreach left over by the Obama Administration are a boon for consumers and the U.S. economy. 

Photo Credit: Gage Skidmore

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High Taxes Drive Innovators and Entrepreneurs to Low-Tax States: Study

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Posted by Satyajeet Marar on Wednesday, October 11th, 2017, 1:02 PM PERMALINK

A new study has revealed that America’s top-level inventors and innovators are highly mobile and sensitive to tax reform, migrating out of high-tax states to those offering better conditions. The Federal Reserve Bank of San Francisco study monitored the migration patterns of ‘star scientists’ – those with patents in the top 5% of distribution. It revealed that a mere 1% hike to post-tax incomes in individual US states following a tax cut resulted in a 0.4% increase in the stock of scientists within the state, with similar effects observed for cuts to state corporate tax.

The study is good news for North Carolina, Texas and other states which have lowered or maintained low to non-existent income corporate taxes to attract firms and high-skilled workers. It underscores the reality that high taxes discourage productive behavior, driving away those who create value. These states reap scores of benefits including growth in local high tech or scientific industries and flow-on effects including the creation of more high-quality jobs which grow the state economy and boost both paychecks and living standards.

The researcher’s findings are no surprise. Last year, a similar study found that entrepreneurs were highly sensitive to changes in international tax policy, migrating across borders to countries that welcome their contributions through a favorable tax environment.

It is a lesson the US federal government has learned, with plans to drastically cut America’s massive federal corporate tax rate and eliminate perverse disincentives such as the tax on US multinationals attempting to return home profits generated overseas under the Trump administration’s tax reform framework.

At a recent Senate Finance committee hearing, eminent academics in Economics and Law called for reform, noting  that the current regime failed to create a level playing field by disadvantaging US multinationals against foreign competitors who are not taxed a second time on income they return to their home countries. Professor Itai Grinberg of Georgetown University noted that under the status quo, companies were moving management, research & development and even support jobs overseas – depriving the US economy of skills and innovation while actually eroding America’s tax base.

Studies and experience confirm that tax cuts at the state and national level welcome inventors, entrepreneurs and firms who create value and drive innovation. They lay the groundwork for economic growth and prosperity.

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South Dakota and the Constitutionally of Their Internet Sales Tax

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Posted by Matthew Adams on Tuesday, October 10th, 2017, 4:58 PM PERMALINK

Earlier this month, South Dakota’s Attorney General Marty Jackley petitioned the U.S. Supreme Court to rule on the state’s internet sales tax that the state Supreme Court struck down this September.

In what may become a landmark decision, the U.S. Supreme Court will determine the constitutionality of an internet sales taxes, hopefully ruling in favor of taxpayers and in support of federalism.

In March of 2016, Governor Dennis Daugaard of South Dakota signed the massive sales tax into law. 

Senate Bill 106, required out-of-state sellers to collect a sales tax on South Dakota’s buyers, and then forced these sellers to hand over those tax dollars to the state of South Dakota. 

Worst of all, under the law, the seller didn’t even need to have a physical presence in state, yet, were still subject to the overbearing measure.

Under the law, businesses were strong-armed into taking on the role of tax collector. In shifting the tax burden onto business owners, they were required to file dozens of complicated reports detailing their transactions- wasting money, time, and, resources, making it even harder for less advantaged mom-and-pop shops to compete.

With that, the law raised the prices on consumer goods, subjecting hard-working South Dakotans to greater financial struggle.  

To great concern, similar measures have been proposed in the U.S. Congress, mainly the Marketplace Fairness Act, championed by Sen. Tim Kaine (D-V.A.).

In 1992, the court ruled in Quill Corp. v. North Dakota that it was unconstitutional to require retailers with no in-state presence to collect and remit a sales tax.

If they do take up the case, the court will either decide to overrule this previous precedent, opening the floodgates to massive tax increases across the board, or, choose to prioritize the rights and sovereignty of American taxpayers by upholding the 1992 ruling. 

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Grover Norquist: Tax Reform is a Must Win for Republicans (and it really could happen)

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Posted by Grover Norquist on Monday, October 9th, 2017, 2:10 PM PERMALINK

This article originally appeared on Fox News

Tax reform is the one legislative victory Republicans must have if they are to hold the House and pick up five to seven Senate seats in November 2018. And tax reform is also the one legislative victory that looks increasingly likely.

Tax reform is a must-win for two reasons. First, to kick-start strong economic growth and job creation. Second, to demonstrate that President Trump and the Republicans in Congress can "get things done."  

If there had not been a zillion shiny things and tweets distracting us, it should have been obvious last year that America would not elect a Democrat to the presidency for the third time, as a result of the failed economic policies of President Obama and congressional Democrats.

The Democratic failures include higher taxes on everyone, (including eight ObamaCare taxes directly on the middle class), an explosion of regulatory costs, a new unending entitlement and lousy job numbers.

Even coming out of a deep recession, the Obama administration averaged growth of only 2 percent a year. President Reagan battled recession and inflation and managed 4 percent growth, creating 4 million jobs in the first year of his recovery.

In the 2016 election, Hillary Clinton promised $1 trillion in even higher taxes. She said she would not reduce tax rates for anyone and for any business, and hinted at other new and different taxes yet to come.

Donald Trump was elected president because he promised jobs, jobs, jobs. He and the GOP Congress know they have to deliver in such a way that even MSNBC will have to note from time to time that in the first six months of 2018 the economy is in fact demonstrably stronger.

The good news is that the emerging tax reform and reduction legislation will deliver a strong boost to the creation of jobs, income and wealth. The federal tax on businesses will be reduced from 35 percent (fourth-highest in the world), to roughly 20 percent, just below the developed world average. China is at 25 percent. 

Long depreciation schedules will be replaced by full and immediate business expensing – at least for a few years. And history suggests that any such pro-growth measure will be extended again and again (just as the research and development tax credit was) and eventually be made permanent.

Today there are $2.6 trillion earned by American companies overseas and stuck there because of stupid federal tax policy. Tax reform will bring those dollars back in a cascade of real investment in America. President Obama's "stimulus" was run through congressional earmarks and city politicians. It left no noticeable permanent job gains.

The biggest winners of tax reform will be the millions of Americans who enter or return to the job market when we unleash America's business investment through lower taxes, expensing and repatriation.  

Middle-income Americans will also see their personal tax rates fall and the standard deduction for an individual will jump from $6,000 to $12,000, and for a married couple from $12,000 to $24,000. Good luck to the Democrats explaining to millions of middle-class Americans who will see pay raises from these changes that they just benefit "the rich."

Finally, passing tax reform without a single Democratic vote will remind Americans that there are two teams in Washington. One works for government and the other works for them. Democrats refer to tax hikes as income. Republicans know taxes are a cost imposed on American families. Pick your team.

The Republican plan had been to pass ObamaCare repeal and reform, and then move on to tax reform and reduction – and run on those two victories. That may or may not happen. 

ObamaCare repeal may fail if three Republican senators put their personal pique and desire for approbation by the media ahead of their constituents, who are damaged by ObamaCare's ever-higher premiums and the 20 ObamaCare taxes.

Republicans must plan on asking Americans to judge them in 2018 on one big victory, not the expected two. Every Republican member of Congress knows that for policy and political reasons, the tax reform and reduction bill this fall will have to be as large, deep and pro-growth as possible.

 Grover Norquist is president of Americans for Tax Reform. Follow him on Twitter @GroverNorquist.

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Why the Trump Tax Cut is Necessary

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Posted by Grover Norquist on Monday, October 9th, 2017, 1:47 PM PERMALINK

This article originally appeared in The National Interest

The battle underway in Washington to enact pro-growth tax reform is itself a perfect storm. Four questions will be answered. Competing visions of the world will clash and America may change its economic future and define its national policy for years to come. Or not. The stakes are high. And this political battle has a deadline.

It should be easy to cut taxes with a Republican House, a Republican Senate and Donald Trump elected both as a Republican and as the candidate of pro-growth tax cuts. George W. Bush had a Senate majority (fifty-one) slimmer than Mitch McConnell’s fifty-two, and a House majority of 229 compared to Paul Ryan’s 240. The 2001 tax cut was signed into law on June 7, 2001. Reagan had fifty-three Republican Senators and a fiercely partisan 244-Democrat majority in the House. Reagan’s across the board 25 percent tax rate reduction was signed at the Western White House on August 13, 1981.

It is now late September and the optimists predict a tax bill will be signed by Trump in late November, early December.

Why the delay in unveiling and passing a tax cut? Trump’s tax cut plan was as clearly stated and as often repeated in 2016 as George Bush was in 2000 and Reagan was in 1980. It was a central part of the campaign. Trump called for reducing the corporate income tax from 35 percent—the fourth highest business tax rate in the world (United Arab Emirates, Comoros and Puerto Rico have higher rates.) Trump’s recommended business income tax rate of 15 percent was below the 25 percent House Republicans had earlier supported and Paul Ryan rewrote his plan to move to a 20 percent rate to be closer to Trump’s number.

American firms today pay, on average, 19 percent higher business tax rates than our competitors overseas. China’s business tax is 25 percent, Irelands is 12.5 percent. This is the U.S. government handicapping American businesses and kneecapping American workers. Worse, the United States has a worldwide tax system—unlike almost all the rest of the world. The federal government taxes American businesses and citizens not just on the income they earn here in the United States, but also on any earnings overseas. The French government taxes French people and French companies earnings in France. But if a French firm or citizen earned money in Baltimore, then the firm or individual would pay U.S. taxes and then be free to repatriate all earnings without further interference by France. This means that an American firm that does business internationally is worth more when purchased by a Canadian firm. When Burger King was bought by Canadian firm Restaurant Brands International, it had the same number of employees, the same product, the same intellectual property—but lower taxes because earnings around the world are taxed one time in the country in which they are earned. Not once overseas and again by America.

The Republican and Trump plans all move to a territorial system. There would be a one-time hit on money now overseas—some suggest 3 percent on fixed assets and 8 percent on cash—that all future repatriations experience.

Trump joined House and Senate Republicans in demanding the abolition of the Death Tax—originally enacted to pay for the Civil War. Trump also railed against the Alternative Minimum Tax (AMT), which was put in the tax code in 1969 to ensnare some 115 high-net-worth American who escaped federal income taxes by investing in tax free municipal bonds. Abolition of both the Death Tax and AMT have been advocated by Republicans for years.

Trump and the House Republicans endorsed the idea of moving to full and immediate expensing of business investment in plant and equipment, which will replace long depreciation schedules. This dramatically reduces the cost of new investments, leading to a substantial increase in GDP, wages and employment.

Trump’s personal income tax rate reductions were largely borrowed from Paul Ryan’s plan to reduce the number of tax rates from seven to three. The top rate would fall from 39.5 percent to 35 percent. The bottom rate from 10 percent to effectively 0 percent due to a larger Standard Deduction. And the Standard Deduction for an individual would be increased from $6,000 to $12,000, and for a married couple from $12,000 to $24,000. That means that 95 percent of Americans would no longer have to itemize deductions. A significant simplification.

So what is the delay?

There are two ways to pass a tax cut. One can garner a simple majority of the House and sixty or more votes in the Senate and cut any taxes by any amount one wishes permanently. But Republicans have only 52 senators. They would need at least eight Democrat votes in the U.S. Senate to pass a large permanent tax cut. And on August 1, 2017, forty-five of the forty-eight senators wrote a letter to the present offering to help pass tax reform as long as the reform, one, was not a net tax cut, two, did not cut taxes for all Americans—they wanted to discriminate against high-income earners, and three, the legislation was not enacted through budget reconciliation.

The idea that there are eight Senate Democrats willing to vote to reduce taxes is a fantasy. The issue that most divides the modern Republican and Democrat parties is the tax issue. Yes, John F. Kennedy pushed a 22 percent across-the-board tax cut in the 1960s. But by 1980, most Democrats in the House voted against a 25 percent across-the-board tax cut.

Hillary Clinton ran for president in 2016 as the more moderate Democrat candidate for president, and she promised one trillion in higher taxes over the next decade and did not propose a single tax rate reduction for any American business or citizen. No Democrat has endorsed the GOP tax reforms this year

Thus, the only path to tax reduction is to use the reconciliation process, which allows a single majority in the Senate to pass a budget that includes tax cuts. The rules for reconciliation process is that the tax cuts can be of any size inside the “budget window”—arbitrarily set at ten years. It could be any number larger than five. Outside the budget window, in years eleven to fifty following passage, the only tax reduction that would be “permanent” would have to be offset dollar for dollar by reduction in entitlements (hence permanent cuts), tax increases, or increased revenue projections due to pro-growth policies in the bill scored by the Joint Committee on Taxation.

Since there are limits to how much growth the Joint Committee on Taxation will attribute to tax reform there are limits to how much tax cuts can be made permanent. In the past the Congressional Budget Office has pointed out that if the U.S. economy grew at four percent a year, instead of two percent a year for one full decade the federal tax revenue would be increased by $6 trillion over those ten years. Growth is a powerful generator of more tax revenue. In the past, the Joint Committee on Taxation did not consider the dynamic effects of tax changes. But that has proved embarrassing. The 1993 Bush tax cut in the tax rate on dividends and capital gains generated more revenue between 1993 and 1997 to Washington than was predicted without the tax cuts—i.e. that tax cut actually paid for itself.

So the size of the permanent tax cuts is limited to how much revenue can be raised by eliminating tax credits and deductions—for instance, eliminating the tax deductibility of state and local taxes would raise $1.7 trillion over a decade—and what growth in revenue might be projected by the Joint Committee on Taxation from lower rates and expensing. There is a third way to increase the amount of permanent tax cuts beyond the ten-year window and that is for congress to use “present policy” rather than “present law” in projecting future revenue. Assuming all tax credits that are planned to expire will continue frees us more space for permanent tax cuts that if one employed “present law” and assumed they would indeed lapse.

There is no limit on how many tax cuts can be enacted for the next ten years and how deep those tax cuts can be. The only limit is on how many and much of those tax cuts can be made permanent. That is enough to keep the House, Senate, White House and affected interests busy through November.

So, can the House leadership convince the “Freedom Caucus” to avoid the train wreck of Obamacare repeal and this time avoid making the perfect the enemy of the good. Can they vote for a “less than perfect” tax bill? Can anyone convince John McCain to set aside personal pique and vote for a Trump-endorsed tax bill? One remembers that McCain voted against both the successful Bush tax cuts. Can Trump avoid the siren call of the media to engage in endless and fruitless negotiations with Democrats to water down a bill they will not vote for under any circumstances? Will the Joint Committee on Taxation provide a reasonable dynamic score that allows more of the tax reductions to be permanent?

We shall see.

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IRS Continues to Use Outdated IT, Leaving Taxpayers At Risk

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Posted by Satyajeet Marar on Monday, October 9th, 2017, 12:29 PM PERMALINK

The IRS has failed repeatedly in its efforts to modernize its IT systems and is instead using outdated technology that is leaving the personal tax data of millions of Americans at risk.

The House Ways and Means Oversight Subcommittee conducted a hearing last week exploring the IRS’s IT practices following the news that the agency awarded a $7.25 million contract to Equifax just a week after that company was responsible for a major data breach compromising confidential data of 145 million American taxpayers.

Alarmingly, neither IRS Chief Information Officer Gina Garza, nor Jeffrey Tribiano, Deputy Commissioner for Operations Support, were aware that the contract with Equifax was signed until the morning of the hearing.

As noted by David Powner, Director of IT Management Issues at the Government Accountability Office, this represents a major breakdown in IRS management as CIO’s are required by law to approve major IT contracts such as the one awarded to Equifax:

“CIOs should approve the IT budget, they should approve major IT contracts, that’s a provision in the law… I can tell you right now that was put in there because of this stuff [referencing the Equifax funding granted by the IRS].”

This breakdown represented just one example of how the IRS’s modernization efforts have failed. When asked by Rep. Tom Rice (R-SC) if anyone on the panel thought that the modernization efforts of the IRS have been acceptable – every witness agreed the IRS is falling far short and failing taxpayers.

Describing the incident as an “abject failure”. Rep Jackie Wolorski (R – IN) called for structural change in the IRS, noting that the organization was in need of “major reform”.

The Equifax data breach should come as no surprise as IRS practices have been investigated by independent watchdogs on a number of occasions.

  • Last year, a TIGTA review found that the IRS’s outdated systems were leaving taxpayer data at risk, noting that “the use of outdated operating systems may expose taxpayer information to unauthorized disclosure, which can lead to identity theft.  Further, network disruptions and security breaches may prevent the IRS from performing vital taxpayer services, such as processing tax returns, issuing refunds, and answering taxpayer inquiries.” 
     
  • Another review revealed that poorly articulated and badly enforced data retention policies were responsible for the destruction of laptops and critical records, hindering the ability of taxpayers to hold the agency accountable. 
     
  • Concerns about the IRS’s mishandling of private information have prompted the GOP’s proposed Taxpayer Bill of Rights, designed to protect (amongst other things), the privacy and confidentiality of American taxpayers by holding the agency accountable and affording taxpayers a means of redress.
     
  • The Oversight Committee found that the IRS has retained outdated 20th-century technology that puts citizen data at risk instead of developing or implementing integrated cloud technology which is the industry standard.


Given the agency’s clear failure to modernize its IT systems, it is clear that reforms are needed to ensure that the IRS is held accountable to everyday Americans and is properly completing its responsibilities. 

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Updates from the Stop Obamacare Taxes Road Crew


Posted by Matthew Adams, Justin Sykes on Friday, October 6th, 2017, 4:36 PM PERMALINK

Allowing more Obamacare taxes to take effect in 2018 must be out of the question. If Congress fails to act the Obamacare Health Insurance Tax (HIT) will hit Americans on January 1, 2018. This tax alone could cause premiums to increase by $5,000 over a decade. ATR launched the “Stop Obamacare Taxes” bus tour in late September to keep pressure on Congress to delay and repeal all Obamacare taxes.

Continuing the march across the country, on Tuesday, October 3, the “Stop Obamacare Taxes” bus tour made its second stop in Denver, Colorado at the Pepsi Center before the WWE “Smackdown Live.”  The stadium seats over 18,000 people and was packed to the brim. The parking lot where the ATR tour bus was positioned was just as packed. As WWE fans headed into the stadium, many stopped to take pictures of the bus and to read about the pending Obamacare Taxes soon to take effect.

Many concerned citizens interested in learning about the looming tax hikes were asked to write their Congressmen urging a repeal of ALL Obamacare taxes. And those who really wanted to drive the message home about the need for repeal, received a camo koozie and a t-shirt that reads, “You can’t hide from Obamacare tax increases.”

ATR staff fielded questions from those in attendance, explaining how the trillions of new and enacted taxes under Obamacare will affect their lives, taking more hard-earned dollars out of their paychecks.

Numerous people opened up and shared their own stories about how Obamacare has already negatively impacted them, raising their premiums sky-high. 

Moving from Denver, the tour headed north through Fort Collins, Colorado into Wyoming, stopping along the journey to spread awareness to American taxpayers.

At an impromptu stop in Wheaton, Wyoming, dozens of residents approached the tour to share their own personal experiences under the law, and they were horrified to hear about the coming tax increases once the other Obamacare tax provisions take effect.

One story that stuck out was that of Robert Parks, an Air Force Veteran, retiree, and Wyoming resident who told ATR staff and fellow citizens about how his premiums used to be just slightly over $50, yet, after retirement and post-Obamacare, his premiums skyrocketed to over $500! Unfortunately, Mr. Parks is not alone, millions of Americans find themselves in the same situation, having to foot the bill for the exorbitant tax-hikes under the ACA.

After their departure from Wyoming, the crew headed to South Dakota, arriving in Rapid City on Wednesday. Throughout the day, over two dozen residents approached the tour to share stories regarding how Obamacare has negatively impacted their lives.

ATR Federal Affairs Manager, Justin Sykes, also did an interview in front of the bus for Rapid City’s KOTA News Station. See the video above.

The next stop for the “Stop Obamacare Taxes” bus will be in Wisconsin, stay tuned for more details!

Photo Credit: Justin Sykes

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TPC Study Based on Flawed Assumptions, Fails to Use Accurate Scoring

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Posted by Alexander Hendrie, Olivia Grady on Friday, October 6th, 2017, 10:30 AM PERMALINK

[Full PDF of this Document Can be Found Here]

Since President Trump and Republicans in the House and Senate released their joint tax reform framework last month, many have rushed to judge the plan. While this plan is an excellent first step, it is still just a framework that will further be developed by the Committees of jurisdiction, as noted in the document. The next step in the process is to move through regular order:

 “This unified framework serves as a template for the tax-writing committees that will develop legislation through a transparent and inclusive committee process.”

Despite this, some have decided to prematurely analyze the tax framework using their own assumptions. Exhibit A amongst these biased analyses is the study published by the Tax Policy Center, a joint project of the left-leaning Urban Institute and Brookings Institution. 

This study fails to take into account numerous issues.

First, it does not take into account any dynamic macroeconomic effects of the tax changes. Instead, it analyzes tax changes solely on the static revenue lost or gained as if every tax cut or tax increase is the same and has no effect on behavior.

Second, it assumes numerous details that have not been decided yet. The framework did not include the income ranges for the individual brackets or the size of the expanded child tax credit. Both of these will be decided by Committees of jurisdiction. The Tax Policy Center study included income ranges and the size of the credit despite this.

[The Full Document is Also Available Here] 

Dynamic Scoring is Key to Any Realistic Analysis of The Tax Reform Framework

The analysis conducted by the Tax Policy Center fails to use dynamic scoring to analyze the benefits of the plan. Instead, it uses static scoring to downplay the positive economic effects of the plan.  Realistic scoring of tax proposals must use dynamic scoring for several reasons, as outlined by the Tax Foundation. 

First, static scoring does not take into account the changes to the economy and specifically economic growth that a tax change might cause. With dynamic scoring, however, representatives can understand the real benefits and costs of a tax change proposal. Dynamic scoring, therefore, is simply more accurate scoring. 

A high tax rate will discourage some people from working as much because if the government is taking away most of the money from an additional hour that they’ll work, it won’t be worth it to work. However, if the government only takes a small percentage, more people will choose to work to i.e. save up for a vacation or their child’s college tuition. Dynamic scoring reflects these behavioral changes, while static scoring does not.

Second, many tax changes made in the GOP framework are designed to promote economic growth. Because this is the goal, lawmakers need to understand how the change will affect economic growth. Static scoring does not show economic growth. It assumes that the gross domestic product will remain the same.

The Unified Framework is a plan to grow the economy and increase the number of jobs. In fact, economic growth is one of President Trump’s goals for tax reform. Using static scoring makes it impossible for policy analysts to determine how much economic growth and how many jobs this framework will create.

Finally, static scoring does not show all the benefits of tax cuts. It downplays how much additional money the Treasury will see from economic growth due to the tax cuts. Therefore, the Congressional Budget Office’s (CBO) estimates were often very far off from reality before the office started using dynamic scoring. Despite how far off the estimates were, the analysis by the CBO and JCT did determine whether a tax change passed.

Due to these reasons, Congress passed the Pro-Growth Budgeting Act of 2013, requiring the CBO and the JCT to use dynamic scoring. However, both the CBO and the JCT do not use as robust scoring as they should.

An example of how their scoring isn’t robust enough is one provided in Curtis Dubay’s 2015 Heritage article, “JCT Dynamic Score of Bonus Depreciation: Highly Flawed.” His example was bonus depreciation, a policy that allows businesses to deduct 50 percent of their investments in the year that they purchased them. The Joint Committee on Taxation (JCT) said this policy would only grow the size of the economy by .2 percent over ten years using dynamic scoring, while the Tax Foundation argued that the economy would grow by 1.1 percent over ten years.

Despite this flaw, the scoring by the CBO and JCT is more accurate than if they used static scoring.

While there are clear reasons for using dynamic scoring, the Tax Policy Center surprisingly examined the effects of the Congressional Republican’s proposal, the “Unified Framework for Fixing Our Broken Tax Code” using static scoring. The Center now claims that the framework would reduce federal revenue by $2.4 trillion over ten years. In addition, those with the largest income would see the biggest tax cuts, and some would experience a tax increase under this plan.

The United States has historically seen large economic growth after tax cuts, and economic growth is one of the main purposes for this tax cut. If you think that there isn’t going to be growth after a tax cut and the taxes have been reduced, it is not a surprise that federal revenue decreases and deficits increase. The Wall Street Journal pointed this out in a recent article and predicts that if GDP growth increases to 3% a year with this tax cut, the Treasury would see an additional $2.5 trillion. 

Efforts to Attribute Distributional Effects to the Framework Are Premature

As the framework notes, specific details, such as the income threshold for the consolidated tax brackets, will be developed by the House Ways and Means and Senate Finance Committees. Given this, any detailed modeling including distributional tables is premature and based on assumptions on details that have yet to be decided.

Despite this, the report by the Tax Policy Center conducted a detailed analysis of the changes to the framework, based on their own assumptions they claim that there would be little to no benefit for many Americans.

These conclusions are very different from those reached by the Tax Foundation. Tax Foundation Senior Analyst Scott Greenberg explained in an article, ”What Would the “Big Six” Framework Mean for Lower-Middle Income Households?” how the plan would affect lower-middle income households. 

Greenberg says that the GOP individual tax proposal would reduce federal revenue by $209 billion on a static basis. The plan would benefit taxpayers in the 20% to 80% income group most, while the highest earners would pay more in taxes due to the elimination of most itemized deductions. The bottom 20% would gain from the increased standard deduction and child tax credit.

Similarly, Ryan Ellis, Senior Tax Advisor for the Family Business Coalition, found that the TPC was understating the benefits of the tax reform framework. In a recent Forbes column, he describes three typical scenarios. All three median scenarios will allow the individuals or families to invest in the economy, instead of “investing” in poorly performing government programs that were created to help politicians stay in power.

His first scenario is a family of four. The family has two children under the age of 14. The family earns the median income for a married couple, $87,000, according to the Census bureau. While the larger standard deduction reduces the family’s taxable income substantially, the lack of a personal exemption makes the family’s taxable income larger after the deductions have been taken. However, once the child tax credit is accounted for, the family receives a tax cut of $1223. This is a substantial decrease for a family that owes $4560 under the new tax plan.

The second scenario is a single mother with two small children. She earns the median income of a female head of household, $41,000. Once again, her taxable income after only the larger standard deduction has been applied is larger than her taxable income after the current standard deduction and the personal exemption have been applied. This changes again when the larger child tax credit is used. Her tax cut is $498. Under the new plan, she not only doesn’t have to pay $258 in taxes, she is given $240 by the federal government.

The final example is that of a single person who earns $36,000. She also benefits from the framework. However, once the larger standard deduction has been used, her taxable income decreases even without the personal exemption. Her taxes decrease from $3,374 to $2,880, and she receives a tax cut of $494.

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The Promised Land of Trump's Tax Plan?

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Posted by Grover Norquist on Friday, October 6th, 2017, 9:26 AM PERMALINK

This article originally appeared on OZY

The White House and congressional Republicans unveiled their unified framework for tax reform they expect to pass before the end of 2017. So will tax reform meet the same fate as Obamacare repeal — failing because three Republican senators break rank? Is this just a replay of Reagan’s supply-side 25 percent across-the-board reduction in marginal tax rates? Or is it closer to the bipartisan 1986 Tax Reform Act that was revenue neutral — not a net tax cut — and simplified the code by culling deductions and credits and reducing individual tax rates?

THE RATES

The outline presented last week by the White House does call for lower marginal tax rates for all Americans who pay taxes. The seven rates — from 10 to 39.6 percent — will be reduced to four: zero, 12, 25 and 35 percent. The standard deduction will double from $6,000 to $12,000 for an individual and from $12,000 to $24,000 for married couples. Your first $24,000 is taxed at the zero rate, and the larger standard deduction means that a whopping 95 percent of Americans will not have to itemize, compared to the third who itemize today.

THE OPPOSITION

Forty-five of the 48 Democrat senators wrote a letter to the GOP — before the framework was unveiled — saying they would oppose any tax reform that actually cut taxes, that cut tax rates for all Americans or that did not receive at least eight Democrat Senate votes. That was a not-too-subtle way of saying they would oppose any Republican tax reform.

And they will. But that was expected. No one has ever assumed a single Democrat vote. The Democrat opposition today is the same as its opposition to all tax cuts — they say they benefit the rich. So look out for “studies” saying the Trump/GOP tax cut will benefit high-income earners. Since the plan is only in outline form, much of these early assertions are based on assumptions by critics. But the fact is that this battle will be won or lost by winning (or failing to win) 50 Senate Republicans on the benefits of growth — not by asking for Democrat votes.

FOSTERING GROWTH

So how will this stack up against the 2.2 percent average of the Obama recovery, the 3 percent average growth after World War II or the 4.8 percent rate following the Reagan tax cut? The plan claims to boost growth with three new approaches. First, the corporate rate will drop from 35 to 20 percent. At 35 percent, we have the highest business tax rate of all our significant competitors — China’s 25 percent, Russia’s 20 percent and Canada’s 15 percent. Because the corporate capital gains tax rate is the same as the regular corporate rate, reducing the corporate rate from 35 to 20 percent also slashes the capital gains tax rate and is expected to encourage companies to sell trillions of dollars of long-held land and other appreciated assets.

The corporate tax will also shift from a worldwide tax system — we now tax all earnings by American firms both here in the United States and abroad — to one used by most other countries: a territorial system, where each country only taxes economic activity inside its borders. Moving to a territorial system will start with allowing much of the $2.5 trillion to $3.5 trillion in American earnings to return to the United States, paying a one-time hit of perhaps 8 percent on cash, but with all future repatriation being tax-free. Today’s high 35 percent rate and worldwide taxation makes any American multinational firm more valuable if purchased by a foreign company. Hundreds of billions of dollars worth of U.S. firms have moved to or been bought by foreign businesses because of this self-inflicted wound. This change is expected to attract capital from around the globe and end inversions (relocating a firm’s headquarters to a country with lower taxes) and tax-driven purchases of U.S. firms.

The second growth factor? The move from long depreciation schedules for business investment to immediate and full business expensing. Today if you buy a plant and equipment and you expense the cost that year — not depreciating it over 10 or 20 years — it reduces the cost of new investment. Expensing is scheduled as a temporary five-year measure, but everyone understands that expensing would, like the research and development tax credit, be extended and eventually made permanent.

This tax reform is focused on growth through reducing business taxes, rather than the Reagan 1981 focus on reducing high — 70 percent — tax rates on individual income and the 2003 Bush tax cuts that slashed capital gains and dividend taxes paid at the individual level. Trump and the Republicans have added a new twist, focusing on the 30 million Americans who own “pass through” businesses, where they pay individual tax rates on their business earnings. (These are sole proprietorships, partnerships and subchapter S corporations.) The top rate for pass throughs is higher today than the top rate for corporations. These, usually smaller firms, employ half of the U.S. private sector workforce and earn half of American business income; corporations employ and earn the other half. But past tax cuts have ignored this rather large number of businesses. This time the top rate for pass throughs will drop to 25 from 39.6 percent, the same percentage reduction corporations got when their top rate fell from 35 to 20 percent.

WILL IT PASS IN 2017?

Republicans do know how to do one thing: cut taxes. There is a consensus in the GOP on all the major parts of the tax cut — ending the death tax and the Alternative Minimum Tax, reducing rates on all business income, and simplifying and reducing personal taxes. And the business community from Silicon Valley to the Rust Belt manufacturers are strongly in support of lower rates and expensing. One suspects that 30 million small business men and women and their spouses are a heretofore untapped reservoir of support for tax reduction/reform.

The GOP failed to deliver on the repeal of Obamacare. So they will face voters in 2018, not with the double-barreled “we ended Obamacare and cut taxes” slogan but with one visible, measurable accomplishment: tax reform. The incentives are strong to make it big, pro-growth and to have it fully in effect by Jan. 1, 2018, nine months before Election Day on Nov. 6, 2018.

Photo Credit: U.S. Department of Energy

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Speaker Paul Ryan Explains How Tax Reform Makes Your Taxes Simpler Next Year


Posted by Satyajeet Marar on Thursday, October 5th, 2017, 5:35 PM PERMALINK

Speaker of the House Paul Ryan recently sat down for a Facebook Live chat with ATR President Grover Norquist to discuss plans to radically reform America’s cumbersome and uncompetitive tax system - making it simpler and fairer for American families, workers, and businesses.

Speaking to Grover, Ryan flagged a number of reforms including the doubling of the standard deduction and consolidating the current 7 tax brackets into just 3 – 12, 25 and 35 percent. The change will bring income earners into lower brackets, allowing workers in all brackets to take home more of their own money. Many of those on low incomes will fall into the 0% bracket and won’t need to pay income tax at all. With so many lower and middle income Americans shouldering an ever-growing tax burden, the changes offer respite to those who need it the most.

But the reforms also radically simplify the system. 9 out of 10 US taxpayers currently need to enlist accountants to complete their taxes. Removing complex itemized deductions in favor of a simple doubled standard deduction allows taxpayers to replace complicated, multiple-page forms with a simple postcard-sized return. These returns can be filled out in minutes rather than days, with no professional help. 

Grover also asked Speaker Ryan about his commitment to ATR’s Taxpayer Protection Pledge – a written commitment to taxpayers to oppose and vote against all income tax increases. Over 1,400 officials nationwide have taken the pledge. Ryan, a signatory since 1998, noted that the reforms are consistent with his commitment by ensuring that no individuals or businesses are worse off as all deductions and credits eliminated are met or exceeded by a matching tax cut.

Speaker Ryan and the current administration should be commended for making badly needed tax reform a priority. These timely changes will attract investment, create jobs, foster competition and grow the paychecks of working people nationwide.  

A brief summary of the uniform tax reform framework can be viewed here.

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