Unfortunately for taxpayers in the Golden State, the California Department of Tax and Fee Administration (CDTFA) has decided to unilaterally increase the state’s tobacco tax by a whopping 11.5%. Each year, the CDTFA must reevaluate its tax rate for “Other Tobacco Products” (OTP). OTPs include pipe tobacco, cigars, and snuff. This new tax will go into effect July 1 of this year and will be re-evaluated and likely raised again by June 30, 2022. 

This tax hike on OTPs will continue to disproportionally harm California’s most vulnerable populations. Data has demonstrated that tobacco tax increases have no statistically significant impact on smoking prevalence among those with household incomes of less than $25,000, and 72% of smokers come from low-income communities. Californians have already suffered incredible hardships due to the harsh, job-killing restrictions imposed on them by Democrats in Sacramento. This tax hike will further perpetuate financial stress on individuals who are already struggling to make ends meet.   

Increased taxes on cigarettes and other tobacco products consistently result in lower than projected revenues. For example, when nearby Utah raised its tobacco tax, smuggled cigarettes doubled to over 20% of the market. In New York, smuggling has reached over 50% – and California is not far behind at 47.7%  market share. As a result of these alternate unregulated markets, only three out of the 32 state tobacco tax increases studied met tax revenue estimates.  

These tax hikes promote black markets for smuggled tobacco products. Most tobacco smuggling operations are run by multi-million-dollar organized crime syndicates who also engage in human trafficking and money laundering. In addition, profits from smuggling have been used to fund terrorist activity. The US State Department has explicitly called tobacco smuggling a “threat to national security.”  

California is already one of the most highly taxed states in the nation, ranking 49th in the Tax Foundation’s 2021 Business Tax Climate Index. In addition to its harsh business tax climate, imposing regressive taxes - such as a tobacco tax hike - will only make the Golden State a less attractive place to live and will continue to drive businesses and families out of the state for better opportunities. The CDTFA must recognize this and begin implementing policies that will protect California taxpayers.   

If Biden and the Democrats enact a corporate income tax rate increase, they will have to explain why they just increased your utility bills

If President Biden and congressional Democrats hike the corporate income tax rate, Kentucky 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%. This does not even include state corporate income taxes, which average 4 - 5% nationwide.

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 at least seven Kentucky utilities. The savings take the form of either a rate reduction, or, a reduction to an existing/planned rate increase.

Working with the The Kentucky Public Service Commission, Atmos Energy, Duke Energy Kentucky, Inc., Kentucky Power Co., Delta Natural Gas, Kentucky-American Water Co., Kentucky Utilities and Louisville Gas and Electric Company passed along tax savings to their customers.

Duke Energy Kentucky, Inc.: As noted in this March 7, 2019 Daily Energy Insider excerpt: 

Duke Energy customers will see $110.7 million in energy bill savings as a result of the Tax Cuts and Jobs Act of 2017, the company reports.

That money is spread between Duke’s Ohio and Kentucky customers. Electric customers will benefit most from this, with Ohio customers gaining $46 million and Kentucky customers $16.5 million in annual savings. Where natural gas is concerned, Ohio and Kentucky customers will each gain $3 million in savings, though another $37 million is under consideration in Ohio and another $5.2 million is under review by regulators in Kentucky.

In a single year, Duke said that this could gain individual households up to $70 for natural gas and $40 for electric in Ohio, while Kentucky customers could see up to $51 for natural gas annually and $55 for electric.

Kentucky Power Co.: As noted in this June 28, 2018 The Lane Report excerpt:

In a pair of orders issued today, the PSC approved changes that will have the net effect of reducing an average monthly residential bill by $5.90 for the remainder of 2018. The rates approved today take effect July 1 and will remain in place at least through 2020; Kentucky Power has agreed not to seek an adjustment to base rates to take effect prior to January 2021.

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The January base rate order addressed the immediate impact of the corporate income tax reduction – a cut from 35 percent to 21 percent – that took effect at the start of this year. The remaining portion, most of it tied to deferred federal tax liabilities, was dealt with through a complaint filed by the Kentucky Industrial Utility Customers, Inc. (KIUC), an organization representing large industrial power users.

Atmos Energy: As noted in this May 4, 2018 The Lane Report excerpt: 

The Kentucky Public Service Commission (PSC) has reduced the annual revenue of Atmos Energy, thereby lowering the average monthly bill for residential customers.

In an order issued today, the PSC reset rates that were established on an interim basis in March to reflect reduced federal corporate income tax rates that took effect at the first of the year.

The reduction in the monthly residential bill includes a reduction to zero of a $2.97 surcharge assessed to pay for an accelerated program to replace aging and potentially hazardous pipes in the Atmos distribution system. That surcharge was in addition to the interim $16.52 base monthly service charge.

The base monthly service charge will return to $17.50, which is the amount it was prior to the interim rates taking effect. The delivery charge for gas will rise from the interim $1.45 per 1,000 cubic feet to $1.73 per 1,000 cubic feet. A typical Atmos residential customer uses an average of 5,300 cubic feet per month.

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Atmos filed a rate increase request in September 2017, seeking an additional $10.4 million in annual revenue from gas distribution operations, an increase of about 6.1 percent. Following the passage of federal corporate income tax reductions, Atmos revised the requested increase to about $1.76 million.

Delta Natural Gas: As noted in this September 21, 2018 WYMT Mountain News excerpt: 

The Kentucky Public Service Commission (PSC) ordered Delta to give its customers monthly credit to reflect reduced federal corporate income tax rates.

The credit will come in two phases. In the first phase, the average residential customer using 5,000 cubic feet a month will get a monthly credit of $9.59. The PSC says this is a decrease of about 21 percent of the base rate costs. This first phase begins in October 2018 and ends in March 2019.

The second phase of monthly credit begins in April 2019. The average residential customer will then get a monthly credit of $3.84, about 8.5 percent of the base rate costs. This phase will continue until the next rate adjustment or federal tax laws change.

Kentucky-American Water Co.: As noted in this August 30, 2018 Kentucky Public Service Commission document: 

On August 20, 2018, Kentucky-American filed a revised schedule of rates reflecting the amounts recorded as a deferred liability for the lower tax expense under the TCJA for the period of January 1, 2018, through July 31 , 2018, and an estimated August 2018 reserve. Kentucky-American proposes that the reduction in its revenue requirements attributable to the lower tax expense under the TCJA be returned to customers via a reduction in rates. The proposed rate reduction is based upon only the FIT rate reduction , while the rate impact of the TCJA on Kentucky-American's ADIT will continue to accrue as a deferred liability and will be addressed later in this proceeding, or in Kentucky-American's next base rate case. The proposed rate reduction returns to customers over the next ten months the deferred FIT liability for the eight months of January through August 2018, along with an additional ten months' worth of annual FIT savings over that same period based on authorized revenues from the last rate case.

Kentucky Utilities: As noted in this March 20, 2018 Kentucky Public Service Commission document: 

The TCJA Surcredit will be applied for services rendered on and after April 1, 2018, through April 30, 2019. The parties do not anticipate the TCJA Surcredit continuing after that date because KU/LG&E plan to file for a change in their base rates - which will take into account the changes from the Tax Cut and Jobs Act, among other potential factors - effective May 1, 2019, either as approved by the Commission or placed in effect by KU/LG&E subject to refund based on the Commission's final orders in the anticipated rate cases. 

KU/LG&E estimate the benefits of the Offer and Acceptance of Satisfaction for services rendered on and after April 1, 2018, through April 30, 2019, as follows: 

Bill reductions to KU customers in the amount of $91,290,656, with $70, 180,255 taking the form of the TCJA Surcredit for an estimated 4.2 percent reduction to the monthly bill for the average KU residential customer.

Louisville Gas and Electric Company: As noted in this March 20, 2018 Kentucky Public Service Commission document: 

The TCJA Surcredit will be applied for services rendered on and after April 1, 2018, through April 30, 2019. The parties do not anticipate the TCJA Surcredit continuing after that date because KU/LG&E plan to file for a change in their base rates - which will take into account the changes from the Tax Cut and Jobs Act, among other potential factors - effective May 1, 2019, either as approved by the Commission or placed in effect by KU/LG&E subject to refund based on the Commission's final orders in the anticipated rate cases. 

KU/LG&E estimate the benefits of the Offer and Acceptance of Satisfaction for services rendered on and after April 1, 2018, through April 30, 2019, as follows: 

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Bill reductions to LG&E electric customers in the amount of $68,934,450, with $48,993,021 taking the form of the TCJA Surcredit for an estimated 4.3 percent reduction to the monthly bill for the average LG&E electric residential customer. 

Bill reductions to LG&E's gas customers $16,663,609, with $16,229,321 taking the form of the TCJA Surcredit for an estimated 3 percent reduction to the monthly bill for the average LG&E gas residential customer.

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

Many small businesses operate on tight margins and can't afford higher heating, cooling, gas, and refrigeration costs. President Biden should withdraw his tax increases.

Gov. Kim Reynolds and Republican legislators are delivering $1 billion in tax relief to Iowans over the next eight years.

Senate File 619, managed by Senator Dan Dawson and Representative Dustin D. Hite, will make a number of pro-growth reforms to Iowa’s tax code that will allow individual taxpayers, families, and small businesses across the Hawkeye State to keep more of their heard-earned money.

One of the biggest victories in SF 619 is that it will fully phase out the state inheritance tax by 2025. Right now, Iowa has the unwelcome distinction of being one of just six states that still impose an inheritance or death tax. Because of this, non-lineal descendants – including siblings, nieces, nephews, domestic partners, and business partners – have faced a tax of up to 15 percent when they inherit assets that are valued at more than $25,000. 

“In Iowa, this often means a niece or nephew who inherits a share of the family farm from an uncle who never married will be faced with finding hundreds of thousands of dollars to hold onto land that’s been in their family for generations,” explained Iowans for Tax Relief. “Iowa’s inheritance tax hits entrepreneurs, too. If unrelated partners build a business together and one of them dies, the deceased partner’s half of the business would be subject to the inheritance tax if they choose to leave their portion to their business partner.”

Thanks to SF 619, Iowa’s death tax will not be around much longer. “Death taxes are always a second or third tax on the same income and savings,” explained Grover Norquist, president of Americans for Tax Reform. “The argument for death taxes is the politics of envy. The good news is that 70% of Americans have year after year consistently supported abolishing the death tax. Killing the death tax is good economics, good politics and helps end class warfare nonsense.” 

Another benefit of SF 619 is that it guarantees much-needed income tax relief will be delivered in 2023. Back in 2018, Iowa passed a tax reform bill that, once fully implemented, will deliver the largest tax cut in Iowa history. The catch with the 2018 tax reform package is that it made a lot of those important reforms contingent upon stringent triggers being met.

“The 2018 tax reform law designed two stringent revenue triggers for income tax rates to be reduced in 2023,” explained John Hendrickson, Policy Director for TEF Iowa. “The first, state revenues were to surpass $8.3 billion, and the second required revenue growth of at least four percent during that fiscal year. Eliminating both triggers removes an unnecessary impediment to rate reduction.”

SF 619 removes the unnecessary triggers from the 2018 tax reform law, guaranteeing tax relief will be delivered on time. Among other changes, in 2023, Iowa’s top income tax rate of 8.53 percent – the part of the income tax that is most often used to make decisions about investment – will be reduced to 6.5 percent. This will be a huge win for all Iowans.

Under the status quo, Iowa’s income tax is not competitive. Nine states – including Iowa’s neighbor South Dakota – do not tax wage income and thirty-three more states – including neighbors Illinois, Kansas, Missouri, Nebraska, and Wisconsin – have top marginal individual income tax rates that are lower than Iowa’s. The lower rate will make Iowa more attractive to investment, and will allow individual taxpayers, families, and small businesses, which overwhelming pay income taxes on the personal side of the code, to invest more in jobs and wages. 

While this is a great first step, Iowa should not get complacent. As people and jobs continue to move out of high tax states and into states that do not impose income taxes, more states are looking to put their income taxes on the path to zero. Iowa has a long way to go if it really wants to attract investment, jobs, and opportunities.

Vox Media recently published an article advocating for the ABC test to ensure “fairer conditions” for gig workers that are classified as independent contractors. In its so-called “analysis,” Vox ignores that the ABC test remains broadly unpopular among California’s independent contractors, and that a national ABC test would threaten the jobs of more than 59 million Americans that engage in freelance work.

Freelancers offer vibrancy to the American economy, and the ability to work as an independent contractor provides Americans with the flexibility that does not come with a traditional employment relationship. Think of a single mom earning a living by selling homemade goods on Etsy, or an Uber or Lyft driver using extra cash he earns to start a business of his own. These are real Americans chasing their dreams without the need to have a boss.

The ABC test under AB5 forced Californian companies to reclassify freelancers as employees, effectively eliminating the possibility of a freelancer classification. Under the ABC test, businesses must prove that a contractor is doing duties “outside the usual course of work of the hiring entity” and that “the worker customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.” This significantly limits the ability of businesses to retain contractors who may operate within the scope of work sometimes performed by employees in similar circumstances. It’s an unnecessary distinction that prohibits most businesses from working with independent contractors.

The ABC test forced the mass reclassification of California’s independent contractors, forcing countless residents to flee the state to pay their bills and chase their dreams. More than 90 percent of California independent contractors opposed the ABC test reclassification before it was signed into law. ATR has complied 655 personal testimonials from independent contractors who details the ways that AB5 has hurt them, which you can view here.

In fact, the ABC test was so unpopular that Californian voters passed Proposition 22 by over a 17-point margin which allowed ride-sharing and delivery drivers to continue working as independent contractors. Recent survey data from Californian drivers indicates their broad support for Proposition 22. 3 out 4 drivers polled said that they believe that people from other states would benefit if Proposition 22 were passed there and 76% of drivers polled said that Proposition 22 personally benefits them. In comparison to the ABC test, 84% of drivers believe that the Proposition 22 was a superior solution to reclassifying independent contractors as employees. Instead of acknowledging this data, Vox made broad-sweeping allegations regarding the worries and concerns of workers regarding Proposition 22 without directly engaging any of the data that poked holes in their assertions.

Vox also ignored the devastating impact of a national ABC test on American small businesses. 73% of small business owners polled feel that working with freelancers was critical to surviving the COVID-19 pandemic. In addition, 45% of small businesses felt that the PRO Act, a federal law that includes nationalizing the “ABC” test, would force them to close their doors forever.

Ironically, the ABC test crushed some former Vox Media workers. About 200 freelancers from Vox Media in California lost their jobs in the month prior to AB5 going into effect. A cruel irony exists when an organization publishes an article that frames the ABC Standard as a “huge victory for workers” despite firing their workers as a direct result of that law.

The ABC test was such a disaster for California that voters chose to exempt rideshare drivers from its onerous requirements. Similarly, a national ABC test would be a disaster for small businesses and freelancers alike. As our economy attempts to recover from the COVID-19 pandemic, the last thing we need is to limit opportunities for American workers to earn a living.